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Guide to Successful MRP Implementation

Nov 9, 2014 | Posted by Olof Simren | Inventory, Manufacturing | 20 comments |

Implementing MRP (material requirements planning) successfully in Microsoft Dynamics NAV is one of the more complex tasks. There are lots of moving parts and to make it work in an efficient way you not only need to know Dynamics NAV and the theories behind MRP but also the product structures and how the business wants to operate.

This is my guide to how to make it work, it is based on my experience and how I normally approach MRP. It does not guide or dictate how you should setup NAV, just some guidance on how to get there (I guess it can be used by any type of MRP implementation, not only Dynamics NAV). I have seen MRP implementations fail because of the approach was just to ‘plug in the values’ and ‘run it’, I think structure it and put some thoughts behind it first will definitely make it easier and pave the way to success.

My approach consists of the following steps:

1. Categorize Your Items

2. Describe a Strategy for Each Category

3. Simulate Scenarios

4. Apply Planning Parameters

5. Determine How to Run MRP

6. Continually Optimize

It is important to know that it takes a fair amount of work to get to a good running MRP solution where there is a balance between supply and demand and where few resources can successfully plan a larger number of items and orders without shortages or too much inventory.

There are some important prerequisites that you should be aware of; correct inventory levels, accurate production BOMs and routings with times, accurate lead times on purchased items, timely registration of inventory movements and a location structure that makes sense. In addition, not only the planners has to be determined to get it to work, also sales that are entering/maintaining sales orders and purchasers that are entering/maintaining purchase orders needs to be in on the plan. It is very important that shipment dates and receipt dates are entered accurately or realistically; I always say that the dates are equally important to the quantities. If you can’t get the above commitment it will be very hard to get to a well working MRP system.

1. Categorize Your Items

Start with categorizing your items from a replenishment point of view. Determine what different types of parts that should be replenished similarly and make a list of the different categories.

It could be categories such as; frequently used raw material items that should be in inventory at all time, seldom used raw material items, long lead time items, sub-assemblies, finished standard items, finished custom items, items that you are obligated to have in inventory for customers, consignment items, assemble-to-order items, etc.

Make a table of the categories, something like below.

Item-Categories-Dynamics-NAV

This step you should be able to do without any knowledge of Dynamics NAV. This will help the NAV expert to get the overall picture on what different categories of items there are.

When you have categorized your items you continue to the next step.

2. Describe a Strategy for Each Category

Describe how you want to replenish each category. Look at each category and ask yourself if you want to carry the items in inventory and if so how much, what should determine the order quantities and when to reorder, do you need a forecast to drive the replenishment, what will be the impact of a stock out, etc..

Describe the above for each of the categories, extend the table from #1 to look something like below.

Planning-Strategy-Dynamics-NAV

This step you should also be able to do without any knowledge of Dynamics NAV. This will help configuring the Items/Stockkeeping Units in NAV (see it as the requirements for the configuration) and to verify the results during the next step when the scenarios are simulated.

3. Simulate Scenarios

Simulate scenarios with a sample set of items for each category. For this you need to know the functionality in Dynamics NAV (or get help by someone who knows it).

Focus on material planning and not capacity planning. You need the material planning to work first, and then you can focus on the capacity planning if needed. It does not make sense to plan the capacities (work/machine centers) if you don’t have good control of your inventory. The exception to this is if you have unlimited supply of your material, but then you are reading the wrong blog post. 🙂

Stick to the standard functionality. Apart from doing minor adjustments (like the Accept Action Message in Planning Worksheet or extending the results with new fields, etc.) my suggestion is to stay away from customizing the MRP logic, it quite quickly becomes complicated and if you can’t fit in with the standard MRP rules in Dynamics NAV you should look into something else (like an add-on or third party software) to plan your material requirements. Although most of the times it is just a matter of not knowing the functionality enough.

Simulating the scenarios can with advantage being done in a separate company where you can control orders and inventory levels to stage different scenarios. Make sure to also cover what to do when changes in demand occurs.

This step can almost be seen as a user acceptance test where the functionality is confirmed by the users against the requirements for each category of items.

Note your result and/or issues for each of the categories and how the planning parameters setup was done, something like below.

