Requirements Planning – Rajawali Adikarya

What Is?

Manufacturing creates wealth by adding value to goods. To improve productivity and wealth, a company must first design efficient and effective systems for manufacturing. It must then manage these systems to make the best use of labor, capital, and material. One of the most effective ways of doing this is through the planning and control of the flow of materials into, through, and out of manufacturing.

There are three elements to a material flow system: supply, manufacturing planning and control, and physical distribution. They are connected and what happens in one system affects the others.

Traditionally, there are conflicts in the objectives of a company and in the objectives of marketing, finance, and production. The role of materials management is to balance these conflicting objectives by coordinating the flow of materials so customer service is maintained and the resources of the company are properly used.

Manufacturing companies are in the business of converting raw materials into a form that is of more value and use to the consumer than the original raw materials. Logs are converted into tables and chairs, iron ore into steel, and steel into cars and refrigerators. This conversion process, called manufacturing or production, makes a society wealthier and creates a better standard of living.

To get the most value out of our resources, you must design production processes that make products most efficiently. Once the processes exist, you need to manage their operation so they produce goods most economically.

Managing the operation means planning for and controlling the resources used in the process: labor, capital, and material. All are important, but the major way in which management plans and controls is through the flow of materials. The flow of materials controls the performance of the process. If the right materials in the right quantities are not available at the right time, the process cannot produce what it should. Labor and machinery will be poorly utilized. The profitability, and even the existence, of the company will be threatened.

Materials management is a coordinating function responsible for planning and controlling materials flow. Its objectives are to:

Maximize the use of the firm’s resources
Provide the required level of customer service.

Reducing cost contributes directly to profit. Increasing sales increases direct costs of labor and materials so profit does not increase directly. Materials management can reduce costs by being sure that the right materials are in the right place at the right time and the resources of the company are properly used.

There are several ways of classifying this flow of material. A very useful classification is manufacturing planning and control.

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SYSPRO Solution

The Requirements Planning system (with its online MPS and Job, Purchase Order, and Supply Chain Review programs) enables straight-forward conversions of the suggestions from the Requirements Calculation results, to live data. It is a bucket less system which provides the facilities to run ‘what-if’ scenarios. Variable planning intervals and user-defined planning horizons offer further flexibility.

Dynamic capacity profiling, load leveling and single-level forward finite scheduling enable you to assess the impact of suggested jobs on your existing capacity loads.

Process Flow

Manufacturing is complex. Some firms make a few different products, while others make many products. However, each uses a variety of processes, machinery, equipment, labor skills, and material. To be profitable, a firm must organize all these factors to make the right goods at the right time at top quality and do so as economically as possible. It is a complex problem, and it is essential to have a good planning and control system.

A good planning system must answer four questions:

What are we going to make?
What does it take to make it?
What do we have?
What do we need?

These are questions of priority and capacity.

Priority-capacity Relationship

Priority relates to what products are needed, how many are needed, and when they are needed. The marketplace establishes the priorities. Manufacturing is responsible for devising plans to satisfy the market demand if possible.

Capacity is the capability of manufacturing to produce goods and services. Eventually it depends on the resources of the company – the machinery, labor, and financial resources, and the availability of material from suppliers. In the short run, capacity is the quantity of work that labor and equipment can perform in a given period.

There are five major levels in the manufacturing planning and control system:

Strategic business plan
Production plan (sales and operations plan)
Master production schedule
Material requirements plan
Purchasing and production activity control.

Each level varies in purpose, time span, and level of detail.

The Strategic Business Plan

‘The strategic business plan is a statement of the major goals and objectives the company expects to achieve over the next two to ten years or more. It is a statement of the broad direction of the firm and shows the kind of business – product lines, markets, and so on – the firm wants to do in the future. The plan gives general direction about how the company hopes to achieve these objectives. It is based on long-range forecasts and includes participation from marketing, finance, production, and engineering. In turn, the plan provides direction and coordination among the marketing, production, financial, and engineering plans.’

