I have demand, on-hand inventory and open purchase orders. What orders can I cover with materials and which orders are going to be short?
This is a simple question in material planning. We frequently get asked by clients to build spreadsheet tools that can provide an answer. You can download a simple example of such a tool here.
Now, most of these companies run some kind of MRP system. You might think that this Material Requirements function would be central to MRP. The problem is that many MRP systems lose the direct connection between demand and material requirements known as pegging. This means that users find it difficult to make decisions about priorities and allocation when there is some kind of shortage. It is often helpful to have the supply conditions for each component expressed for each sales order. This means no logic is hidden by a software system and material requirements are transparent and open.
There is a neat trick that you can use to build such tool. It is so simple and yet powerful that with practice you could build it in 10 minutes. Here is a short video explaining the logic and showing the build from start-to-finish.
We use a Fast Excel Development Template to build this material planning tool. You can download it for free here (or in Excel 2003 here). If you like what you see, you can learn more about how to use the Development Template with these tutorials.
This is a very simple technique for material planning that you can use as the foundation for a powerful material planning system. Usually, the input files come directly from the MRP system, so you can be sure that the data is accurate and up-to-date. Material availability is one half of finite scheduling and this method helps you to quickly project inventory cover and identify shortages before they appear.
View the demo video and download the Development Template and example tool. By following the steps, you can use this neat material planning trick to project inventory cover and shortages; all with direct pegging and full transparency to each sales order.