Planning-Strategy-with-Notes-Dynamics-NAV

4. Apply Planning Parameters

Apply the planning parameters to a broader set of items by using the categories defined in step #1 and the configurations simulated in step #3. Most of the times this requires extracting data to Excel, manipulating it and then importing it back into Dynamics NAV. If you for example have reorder points based on demand during the lead times then you need to extract the usage for each of the item and calculate the reorder points to apply. Things like applying a production forecast based on sales history should be done the same time.

5. Determine How to Run MRP

Determine how the MRP run will be carried out in Dynamics NAV. This should include the frequency in which you need to refresh the plan, what items or locations that should be included in what run, etc.

I think having MRP to be run once a day as a scheduled activity and have all items and all locations (except maybe locations like quarantine, customer returns, etc.) being part of the run is a preferred way of doing it. Dynamics NAV does come with a scheduler, called job queue, but in order to schedule the MRP run you need to create your own table to setup the parameters such as horizon etc. for the scheduler to be able to run MRP as required.

Also make a plan on how to review and treat the MRP suggestions. Something like;

1. Look at the errors logged (if any) and fixed them for the next run.

2. Review and handle the exceptions.

3. Look at the suggested changes to existing orders.

4. Review suggestions for new supply that have order dates with in the next two weeks (as example).

If it is a transition from another software to NAV, then using MRP to create all the initial production orders is most likely the easiest way to get a good balance between supply and demand during a go-live. If you migrate production orders from an old system and then start running MRP it might take a while between you get a good balance since NAV might not agree with the supply that is in place.

If it is an existing NAV solution where MRP is going to be introduced then it might be of value to reduce the number of planned and firm planned orders prior to the MRP run and have them being recreated.

The MRP calculation could take a while to run depending on how many items that needs to be planned etc. As an example I just finished a project where there where around 85.000 items with 450.000 production BOM lines and 550.000 routing lines that was planned on a daily basis, the MRP was scheduled to run during the night and took about 45 minutes to run. I expect this to increase a bit once the database grow and gets more transactions in it. It is good to know how long it takes since the MRP calculation in Dynamics NAV locks some tables and you might not be able to post things like output and consumption during the MRP run. In this case we scheduled it to run between 1 and 2 am, this only affected the production night shift which in this case was doing limited postings during that time anyway.

6. Continually Optimize

Once it is all setup and running it is important to continuously work with the system to optimize the plan by reviewing suggestions and updating/maintaining orders and parameters.

Most companies operates in a more or less dynamic environment where you continually need to tweak the setup based on external factors such as changes in purchase lead times, raw material costs, etc. Requirements typically also change; the bestselling items this year might not be the bestselling items next year. You might have new items being introduced by sales and engineering might work on improving products which changes to the components in the production BOMs, etc.

This is an ongoing process and a good planner will be on top of changes and adjust accordingly.
It is also important to realize that in reality things are not always executed exactly according to the plan. To allow for this you can build in some slack time into the plan by adding safety lead times and queue times to the products and operations. There are also damper parameters that can be set to reduce the number of suggestions that changes to demand otherwise can trigger (this to remove the noise that small irrelevant changes otherwise will create).

If you are facing an MRP implementation hopefully you will find the above approach useful. 🙂

Tags: MRPPlanning
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20 Comments

Leave your reply.
  • Jörg
    · Reply

    May 3, 2015 at 3:23 PM

    Hello Olof,

    thank you very much…i love your blog.
    keep posting!

    Jörg

  • Ishan
    · Reply

    July 29, 2015 at 9:15 AM

    Thanks a lot Olof..
    Your posts are very useful.
    I am facing a problem in planning worksheet – MRP.
    The problem is as follows:
    Calculate Regenerative Plan does not take Make to Order into consideration when run Carry Out Action in NAV 2013 IN localization. It is working properly in NAV 2009, 2009R2, 2013R2 but not working in NAV 2013.
    I found a hotfix for DE localization.
    Will this work for IN localization?

