Examples: Order Recommendations

The following example demonstrates how the MRP handles receipts from recommendations and demands from the future period in order recommendation planning.

This scenario describes the calculation process for an item in a single warehouse. The following planning parameters are used:

Planning horizon: July 1 to July 5
Lead time: 2 days
Future period: July 6 and July 7
Note
- The future period is the lead time period right after the end of the planning horizon. To include future data in order recommendation planning, the MRP lets you include future demands that can only be satisfied by recommendations released within the current planning horizon.
- In the MRP wizard, all future data is consolidated into one column. However, to present the calculation algorithm, the future period is displayed in days.
End of the note.

The table below shows an item’s inventory status before implementing the MRP order recommendations.

Note Note

The receipts and receipts from recommendations are actually consolidated into one row in the MRP wizard as Supplies. To better present the calculation algorithm, the table displays the two types of receipts separately.

In the MRP wizard, if you want to view the origin of receipts, you can click the cells with supply values, and the Pegging Information window appears, displaying in the Remaks column whether the supply is a receipt from existing purchase or production documents, or a receipt from the orders recommended by the MRP.

End of the note.

	July 1	July 2	July 3	July 4	July 5	July 6 (Future)	July 7 (Future)
Initial Inventory	75	5	-5	15	-15	-35	-125
Receipts	30	50	60	70	40	10	20
Demands	100	60	40	100	60	100	120
Final Inventory (Before MRP)	5	-5	15	-15	-35	-125	-225

The MRP calculates order recommendations following the steps below:

Note Note

Actual demands refer to the quantity needed to keep the inventory level from falling into negative.

End of the note.

July 1
- Final inventory before MRP: 5
- Actual demands: No demands
- Receipts from recommendations: 0
- Final inventory after MRP: 5
July 2
- Final inventory before MRP: –5
- Actual demands: 5
- Receipts from recommendations: 0
  There is a demand for 5 items on July 2. However, July 2 is within the lead time period, and due to the 2-day lead time, demands fall into the lead time period cannot be satisfied by order recommendations. In this situation the quickest supply can only arrive at the first day right after the lead time period, and that is on July 3 in this example.
  
  In the MRP run, the application calculates based on the following steps:
  1. Inspect the first day after the lead time period to see whether there would be any receipt from the existing documents.
  2. If the final inventory before MRP is positive (enough receipts happen to satisfy the inventory demands for that day and the day before), the MRP does not make any recommendation.
  3. If the final inventory before MRP is negative (receipts cannot fully satisfy the demands) , the MRP recommends quantities to fulfill the demands.
    In this case, there are receipts coming on July 3, and the final inventory is 15, therefore the MRP does not make any recommendation for demands of July 2, and there is no receipt from MRP recommendation on July 2.
- Final inventory after MRP: –5
July 3
- Final inventory before MRP: 15
- Actual demands: No demands
- Receipts from recommendations: 0
- Final inventory after MRP: 15
July 4
- Final inventory before MRP: –15
- Actual demands: 15
- Receipts from recommendations: 15
  The final inventory before MRP falls negative, therefore the MRP recommends an order with a due date on July 4. Considering the 2-day lead time, the order is recommended on July 2 and there will be a receipt from MRP recommendation on July 4. With this recommendation, the final inventory after MRP for July 4 is 0.
- Final inventory after MRP: 0
July 5
- Final inventory before MRP: –20 (Initial Inventory: 0; Receipts: 40; Demands: 60)
- Actual demands: 20
- Receipts from recommendations: 20
  The MRP recommends an order on July 3 so that the final inventory after MRP is 0.
- Final inventory after MRP: 0
July 6
- Final inventory before MRP: –90 (Initial Inventory: 0; Receipts: 10; Demands: 100)
- Actual demands: 90
- Receipts from recommendations: 90
  The MRP recommends an order on July 4 so that the final inventory after MRP is 0.
- Final inventory after MRP: 0
July 7
- Final inventory before MRP: –100 (Initial Inventory: 0; Receipts: 20; Demands: 120)
- Actual demands: 100
- Receipts from recommendations: 100
  The MRP recommends an order on July 5 so that the final inventory after MRP is 0.
- Final inventory after MRP: 0

The following table shows the inventory status after implementing the MRP recommendations.

	July 1	July 2	July 3	July 4	July 5	July 6 (Future)	July 7 (Future)
Recommendation		15	20	90	100
Initial Inventory	75	5	-5	15	0	0	0
Receipts	30	50	60	70	40	10	20
Receipts from Recommendations	0	0	0	15	20	90	100
Demands	100	60	40	100	60	100	120
Final Inventory (Before MRP)	5	-5	15	0	0	0	0