5 Tips for Making Material Planning More Effective

By using these tips, your material planning efforts should become more effective as you and your MRP or ERP system gather accurate and reliable information that results in timely shipments, and a clearer picture of your inventory.

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Accurate and ongoing material planning is a critical process for any manufacturer. Without it, you risk higher inventory costs, unhappy customers, inventory shortages, and fewer on-time deliveries. Your production schedule can be thrown off-kilter, which will likely result in lower profits.

The good news is that none of these things need to happen. Effective material planning helps with production, inventory control, and other areas like sales quoting, work orders, bills of material, and shop floor management. With reliable material planning, manufacturers can expect to see improvements in customer satisfaction, inventory control, and their company’s bottom line.

Whether you’re using a Manufacturing Resource Planning (MRP) or Enterprise Resource Planning (ERP) system, which is cutting-edge technology, or an old-school spreadsheet, here are the top five tips for making material planning more effective:

1. Your inventory balances must be accurate

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You’ve heard it since the advent of computer programming: “garbage in, garbage out.”  If your inventory balances aren’t valid, you won’t be able to count on the data that your system generates for you. In other words, if your on-hand quantity is incorrect, your MRP or ERP System will plan around those inaccurate amounts.

Also, ensure that quality control has approved all the inventory in your system. If not, your usable inventory will be less than you’re counting on, and your material planning will be skewered and compromised by bad data.

While the importance of precise data is well understood, surprisingly enough many manufacturers don’t pay close attention to the accuracy of the data they input, and they end up compromising the rest of their material planning efforts. Those efforts should focus on all calendars, resources, inventory, and capacity. Checking the numbers and scheduling periodic reviews will help to make sure the data you’re using is up to date.

2. Proper forecasting should be a priority

MRP and ERP systems will typically take either your open or your forecasted sales to calculate your material demands. When you create your forecast, it can be based on anticipated or production figures. Whichever you choose, the system will use the information to generate your material requirements.

Using forecasted sales rather than open sales allows you to estimate your material requirements further out than the timeline that applies to your current sales orders. It also gives you the benefit of scheduling your production and staffing needs long into the future.

The forecast you come up with does not have to be chiseled in granite (nor should it be!). You’ll need to have some flexibility to make alterations as conditions change. Many manufacturers deal with fluctuations throughout the year. These disparities in demand can result from seasons, holidays, events, or trends. If you are going to avoid wasting surplus production or coming up short with demand, you need to make accurate forecasting a priority.

Excellent MRP and ERP solutions can help you to augment material planning and forecasting. Your system will be equipped with historical sales data, which should provide you with invaluable insights into your future needs.

3. Take lead times into consideration during material planning

You need to have accurate dates in your system for sales and purchase orders. Ideally, you’ll want your MRP or ERP to inform you when you’ll need your materials for production. For example: when will you need to release the purchase order so you’ll have those twenty sheets of stainless steel to fabricate that structure by the due date?  

It’s critical to know how long it usually takes for materials to arrive from the time you order and how long it’s going to take to complete the finished product. To make things even more accurate, you can add in the time it takes for your quality control people to inspect and release the material for production or shipping.

Many of today’s MRP and ERP systems will have a series of fields where you can enter this information, and they will use it to recommend when to place the purchase order and when to start production.

4. Audit your vendors regularly

Along with paying attention to lead times goes performing reviews of transactions by vendor or item number. Through these audits, you can compare the scheduled lead times to actual lead times. You can see how your company is performing for your customers, and you can use the information to make adjustments.

Just a word or two about vendors: It can be comfortable to use the same suppliers each time since you can get consistent quality and pricing by doing that. By establishing a relationship with them, there’s a sense of trust that puts both you and the supplier at ease, especially when large orders are involved.

Just remember not to overemphasize the comfort factor. Perform those regular audits, and review the historical transactions between vendors. See how they compare in terms of anticipated lead time vs. the actual lead time. This information can be invaluable in helping you to improve your material planning process.

5. Understand your capacity

It’s not enough to create a production schedule that has been derived from accurate material planning, the availability of employees, and forecasted demand. You must also consider the various production limits of your work centers and the amount of space to which you have access.

Be sure to factor capacity and space into the production equation, or you could end up with late deliveries or more inventory than you can store or ship.

You might also like 7 Steps to Choosing the Right ERP for a Small Manufacturing Business.

By using these tips, your material planning efforts should become more effective as you and your MRP or ERP system gather accurate and reliable information that results in timely shipments, and a clearer picture of your inventory.