    • Olof Simren
      · Reply

      Author
      July 29, 2015 at 9:41 AM

      Hi Ishan,
      Thanks for your comment!
      I am not familiar with the IN version of NAV. But, if you found an hotfix for the same issue for a DE database, then maybe look into the object changes that are included in that hotfix and make the same changes in your IN version to see if it make a difference (you will most likely have to do the changes manually in your IN database, just importing objects from the DE database will not work).
      If not, I would reach out to Microsoft and see what they say.

      /Olof

  • Akhil Kumar
    · Reply

    April 18, 2016 at 8:59 AM

    Nice Blog …………………Olof
    Fully satisfied with your work.
    Only, one query, Can it is possible that while calculating the plan system will not suggest the required old Sales Order quantity?

    Regards
    Akhil Kumar

    • Olof Simren
      · Reply

      Author
      April 20, 2016 at 10:56 AM

      Hi Akhil,
      I don’t think so, the plan always include demand back in time.

      /Olof

  • Steve Pena
    · Reply

    March 21, 2017 at 11:35 AM

    Hi Olef,

    This may be a bit of a question but I thought I’d ask. We have several manufactured items that have multi-level BOMs. The reorder policy is Fixed ReOrder and the items are Make to Stock.

    When we run the planning worksheet and accept production orders, production orders for the higher level items are created first. For example, item BIKE gets assigned Firm Planned Order 00001. Item B for spoke, which is a sub component of BIKE gets assigned Firm Planned Order 00010.

    So when we try to post Firm Planned 00001, we get a shortage message and can’t post. I’m just wondering if there is some setup to assign the lowest level items a production order number first.

    I have Dynamic Low Level codes turned on in Manufacturing setup.

    Thanks,

    Steve

    • Olof Simren
      · Reply

      Author
      March 22, 2017 at 12:52 PM

      Hi Steve,
      You should complete the production orders according to their due dates and not according to their order numbers.
      The components in your case should be due before the parent part.

      /Olof

  • Steve Pena
    · Reply

    March 27, 2017 at 4:48 PM

    Hi Olef,

    Makes complete sense. Thanks so much!

    Steve

  • Maureen
    · Reply

    July 18, 2017 at 5:09 AM

    Hi Olef,

    The information was really helpful although i have a question. I have an item that is part of a production BOM and has a safety stock quantity. The current value on inventory is zero and there exists a purchase order with the quantity of the set safety stock. When i run MRP it still gives me the same quantity of the safety stock even though i have a purchase order in place. I am using the Lot-for-lot policy. How can i set the system so i dont have the same requisition over and over?

    Maureen

  • Mohamed Ali
    · Reply

    September 15, 2017 at 10:38 AM

    Hi Olef,

    Thanks a lot very helpful. A requirement which does not seem to work as part of the standard in current MRP functionality in NAV is MRP run not excluding expired (or soon to expire) items lots in stock . That’s very important in industries using expiry dates with lot tracking since these items cannot be considered as “usable” inventory. Any thoughts on that ? Do you think it can be customized ?

    Best,
    Mohamed

    • Olof Simren
      · Reply

      Author
      September 18, 2017 at 10:13 AM

      Hi Mohamed,
      This is a known issue in NAV, you will either have to modify NAV or use an add-on that will handle this.
      I have seen workarounds where users move soon to be expired products into a separate location in NAV (that’s not part of the mrp plan), then the inventory in that location is reviewed manually and moved back if there are orders it can be used for (for which it is then reserved). I am not sure if I am a fan of this though..

      /Olof

  • Mohamed Ali
    · Reply

    September 18, 2017 at 10:45 AM

    Hi Olof,

    Thanks a lot for your answer and for the workaround, as you said might not be the best solution especially this would require additional process and a room for human mistakes. Do you know of any MRP add-on for NAV that might solve this issue ?

    Thanks,
    Mohamed

    • Olof Simren
      · Reply

      Author
      September 18, 2017 at 12:00 PM

      We work a lot with a manufacturing solution from COSMO Consult, it has some flavors of this, but it is not really an MRP add-on, more of a extensive manufacturing solution.
      Apart from this I don’t know of an add-on that will do this.

      /Olof

      • Mohamed Ali
        · Reply

        September 19, 2017 at 5:33 AM

        I see, thanks a lot for the feedback !

  • Manish
    · Reply

    October 28, 2017 at 2:24 AM

    Hello Olof,

    I Have a question related to planning system.

