INVENTORY PLANNING

• The process of determining the optimal

quantity and timing of Inventory for the
purpose of aligning it with sales and
production capacity .
•Inventory planning has direct impact a
company's cash flow and profit margins
especially for smaller businesses that rely
upon a quick turnover of goods or materials.
OBJECTIVES OF INVENTORY PLANNING

 CUSTOMER SATISFACTION
 FORECASTING NEEDS
 CONTROLLING COSTS
 SUCCESSFUL STORAGE
ADVANTAGES OF INVENTORY PLANNING
• You know your stock levels
• You can conduct stock rotation
• You can optimize and reduce stock of
items that don’t move that quickly
• You can move you quick moving items
to the front thereby speeding up picking
• You can quick identify items that are not
moving that you can remove from your
inventory
DISADVANTAGES OF INVENTORY PLANNING
 It doesn’t stop staff stealing stock.
 It can waste a lot of effort if not implemented
and maintained correctly.
 It doesn’t replace incompetent management.
 It can be very expensive and the return on
investment can take a long time.
 It requires a lot of staff training and you
may loose some staff on the way.
 MATERIAL REQUIREMENT PLANNING
(MRP)
 is a production planning and inventory control
system used to manage manufacturing
processes. Most MRP systems are software-
based, while it is possible to conduct MRP by
hand as well.
 WHAT CAN MRP DO ?
 Reduce Inventory Levels
 Reduce Component shortages
 Improve Shipping Performance
 Improve Customer Service
 Improve Productivity
 Simplified and Accurate Scheduling
 Reduce Purchasing Cost
 Improve Production Schedules
 Reduce Manufacturing Cost
 Reduce Lead Times
 Less Scrap and Rework
 Higher Production Quality
 Improve Communication
 Improve Plant Efficiency
 Reduce Fright Cost
 Reduction in Excess Inventory
 Reduce Overtime
 THREE BASIC STEPS OF MRP
 IDENTIFYING REQUIREMENTS
 RUNNING MRP – CREATING THE SUGGESTIONS
 FRAMING THE SUGGESTIONS
 IDENTIFYING THE REQUIREMENTS
 QUANTITY ON HAND
 QUANTITY ON OPEN PURCHASE ORDER
 QUANTITY IN/OR PLANNED FOR
MANUFACTURING
 QUANTITY COMMITTED TO EXISTING
ORDERS
 QUANTITY FORECASTED
RUNNING MRP – CREATING THE SUGGESTIONS

 CRITICAL ITEMS

 EXPEDITE ITEMS

 DELAY ITEMS
 FRAMING THE SUGGESTIONS

Manufacturing Orders

Purchasing Orders

Various Reports
 TYPES OF MRP REPORTS
• PRIMARY MRP REPORTS
 Planned orders to be released at a future
time.
Order release notices to execute the
planned orders.
Changes in due dates of open orders due to
rescheduling.
Cancellations or suspensions of open orders
due to cancellation or suspension of orders
on the master production schedule.
Inventory status data.
 • SECONDARY MRP REPORTS
Planning reports, for example, forecasting
inventory requirements over a period of
time.
Performance reports used to determine
agreement between actual and
programmed usage and costs.
Exception reports used to point out serious
discrepancies, such as late or overdue
orders.
 What is Master Production Schedule ?

-A Master Production Schedule or MPS is the plan

that a company has developed for production,
inventory, staffing, etc. It sets the quantity of each
end item to be completed in each week of a short-
range planning horizon. A Master Production
Schedule is the master of all schedules. It is a plan
for future production of end items.
-The Master Production Schedule gives
production, planning, purchasing, and top
management the information needed to plan
and control the manufacturing operation. The
application ties overall business planning and
forecasting to detail operations through the
Master Production Schedule.
 BILL OF MATERIALS (BOM)
 A listing of all the subassemblies, intermediates,
parts, and raw materials that go into a parent
assembly showing the quantity of each required to
make an assembly.
 Basically, a bill of material (BOM) is a complete list of
the components making up an object or assembly.
 Bills of materials come in different types specific to
engineering (used in the design process),
manufacturing (used in the manufacturing process),
and so on.
 A manufacturing BOM is of vital importance in
materials requirement planning (MRP) and
enterprise resource planning (ERP) systems.
 BENEFITS OF A BOM
 Improve material management by
responding to changes in production.
 Reduce inventory levels and obsolete parts.
 Reduce manufacturing costs.
 Minimize clerical and engineering efforts by
optimizing the tasks of maintaining and
changing multi-level bills.
 Supports variable length part numbers and
unlimited descriptive text.
 Easy methods for accessing part
information