Automating MRP for a small to mid-size business can be an overwhelming challenge, especially when automation is being deployed for the first time. There are many reasons why this task can be so difficult, however like many other business tasks, there are two primary things that must be considered in order to be successful: data and people.
In Business Central, the “Calculate Regenerative Plan” process in the Planning Worksheet is effectively like a giant calculator which analyzes supply and demand data and creates suggestions based on the settings and parameters that have been defined in the system. Truly, the old adage “Garbage in, garbage out” relates to this situation.
But people and the processes they use are equally important in successfully automating MRP. Everyone must have a solid understanding of how the system is generating suggestions, how to analyze the suggestions, and how to work with one another to carry out the suggested plan.
This document provides recommendations which if applied will increase the chances of a successful MRP automation project in Business Central. The recommendations are grouped into two sections: data-based and people-based.
Data-based recommendations
1. Define Location Codes carefully to ensure that supply and demand is balanced.
All of the Item availability and planning calculations within Business Central consider the Location Code associated with all supply and demand quantities. This is an important fact when relying on the system to recognize when supply needs to be replenished (and when it doesn’t!).
As an example, if a manufacturing company has a single production facility, plus a second warehouse next door that holds overstock of raw materials, one option would be to create a separate Location for each of these three real or virtual warehouses. However, in this scenario, Business Central’s item availability and planning logic will attempt to balance supply and demand per Location Code, which may result in inaccurate planning suggestions. An alternative option to better match supply and demand would be to use a single Location Code with Bin Types denoting the physical location or status of an Item’s on-hand quantity. Of course, there may be scenarios where a second Location Code may make sense if these quantities should be excluded from planning activity.
2. Set and maintain the Lead Time Calculation field on the Item Card (or Stockkeeping Unit Card) for purchased Items to ensure that raw materials are purchased in a timely fashion.
The Lead Time Calculation field on the Item Card (or Stockkeeping Unit Card, if used) specifies how long it will take for a vendor to deliver purchased parts. This value is a date formula, so the lead time can be set in days, weeks, months – such as “3D” for 3 days, “2W” for two weeks, etc. However, because this value considers the Base Calendar Code assigned to the vendor, this value should really be entered in days, excluding weekend days if those are specified as non-working days on the Base Calendar. In this example, a 2-week lead-time for a part should be entered as “10D” (10 working days – excluding the weekends).
If this field is not set, the planning engine will assume that the Item will be received the same day the Item is ordered. So it is important that a reasonably accurate value is entered for each Item.
Lead times also change over time, so these values need to be reviewed on a regular basis and updated as needed. No standard report exists in Business Central to compare the current Lead Time Calculation values with the actual lead times incurred over the recent period, but this can be created via a Power BI report or custom query in BC.
3. Build Production Routings with realistic Setup, Run, Wait, and Move times.
Similar to how the Lead Time Calculation values are important for purchased part and scheduling Purchase Orders and the related Production Orders, it is equally important that accurate estimates of the time required for each Work Center operation are assigned. Setup Time is defined per Routing operation, Run Time is defined per Unit, and Wait/Move time are defined per Routing operation. Wait time is the time a WIP Item will sit at the Work Center before production activities are started (a queue) while Move Time is the time that an Item will remain in the Work Center before it is moved to the next operation. Good examples of Move time are time to cool an Item after heat treating or time for paint to dry after a painting operation.
If these values are not established properly, then the system will build the production plan with unrealistic expectations for efficiency and productivity.
4. Apply the appropriate Reordering Policy to each Item and understand the impact of the related reordering parameters and modifiers.
The Planning Worksheet includes a function called Calculate Regenerative Plan which analyzes Items along with their supply and demand per period and will make reorder suggestions. If and how reorder suggestions are created are based on many factors; however, the key factor is the Reordering Policy set on the Item record.
Reordering Policies include:
Blank: no suggestions will be created (obsolete/inactive Item, kanban item, etc.)
Fixed Reorder Qty.: when the available quantity gets below the Reorder Point, order the Fixed Reorder Qty set for the Item.
Maximum Qty.: when the available quantity gets below the Reorder Point, order the quantity that will result in the Maximum Qty. of inventory set for the Item. Additional qualifiers such as Minimum Order Qty., Maximum Order Qty, and Order Multiple are available.