The Production Plan

Given the objectives set by the strategic business plan, production management is concerned with the following:

The quantities of each product group that must be produced in each period
The desired inventory levels
The resources of equipment, labor and material needed in each period
The availability of the resources needed.
The level of detail is not high.

For example:

If a company manufactures children’s bicycles, tricycles, and scooters in various models, each with many options, the production plan will show major product groups, or families: bicycles, tricycles, and scooters.

Production planners must devise a plan to satisfy market demand within the resources available to the company. This will involve determining the resources needed to meet market demand, comparing the results to the resources available, and devising a plan to balance requirements and availability.

This process of determining the resources required and comparing them to the available resources takes place at each of the planning levels and is the problem of capacity management. For effective planning, there must be a balance between priority and capacity.

The Master Production Schedule

‘The master production schedule (MPS) is a plan for the production of individual end items. It breaks down the production plan to show, for each period, the quantity of each end item to be made.’

For example:

It might show that 200 Mountain bikes are to be built each week. Inputs to the MPS are the production plan, the forecast for individual end items, sales orders, inventories, and existing capacity.

‘The level of detail for the MPS is higher than for the production plan. Whereas the production plan was based upon families of products (tricycles), the master production schedule is developed for individual end items (each model of tricycle).’

The Material Requirements Plan

‘The material requirements plan (MRP) is a plan for the production and purchase of the components used in making the items in the master production schedule. It shows the quantities needed and when manufacturing intends to make or use them. Purchasing and production activity control use the MRP to decide the purchase or manufacture of specific items.

The level of detail is high. The material requirements plan established when the components and parts are needed to make each end item.’ (See Reference – ‘Introduction to Materials Management’ in About This Course section)

Purchasing and Production Activity Control

‘Purchasing and production activity control (PAC) represent the implementation and control phase of the production planning and control system. Purchasing is responsible for establishing and controlling the flow of raw materials into the factory. Production activity control is responsible for planning and controlling the flow of work through the factory.’

Integration

Requirements Planning requires the Inventory module to be installed. The other solutions-Purchase Orders, Sales Orders, Bill of Materials, Quotations and Work in Progress- integrate to Requirements Planning, representing either a supply of inventory or a demand for inventory.

The Requirements Planning module integrates to the following SYSPRO modules:

Inventory

Requirements Planning requires the Inventory module to be installed, as it balances supply with the demand for stocked and non-stocked items. Inventory order policies, safety stocks, minimum and maximum levels and gross requirements rules are all integral to the Requirements Planning calculations.

Purchase Orders

Purchase Orders are used by the Requirements Planning module in the calculation of suggested supply.

Sales Orders

Sales Orders are used by the Requirements Planning module in the calculation of net demand. Supply Chain Transfer orders are used to calculate both demand and supply (for the source and target warehouses, respectively)

Bill of Materials

Bill of materials are used to determine which components are needed to manufacture a parent part as well as the lead times for the components and parent.

Quotations

Quotations with a certain probability will be included during the MRP calculation, and they will generate a demand.

Work in Progress

Job parent parts are used by the Requirements Planning module in the calculation of supply, while material allocations are used in the calculation of demand. In addition, job operations are used in the calculations of capacity requirements and start/delivery dates.

Inventory Forecasting

Forecasts confirmed in the Inventory Forecasting module become the approved forecast for the Requirements Planning demand calculations.

Inventory Families and Groupings

The approved forecast from Forecasting becomes the current forecast in Requirements Planning. Please note that any changes made to the forecast within Requirements Planning do not also change the forecast within the Forecasting module. Changes should rather be made in Forecasting and the changes written to Requirements Planning through the approval process.

Essential and Recommended Modules

Essential

Inventory

Recommended

Inventory Forecasting
Inventory Families and Groupings
Sales Orders
Purchase Orders
Work in Progress

The Integration with other SYSPRO Modules

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