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Transcript of Material Planning
The fundamental objectives of the Materials Management function, often called the famous 5 Rs of Materials Management, are acquisition of materials and services:
of the right quality
in the right quantity
at the right time
from the right source
at the right price
Material Planning Process
design by Dóri Sirály for Prezi
Reduction in inventory with fewer shortages
To maintain a high inventory turnover, by reducing excess storage, carrying costs and inventory losses occurring due to obsolescence
Faster response to market changes
To minimize the total cost of ownership by improving the efficiency of operations and procedures
Improved labor & equipment utilization
Better inventory planning & maintenance scheduling
Inventory Planning 101
Presented to: Prof. Vijaya Dixit
What do we do?
To achieve these objectives, we require 3 inputs
Entered on the WO parts list with either the JDE# or supplier P/N# preceded by *
Enter the date material is required. This date is a critical input that drives decision making with respect to procurement, expediting, pick and pack and used by MRP to calculate supply availability and measure on time delivery.
Indicate the Estimated Quantity and UM. By default, the primary unit of measure is selected but it's possible to choose another unit of measure if a conversion exists (eg. 1 EA = 50 FT, if you only need 25 FT change the UM to FT and quantity to 25).
The inventory planner uses the information (what, when, how many) entered on a parts list for all work orders between status 40 & 73 to determine demand. Once demand is calculated, the inventory planner reviews available supply in relation to the materials Reorder Point (ROP) and Reorder Quantity (ROQ). If a shortfall is anticipated, the planner sends a procurement request to the procurement team. Where demand exceeds the ROP/ROQ (min/max) a 'Stock PO for WO' is created and the material is reserved to the work order at time of receipt (kitted), otherwise, an ROP/ROQ replenishment PO is created.
PICK & PACK
Knowing what, when and how many enables the procurement team to provide material at the right time in right quantity of right quality at right price from the right source.
PO Generator prompts you to create purchase orders based on an item's availability, as well as on open purchase orders that exist for the item. It also makes suggestions as to the quantities you should order based on Reorder Point and Reorder Quantity.
Identical to E1 PO Gen with the following enhancements
Exclude type 4 & 5 work order demand to better align purchase quantity with preventative maintenance activities & historical demand
Commitments excluded from suggested order quantity calculation as demand based ordering is achieved in Inventory Planning process
PO Qty excludes PO's created directly for a work order as this ensures we always stock to the max stocking level (ROP + ROQ)
We've ordered safety stock (ROP/ROQ) but what if demand exceeds what we would ever stock in the warehouse?
The inventory planning process prompts materials management to create purchase orders when total demand for an item exceeds both available supply and ROP/ROQ. Material is procured in relation to the items lead time and the work order request date.
if demand is greater than > (on hand qty + PO qty) OR (ROP+ROQ) = order
This process enables maintenance teams to plan well in advance of the work order start date and load WO's in E1 without driving unnecessary procurement. This reduces our total cost of ownership and ensures parts are ordered when required.
Used to identify exceptions where demand spikes (seasonality, reliability) or current stocking levels do not support demand
Stock PO's created via this process are created for the work order and the material is reserved to the work order at time of receipt
Material is procured with the expectation it arrives 7 days prior to parts line request date
Demand for obsolete items is captured
Inventory Planning Process
Red highlighting indicates material has been procured for this WO.
Green font indicates the material is for a type 1 or 2 WO (urgent action required)
Green highlighting identifies material that has been issued to the work order but is not yet updated on the parts list.
Line type N indicates non-stock. Planner to create branch record.
Stocking type O indicates obsolete. Inventory planner interfaces with maintenance planner prior to ordering
Global on hand is qty across all warehouses. Inventory planner uses this to balance inventory across logistical warehouses. Conversely, quantity on hand is the inventory in the location the parts list references.
Quantity ordered is the qty on the parts list. Trans Qty is the amount already issued to the work order.
Parts request date (need date) is the date the business requires the material. Target arrival date from supplier is 7 days prior to this date.
The inventory planner uses this field to identify material that requires procurement.
The Sales ABC class categorizes inventory into three categories (A, B, and C) in order of their estimated importance.
'A' items are very important for an organization Typically high $ value and/or usage.
'B' items are important, but less so than ‘A’ items and more important than ‘C’ items
'C' items are marginally important. Typically low $ value and/or usage.
Material criticality is the determination of which materials are most important to the business.
CRT (Critical) are the most important.
MCT (medium criticality) are important, but less so than 'LCT' (low criticality) items
REP - Repairable material is material that can be repaired X times prior to purchasing new. Inventory planning does not purchase REP designated material unless identified by the business to purchase new.
Inventory status designates material as follows
ROR - reorder on request material is not purchased unless requested (added to a WO)
CAP - Capital spare (AFE required - not procured on stock PO)
VMI - Vendor managed inventory is inventory the preferred supplier manages on our behalf
Normal consumption during lead-time + Safety Stock
Is the level of inventory when an order should be placed with supplier
Reorder Quantity is the quantity ordered to increase our inventory to the maximum stocking level
Orange highlighting identifies material warranting ROP/ROQ review due to changes in demand and/or lead time
The usage calculation used to compute suggested order quantity excludes type 4 & 5 work order demand
Red highlighting identifies material we are likely to stock out of prior to the next PO receipt
Buyer converts the following output from the inventory planning report, indicating the WO# in subledger and adding a line attachment with the work order # allowing for immediate PICK PACK of material.
We've purchased everything but how do we ensure material arrives on time?
Mimics the functionality of the E1 supply & demand screen to determine whether material will arrive on time in relation to PO promise date and parts request date
Indicates whether a PO is for a specific WO#
The PO # (Supply) or WO # (Demand)
The PO promise date (Supply) or WO request date (Demand) sorted
Negative indicates 'at risk'
This report identifies material that has arrived and requires picking. Material is picked & staged in the appropriate area 7 days prior to delivery.
Indicates whether material has already been transacted to the work order but the transaction is not reflected on the parts list
Identifies the PO# and date the material is expected to arrive if the PO was created to satisfy demand)
Stock in an alternate location or warehouse that can be transferred to fulfill demand
Quantity remaining to pick for the work order
This report can be found in R:\Materials Mangement Public
Since there is no quick easy way to determine if all material for a group of work orders is available, we created the material ready report.
Pressing this button will allow you to filter the report by a group of WO#s
Alternatively, you can view all demand by item/work order and determine if the line is fulfilled or open
Here you can see the buyer, PO status and PO promise date
Material status code to identify open, partial issue, fulfilled or cancelled
This work order has 100 lines, 91 stock, 9 direct charge and of these, 1 line is open and 1 line needed (not in stock)
On Time Delivery KPI
All Business Areas
% of future planned work available in the warehouse
Stock OTD KPI% of stock lines transacted to work order before request date
Lines added to a work order with a request date in the month specified
% of lines added to a work order before material is required. This measure increased from 19% to 53% YOY
# of on demand fulfillment lines (material is issued when needed but not 'planned')
Direct Charge on time delivery KPI
This is the number of planned lines visible to materials management on June 2, 2014
On Time Delivery Golden Rules
Material must be on a parts list for demand to be detected
Parts on a parts list must have a request date
Maintenance change to work order status 40 initiates the procurement cycle
Work order pick and pack is completed relative to the parts request date
Date management is critical