MRP (Material Requirement Planning) is a calculation process that looks at the requirements of products and calculates the necessary production/purchasing schedule considering the production/purchasing lead time of each product. One special aspect of MRP that's different from traditional ROP (Reorder Point) is that it's a time-phased calculation. In other words, not only does MRP consider and suggests the quantity needed for replenishment, it also considers the date when it's needed. The "date" related setting is as important as the quantity related setting.
In this post we will take a look specifically at Firm Horizon and Demand Horizon, and the impact they have on MRP. The (GESITM) Common data, Product, Product-Site record, Planning tab, hosts the setup of Firm Horizon and Demand Horizon.
First, let's take a look at Firm Horizon. It is setup in number of weeks or months. Firm Horizon is a way to specify a period of time that you do NOT want MRP to put suggestions in. Any requirements MRP detects within the Firm Horizon will be pushed to the first day available outside of the horizon, and marked with a "Delay firm horizon" message on the MRP suggestion. In the case where Firm Horizon = 0, the system considers today's date as the last date of the horizon. Any requirement needed before today, such as replenishing safety stock today, will receive the "Delay firm horizon" message.
Second, let's take a look at Demand Horizon. It is setup in number of weeks or months. Demand Horizon is a way to specify a period of time that you no longer want to consider the sales forecast and rely solely on the firm sales order. For whatever is outside of the demand horizon, the system will aggregate the total firm demand within each calculation bucket, compare that with the aggregated total forecasted quantity within the same period, and only take the larger of the two quantity as the demand for MRP calculation. This method is also referred to as "Forecast offset". In the case of Demand Horizon = 0, the system would offset the demand from today.
Examples:
Case 1: Firm Sales Order Demand for 10 at 10/15/2019, Safety Stock=5, EOQ=6, and Technical Lot=2. The Demand Horizon=1 week. The calculation date is at 08/26/2019.
The system will suggest a purchase of 6 to fulfill the Safety Stock. However, the suggested purchase date has been pushed to 09/10/2019 due to the Demand Horizon=1, with "Delay firm horizon" message and a MRP date of 08/26/2019 to show the real requirement date.
Case 2: Firm Sales Order Demand for 10 at 10/15/2019, Safety Stock=5, EOQ=6, and Technical Lot=2. A forecast of 100 has been entered for the week of 10/14/2019. The Demand Horizon=8 weeks.
Since the forecast is within the 8 week Demand Horizon, the system ignores the forecast and will only look at the Firm Sales Order.
Case 3: Firm Sales Order Demand for 10 at 10/15/2019, Safety Stock=5, EOQ=6, and Technical Lot=2. A forecast of 100 has been entered for the week of 10/14/2019. The Demand Horizon=2 weeks.
Since the quantity of 100 is outside of the Demand Horizon, the 100 has been offset by the Firm Sales Order of 10, and therefore only 90 is considered as a valid demand for MRP calculation.
Terminology
There are terms that are being used in this blog. To avoid confusion, below are there explanations.
Product: In some industries, the word "products" only refers to finished product that can be delivered to the customer. However, in this post, "Product" is simply referring to anything that is stock managed. In addition to being a finished product, it could also be a Raw Material in a manufacturing environment.
Demand: The word demand is usually referring to sales demand, such as Sales Orders or Sales Forecast.
Requirement: Requirement in general is referring to a projected decrease of particular inventory on a particular stocked item. The requirement could be coming from shipping requirements of sales orders, or could be material consumption of work orders.
Resource: Resource in general is referring to a projected increase of inventory on a particular stocked item. The resource could be coming from expected receipt of purchase orders, or coming from expected completion of work orders.
MRP: Material Requirement Planning. A calculation process that looks at the requirements of products and calculates the necessary production/purchasing schedule considering the production/purchasing lead time of each product.
ROP: Reorder Point. The process where the system evaluates the current inventory level against a pre-set Reorder Point, and suggests replenishment when the inventory is lower than Reorder Point.