    When order to order link exist that is demand is linked with supply order(parent ,child item are setup with manufacturing policy as make to order)planning system ignores linked supply and demand.

    This particular planning aspect is a problem for me.

    I have a scenarios where Parent item BOM changes after Order for parent and child have been created and linked by system.
    On next planning run system , system doesnt suggest changes to existing order since they are linked.

    E.g. PN is top most assembly item . Under that sub-assembly 1(SA1) is there .

    On first planning run system will create 1 production order with 2 production lines of PN and SA1 linked through reservation

    Now if BOM of PN is changed. SA1 item is replaced with SA2 item , then system on next planning run doesnt do anything.

    can u suggest something on this !!!!

  • Manish
    · Reply

    October 28, 2017 at 2:24 AM

    Hello Olof,

    I Have a question related to planning system.

    When order to order link exist that is demand is linked with supply order(parent ,child item are setup with manufacturing policy as make to order)planning system ignores linked supply and demand.

    This particular planning aspect is a problem for me.

    I have a scenarios where Parent item BOM changes after Order for parent and child have been created and linked by system.
    On next planning run system , system doesnt suggest changes to existing order since they are linked.

    E.g. PN is top most assembly item . Under that sub-assembly 1(SA1) is there .

    On first planning run system will create 1 production order with 2 production lines of PN and SA1 linked through reservation

    Now if BOM of PN is changed. SA1 item is replaced with SA2 item , then system on next planning run doesnt do anything.

    can u suggest something on this !!!!

  • Rasheed.K.R
    · Reply

    November 24, 2017 at 6:27 AM

    Hi Olof
    Is there any possibility to change MPS/MRP action messages coming for Purchase Items? Our buyer’s will not accept the action massage ‘Resched. & Chg. Qty.’ and ‘Change Qty.’ which are coming without considering Lead time.
    Once we loaded a purchase order to vendor, we are not allowed to Change quantity of that particular PO. If we have any new urgent requirement arises, we can place new Purchase order without interrupting already placed Purchase orders.
    Vendor allow us to execute Reschedule and Cancel action messages (IF there is no demand in coming window) .
    Expecting your valuable suggestion. Thanks.
    Regards,
    Rasheed

    • Olof Simren
      · Reply

      Author
      November 24, 2017 at 3:35 PM

      Hi Rasheed,
      You can set the ‘Planning Flexibility’ on the purchase order lines to ‘None’, but this will also eliminate the reschedule and cancel messages, which it sound like you don’t want.
      You can set the ‘Dampener Quantity’ to eliminate suggestions for quantity changes that will reduce the order quantities.
      It does not sound like any of the above two options are exactly what you are looking for, so you probably need to do a modification if you want that exact behavior.

      That’s all I could think of right now.

      /Olof

  • Rasheed.K.R.
    · Reply

    November 25, 2017 at 12:39 AM

    Hi Olof,

    Thanks for your reply.
    We have checked earlier all the possibilities that you had suggested. As you said, IF we change the planning flexibility to ‘None, System will not give Cancel, Reschedule and other action message.
    and in the case of ‘Dampener Quantity’. System will not give any action message for that particular quantity set in Dampener Quantity field. So this will lead to inventory pile up.so Navision code customization is only way to come out from this problem.

    It will be grateful ,if you give your suggestion and advice on following queries

    1. Is it recommendable for a change in Navision Planning Base code to achieve client expectation.

    2. Can you give us an overview where should we change code in Navision to block action messages Change QTY and Reschedule& ChangeQty.

    Expecting your valuable support.

    Regards,

    Rasheed.K.R.

    • Olof Simren
      · Reply

      Author
      November 27, 2017 at 8:48 AM

      Hi Rasheed,
      It is always recommended to apply the standard functionality as much as possible, but if there is a requirement that is a must that is not covered by standard NAV then doing a customization or finding an add-on would be the way to solve it. The material planning is no different from the rest of the application.
      The ‘Inventory Profile Offsetting’ codeunit is probably a good place to start, I would recommend that it is done so the changes can be turned on/off (based on individual SKUs for example) so the standard planning still can run without the change affecting it.

      /Olof

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