Why is my MRP telling me to order that?

Your MRP wants to optimize your supply chain. Trust it.

Supply Chain Confusion
Supply Chain Confusion. Getty Images

MRP's come in all shapes and sizes.  They are built for companies that are massive (a software like SAP or an Oracle product) and small (like Netsuite and some Aptean products like Made 2 Manage).  And even for micro-sized companies… like that Excel spreadsheet that you might still be using.  

MRP commonly means "material requirements planning" and you can pay hundreds upon hundreds of thousands of dollars for the right MRP (or ERP - "enterprise resource planning") or you can go cheap and calculate your needs by hand.

 If your purchasing department needs to order more than ten items on a regular basis, I'd recommend not doing your MRP by hand.  

Your MRP will tell your buyer what to place purchase orders for and when to place those purchase orders.  

But why does an MRP do what an MRP does?  

Or, as I heard a buyer ask recently...

"Why is it telling me to order that?"

Why, indeed.  

Contrary to what some buyers might think, your MRP isn't mocking or taunting you with its "buy" messages.  It isn't throwing up a random part number with some random quantity daring you to figure out why and with no reasoning behind it -- other than to make you feel inadequate.  

Your MRP is set up to run a series of calculations and once it runs those calculations, it will tell your buyers what to buy and when to buy it.  

The first thing you should know is that your MRP didn't come out of the box looking like it does right now on your desktop.

 Parameters were established by the good people installing it - and those parameters were based on the realities of your supply chain.  

Your MRP generates a buy message based upon need.  And that need is defined by demand, lead times, safety stocks, open purchase orders and other variables.  

When you get a buy message from your MRP and it's telling you that you need to order 10,000 eaches of part number A -- and then you go down to your warehouse and you see that you already have 100,000 eaches of part number A sitting there… there's probably a good reason.

 

The first reason is demand.  You might think that 100,000 eaches of part number A is plenty.  But you might not know that your customer service team just entered a new sales order for 110,000 eaches and that's driving the MRP buy order.

Another reason is lead time.  If it takes six months to get another 10,000 eaches into stock and you've got demand out there that's going to consume your 100,000 eaches in less than six months, your MRP is going to tell you to buy more.

What if there's been a spate of quality issues with part number A and management has decided to increase your safety stock by 10,000 pieces?  That's right, that would drive your MRP to tell you to buy more.

By understanding the inner workings of your MRP, you'll see that all your MRP is doing is trying to help you get your customers what they want, when they want it - and spend as little money as possible getting that done.  It is your friend.  Trust it.  

(Assuming that your MRP was set up correctly and has been audited over time to ensure that the original parameters used to set it up are still valid.  If that hasn't been done, please do it.  And then, you can trust your MRP.)