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MRP in Purchasing: Why It's Necessary for Demand Planning

September 21, 2021 by Admin

MRP software allows users to forecast how much feedstock is required to manufacture a product - helping to improve efficiency and productivity and meet ever-changing levels of demand. Effective demand planning helps to reduce the risk of over-ordering or underestimating supply needs to ensure that customers can source the products they need whenever they need them.

Knowing when to replenish inventories and how best to plan for future demand is vital for fulfilling orders and keeping customers happy.

A miscalculation can be expensive, particularly as over-ordering will tie up valuable warehouse space and capital while running short of a specific product risks alienating buyers and losing sales.

Material Requirement Planning – or MRP – software is therefore invaluable as an efficiency and productivity tool for purchasing.

However, probably fewer than half the companies involved in process manufacturing and the chemical sector are currently taking advantage of the many benefits of an MRP system.

Many users still spend an inordinate amount of time patrolling the warehouse to monitor stock levels, manually enter and cross-check their data in spreadsheets, and sift through reams of paperwork to keep on top of everything. It’s a laborious approach that’s prone to errors.

Instead, today’s MRP software has become the best practice methodology that provides accurate and real-time snapshots of stock levels, sales, and performance.

Predicting the Future

Many companies manage their inventories based on their demand expectations – often referred to as Make to Stock or Make to Inventory.

All inventory decisions are made based on what you expect to sell; if you don’t plan to sell it, why would you have the raw materials in stock?

On the other hand, if a customer makes an inquiry and that product isn’t available, you could easily lose that sale.

Reliable forecasting is therefore essential for any business to be successful in an increasingly competitive marketplace.

An MRP makes it possible to continuously analyze demand and trends, make reliable forecasts, and ensure stock is there when you – and your customers – need it.

A capable MRP system adapts to the ever-changing market conditions and is able to make instant calculations to predict future sales.

Different methodologies might be used to do this. Typically, the software can monitor sales over a certain period and take an average to determine what it thinks could be sold moving forward.

However, during times of significant sales growth, it may be more appropriate to use an alternative process called “exponential smoothing”, where rather than that long-term view, there is greater emphasis placed on what has been sold more recently.

Depending on the type of product, seasonality can also have a marked effect on forecasting.

Take antifreeze, for example. Sales tend to soar during the colder winter season, so it makes far more sense for the software to focus on those specific months the year before when trying to anticipate future demand.

Designed to Meet Your Unique Requirements

MRP functionality is included as part of Datacor’s enterprise resource planning (ERP) product offering and has been specifically designed to meet the needs of process manufacturers and chemical distributors. It is highly configurable and seamlessly integrates with your ERP to provide optimal visibility across departments and teams.

So, what should you look for in an MRP system?

First and foremost, is it easy to use and fit for purpose? Will it reliably and clearly inform you of what actions you need to take, what products you need to order, and when? Is it going to optimize purchasing suggestions based on logistics and freight costs? Will it factor in all the unit of measure conversions if a formula relies on gallons, pounds, kilos or liters?

We look at all available data and your product formulations to calculate how much you need to make in bulk to fill your orders, whether you sell in drums, totes, or by the gallon. We determine if you have the necessary ingredients in stock and, if not, whether you have an existing purchase order in place that can deliver them in time or if they can be transferred from another site or warehouse.

Here are some of the ways Datacor MRP keeps you in control of your inventories:

  • By adjusting recommendations based on demand and buying habits.
  • Monitoring past and future sales to optimize stock levels.
  • Suggesting timely transactions around freight and logistics to minimize costs on a per pound or per gallon basis.
  • Improving processes and productivity through full integration with your back office and software so departments and teams have instant access to data for informed decision-making.

Datacor’s leading software solution streamlines processes, increases efficiencies, and helps ensure customer satisfaction. Simple to use and intuitive, our industry-specific MRP offers complete control over inventories and the assurance that they are properly managed and maintained at all times.

To find out more and to schedule a free, no obligation demo of Datacor’s MRP software, contact one of our advisors.

Topics: Datacor ERP, MRP


Admin

Written by Admin

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Datacor offers products and services designed specifically for process manufacturers and chemical distributors. Contact us to learn more about our products and services. Call us now at (973) 822-1551 or fill out the form to the right.