Short and sweet: MRP parameter optimisation 

Prof. Dr. Andreas Kemmner

Before talking about MRP parameter optimisation, it is important to clarify the term MRP parameter:
MRP parameters are material or process master data that control the planning and control, forecasting and scheduling behaviour of materials management systems such as ERP, inventory management systems or advanced planning systems.

MRP parameters are often thought of in terms of material properties such as lead times, minimum lot sizes or lot size increments. However, MRP parameters also include those that determine which algorithms are used in a materials management system for demand and inventory planning of a particular item (MRP procedure, lot-sizing procedure, planned value distribution procedure, forecast composition procedure, …) or that determine how an algorithm calculates (forward clearing horizon, backward clearing horizon, α-factor of an exponential smoothing, …).

MRP parameter optimisation is the correct setting of these parameters in order to achieve certain material management or business management objectives. Examples of such goals are the lowest possible total cost in the supply chain, the ability to deliver with the lowest possible inventory, or the ability to deliver with the lowest possible cost in the supply chain.

Our tip:

Without correctly set MRP parameters, a materials management system will not produce meaningful forecasts, order or production proposals. The desired business objectives will not be met and users will regularly have to override order and production proposals more than they should in order to maintain delivery capability and/or to avoid excessive inventory build-up.
In addition, MRP parameters are not static values that are set once for a material. The parameters need to be readjusted depending on the life cycle of an item and other varying item characteristics, such as demand patterns.

In practice, this task is usually seen as the responsibility of the MRP controller, and they are held responsible if MRP parameters are not maintained. However, the time required to maintain scheduling parameters is so great that it cannot be managed by users in addition to their normal tasks. As a rule of thumb, it can be assumed that for every full-time MRP controller, one-third to one-half of a person is needed to keep the MRP parameters up to date. For economic reasons, this would hardly be feasible.

Even more serious is the fact that a very deep understanding of the algorithms used in a materials management system is required to correctly set the MRP parameters. Such in-depth understanding is extremely rare among users.

To make matters worse, the algorithms of a materials management system interlock like cogs in a gearbox, so that usually several parameters have to be set in conjunction with each other to achieve the desired behaviour.

After all, material flows and market behaviour for many items in a supply chain are not static but dynamic; they are constantly changing over time and are more like a turbulent torrent than a laminar stream. That’s why it’s difficult, if not impossible, to set planning parameters to cope with this turbulence using gut instinct or simple calculations. This is especially the case if a desired objective is to be achieved despite this turbulence, such as ensuring the required delivery capability with the lowest possible average inventory levels.

Only special software systems for optimising MRP parameters, such as DISKOVER, can provide reliable help. It is not only possible to determine exactly which parameter settings are to be effective under which boundary conditions of an article. Rather, the appropriate disposition parameter settings are determined through simulations with empirical data and stored in an expert system. This expert system then automatically adjusts the MRP parameters in the materials management system.

A materials management system without an MRP parameter optimisation system is like a numerical machine tool without CNC control; you should not embark on this adventure!

Prof. Dr. Andreas Kemmner

Autor | Author

Prof. Dr Kemmner has carried out well over 150 national and international projects in over 25 years of consultancy work in supply chain management and reorganisation.

In 2012, he was appointed honorary professor for logistics and supply chain management by the WHZ.

The results of his projects have already received several awards.

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