Order: when a specific demand exists for an Item, a reordering suggestion will be created for the Item. This is generally an Item that is never stocked but only ordered when there is demand.
Lot-for-lot: Under the lot-for-lot option, inventory supply and demand are broken down into periods that are defined per Item in the Lot Accumulation Period. The planning engine then creates reordering suggestions to ensure that adequate supply is available to meet the demand per period.
5. Use Demand Forecasts to complete production and purchase planning for long lead time Items.
Many companies that manufacture products must anticipate what will need to be produced even before customer orders are received. In these cases, the lead time to purchase raw materials and run through all of the manufacturing steps to create the finished good item that will be sold takes longer than a customer is willing to wait. Sales forecasting is required to determine what items need to be produced.
Some organizations use spreadsheets or a separate forecasting solution to manage the forecasting process, however, Business Central includes a feature called Demand Forecasts that is fully integrated with Business Central’s planning functionality.
An unlimited number of Demand Forecasts can be created, and each Demand Forecast can extend for an unlimited length of time. Forecast entries can be entered per day, week, month, or any custom date structure. When the Planning Worksheet’s “Calculate Regenerative Plan” function is run, the user can select a Demand Forecast and Planned Production Orders will be suggested based on the demand derived from the Demand Forecast.
6. Set realistic Expected (Promised) Delivery Dates on Sales Orders.
Date management is a critical factor when running automated MPS/MRP as the system will always create supply suggestions to ensure that inventory is available on the date that it is needed. If an Item takes 4 weeks to be produced but the salesperson promises the customer than they can get the Item in 3 weeks, the planning engine will create a suggested Production Order that will be scheduled to be completed in order to meet the customer’s requested delivery, but in order to do so, it will suggest that the order be started one week ago. These types of scheduling issues become very clear to the user on the Planning Worksheet through the “Warning” field. Types of warnings include “Exception”, “Attention”, and “Emergency”. In this scenario, the recommended solution is to revise the “Promised Delivery Date” on the Sales Order so that the Production Order can be properly scheduled, or the routing on the Production Order can be revised to shorten the production cycle time in order to meet the customer’s Requested Delivery Date.
Using this simple example, it is easy to see how important date management is when running automated MRP. If production is continuously backlogged and everything is past due, it becomes very difficult to schedule and manage production activities. Therefore, setting realistic delivery dates is the easiest and best way to ensure that the suggestions created via MRP can be carried out in an effective manner.
7. Run the “Item Availability by… Event” page to gain visibility to the detailed upcoming supply and demand events expected for an Item.
One of the most common questions users have when running automated MRP is: “Why is the system making this suggestion?”. The answer to this question can usually be found without leaving the Planning Worksheet page. Besides the fact boxes and links to various related documents, there is a page called Item Availability by Event. This page details each supply and demand entry for each Item and there is an option to include/exclude planning suggestions. The Forecasted Projected Inventory column on this page is an easy way to see when the system believes an Item’s availability will be reduced to the point when a planned reorder is suggested.
8. Utilize Routing Link Codes to associate the expected consumption of a component to a specific routing operation to reduce production lead times and fine-tune component reorder cycles.
For organizations that have long production cycle times, there may be scenarios where not all of the components required to finish the production of the Item are required when the Production Order is started. For example, raw steel may be needed in the first operation, but finishing Items such as labels or packaging materials may not be needed until the last operation.
The Routing Link Code field allows each Production BOM component to be associated with a specific Routing operation step. When the Production Order document is generated, each Routing operation will only list the components that have been assigned to that specific operation.
When MRP is run, the system will recognize that some components may not be required for several weeks and can be reordered and resupplied within a few days, so these Items may not need to be ordered immediately. This feature can improve on-time delivery performance by allowing users to quickly recognize that production activities can begin even if some components are not yet available. This feature can also improve inventory turns and cashflow by being able to reorder supply closer to the date it is actually required.
9. Use the Capacity-constrained Resources table to set finite capacity for any Work Centers or Machine Centers that may be a major bottleneck in the production process.
The Business Central planning engine assumes that each Work Center (or Machine Center) has infinite capacity. Simply put, if you have two production orders with the same due date that require the same Work Center, the system will schedule both to be competed as required and it is up to the user to review this situation and make a decision as to which production order should be scheduled first.
