The Material Requirements Planning (MRP) workflow is the term we use to describe the complete (and often complex) process from customer demand (a customer would like to buy your product) to finished goods.
Everything starts with customer demand for a product you sell. Depending on the lifecycle stage of the product, this demand could be prospective or responsive. For example, if you’re working on a new product introduction (NPI), you may be working with forecast demand for the product based on how similar products have sold. If the product is mature, demand can be determined from past performance or existing customer pipeline orders. In either case, prospective or responsive demand is what drives and triggers MRP flow.
Create a Build
Within Aligni, you can represent this demand by using Planned and Scheduled Builds. Planned and scheduled builds are not actionable — that is, they don’t affect inventory or immediately trigger purchasing activities. Instead, they are representative of demand and can be used by buyers to get perspective on how demand for the product and its components will look.
Even though this component demand is not actionable, it is represented in the forecast part usage shown on a part’s Inventory and Supply Chain tabs for informational purposes to help guide planning.
In the example below, historical part usage is shown in yellow. Forecast usage is shown in blue based on planned or scheduled builds:
Allocate the Build
At some point, a planned build will become imminent. This timing is determined by several factors that are industry-, organization-, and product-specific. For example,
- Current product inventory
- Required safety stock
- Lead time for components and assembly activities
- Sales rate
- Cost of the product (and sensitivity to shelf inventory)
Once it has been determined that the build should proceed, the build is allocated. This is an important milestone because the build allocation generates demand for the components required on the assembly. This demand is then visible on the inventory tab for each required component. If inventory is not available, then the demand is listed on the allocation shortage report.
Put another way, build allocation kicks off the build process and starts the clock. In general,
Allocation Date + Time to RFQ + Component Lead Time + Time to Build = Build Completion Date
Request for Quote and Purchase
With component demand, the next step is to determine where to purchase the components, how much each will cost, and when they can ship. Supplier quotes feed directly into the purchasing activities and are an important aspect of how you relate to and communicate with your suppliers. It’s particularly valuable that Aligni coordinates quoting and purchasing within the same database as your item master and demand system (builds). This reduces confusion and data entry errors passing this information to a separate system.
Receive & Reserve Inventory
Received inventory from your suppliers satisfies the component demand that was generated by builds. You may choose to reserve inventory as it arrives as a way to earmark that inventory. This prevents the inventory from being moved, adjusted, or consumed for any other build.
Once all inventory has been accounted for, the build may proceed. The lifecycle of the build allocation and reserve phases can be anywhere from a few minutes to several months depending on the organization and industry conventions.
Order the Assembly
Whether you place the assembly order as a work order internally or as a purchase order to a contract manufacturer, some action must be triggered to initiate a build. This action is often triggered by the full reservation of the build. The material requirements for the build are a requisite condition to actually performing the build. The workflow proceeds only when the appropriate personnel have completed the build.
Finalize the Build
Build finalization is the ultimate goal. The build inputs (components) are removed from inventory and the build output (finished good) is placed into inventory. The new finished goods inventory satisfies the initial product demand and completes the cycle.