Business Central provides the ability to set up a finite (or limited) capacity per Work Center (or Machine Center) through the use of the Capacity-constrained Resource table. Once this has been set up, production orders will be scheduled so that the Work Center is not over-scheduled. Many organizations do not set up finite capacity because they would like the production manager to evaluate the best resolution for each scheduling conflict instead of simply scheduling tasks out into the future which could result in missed delivery dates. However, this setting may be applicable for a specific Work Center that is a clear bottleneck in the manufacturing process.
People-based recommendations
10. Assign clearly defined roles to team members involved in planning, purchasing, and production.
In a report-based (manual) planning environment, it is common for there to be overlap of internal roles related to inventory planning, purchasing, and production planning. While this type of team structure is still possible in an automated MRP environment, because of the structured nature of how Business Central builds planning suggestions in the Planning Worksheet, it is critical that each person understand their specific roles and responsibilities when it comes to planning. Build an ”MRP Responsibility List” to track which Items, Locations, and tasks each person is responsible for to make sure that multiple people aren’t working on the same tasks and also to make sure that nothing is overlooked.
11. Start with MRP automation for a subset of Items and then continue adding Items as user experience, understanding, and confidence in the process is gained.
There are many settings and parameters in Business Central that control how planning suggestions are created in the Planning Worksheet. Many of the fields exist on the Item Card, but other fields that can impact production and purchase order recommendations could exist on Stockkeeping Unit records, Location Cards, Work Centers, Production BOMs, Production Routings, and Manufacturing Setup and more. Therefore, it is important that users understand how and why the system is creating the suggestions in the Planning Worksheet. Starting with a small set of Items to automate will allow users to become familiarized with these settings, build the daily/weekly cadence for planning, understand how to adjust planning parameters, and gain overall confidence in the suggestions being created by the system.
12. Create a detailed plan and schedule for how and when MPS and MRP plans will be generated.
The Calculate Regenerative Plan process has two components: MPS and MRP. MPS is Master Production Scheduling and includes the planning for the top-level (typically the “finished good” Items being sold to customers). MRP is Material Requirements Planning and includes planning for the lower-level sub-assemblies and the raw material Items that need to be purchased.
These components can be run together so that all top-level Items, lower-level production Items, and purchased Items are planned together within single run. However, if the MPS planners typically made adjustments to the Planning Lines in the Planning Worksheet before carrying out the action messages, there may be related sub-assemblies and/or purchased Items that relate to the top-level Items that may also need to be adjusted and these adjustments can be tricky to make, especially when using different Reordering Policies, Reordering parameters, and order multipliers. Therefore, some organizations will run MPS first and carry out all actions and only then run MRP so that planning can be done based on the MPS that has already been confirmed. In this case it is important that the MPS process be completed before the MRP process is run and carried out.
There is no right and wrong answer to how often MPS and MRP should be run, so it is up to each organization to establish the cadence that makes sense based on their requirements. But this schedule is something that needs to be well-thought out and clearly communicated to all team members involved in planning so that the correct planning suggestions are being created at the correct time.
13. Create policies for managing adjustments to the Planned Shipment Date on Sales Orders or the Planned Receipt Date on Purchase Orders after supply planning has already been completed.
All supply planning in Business Central is date-based. That is, the system will ensure that supply meets the demand by date. For example, if there are 100 Widgets in on-hand inventory and a customer places a Sales Order for 250 Widgets with an estimated delivery date 30 days from today, and there is an existing Production Order for 150 Widgets planned to be completed in 25 days, the system will consider this planned production as part of supply in 30 days and no planning lines will be suggested.
Additionally, when the Calculate Regenerative Plan is run, all existing planning lines, order tracking, and planned production orders are removed and then new entries are created to match each demand with a planned supply. However, once suggested planning lines have been carried out in the Planning Worksheet, modifying the Planned Shipment/Receipt Dates on the underlying orders can cause unexpected and often confusing planning suggestions. Therefore, it is important to understand the impact of moving a Purchase Order date out, moving a Purchase Order date in, moving a Sales Order date out, and moving a Sales Order date in once purchasing and production orders are already underway.
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