Last updated on Sep 17, 2024

What are the best tools or methods for performing what-if analysis for MRP contingency planning?

Material requirements planning (MRP) is a method of planning and scheduling the production and inventory of materials and components based on the demand and supply of finished products. MRP helps to optimize the use of resources, reduce costs, and avoid shortages or excesses of materials. However, MRP also faces some challenges and uncertainties, such as demand fluctuations, supply disruptions, quality issues, or changes in production plans. How can you prepare for these scenarios and ensure that your MRP system can cope with them? This is where what-if analysis comes in.

1 What is what-if analysis?

What-if analysis is a technique of testing different assumptions and scenarios on a model or system to see how they affect the outcomes and performance. In the context of MRP, what-if analysis can help you to evaluate the impact of various factors on your production and inventory plans, such as changes in demand, supply, lead times, costs, capacities, or priorities. By performing what-if analysis, you can compare different alternatives, identify potential risks and opportunities, and make informed decisions on how to adjust your MRP parameters and actions.

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Gabriel José de Souza

Gerente de Suprimentos | Strategic Sourcing | Supply Chain | Inteligência de Suprimentos | Gestão de Estoques | Consultoria
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Exatamente, a análise hipotética é uma ferramenta valiosa no contexto do MRP. Ao testar diferentes cenários e suposições, você pode entender melhor como variações na demanda, oferta, prazos de entrega e outros fatores afetam seus planos de produção e estoque. Isso permite a comparação de alternativas, a identificação de riscos e oportunidades, e embasa decisões informadas para ajustar parâmetros e ações do MRP, garantindo uma resposta mais ágil e eficaz às mudanças no ambiente de negócios.

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Eyal Boneh

MRP controller & data analyst
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Some top tools and methods for what-if analysis include: *Scenario Planning:* Create hypothetical situations (like supply disruptions or demand spikes) and simulate their impact on your MRP system. * **Spreadsheets:** Excel or similar tools can be used to model your MRP data, allowing you to make manual adjustments and see the resulting changes. * **MRP Simulation Software:** These specialized tools let you run detailed simulations, considering multiple variables and complex interactions. * **Sensitivity Analysis:** Change one variable at a time (like lead time or safety stock) to observe its effect on overall production. The best choice often depends on the complexity of your MRP system and the level of detail you need in your analysis.

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2 Why is what-if analysis important for MRP?

What-if analysis is a critical component of MRP, as it can help to improve the accuracy, reliability, flexibility, and responsiveness of production and inventory management. By using what-if analysis, you can validate and refine MRP inputs like demand forecasts or bill of materials. You can also optimize MRP outputs such as production orders or purchase orders. Moreover, what-if analysis can help to anticipate and mitigate the effects of uncertainty and variability on your MRP system. Finally, you can use what-if analysis to explore and evaluate the trade-offs and consequences of different MRP scenarios in terms of key performance indicators like inventory turnover or service level.

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3 How to perform what-if analysis for MRP?

When performing what-if analysis for MRP, there are various tools and methods available, depending on the complexity and scope of your MRP system and the objectives and criteria of your analysis. Spreadsheet software, such as Excel, can be used to create simple or advanced MRP models that allow you to input data, formulas, and assumptions and generate outputs. Simulation software, such as Arena, Simul8, or AnyLogic, can also be used to create dynamic and stochastic MRP models that mimic the behavior and interactions of your production and inventory system over time. Additionally, optimization software, such as GAMS, CPLEX, or LINGO can be used to create mathematical MRP models that formulate your production and inventory problem as an objective function and a set of constraints. These tools offer features such as data tables, random variables, algorithms, solvers, or sensitivity analysis to find the optimal or near-optimal solution for your MRP problem.

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4 What are the best practices for what-if analysis for MRP?

To perform effective and efficient what-if analysis for MRP, it is best to follow some best practices. Start by defining objectives and criteria, such as reducing costs, increasing service levels, or balancing inventory. Additionally, select KPIs to evaluate and compare MRP scenarios. Then, choose the most suitable tools and methods for the system and objectives. Design and test scenarios based on the factors that affect the system, and analyze the results by comparing outputs and KPIs. Interpret the results to identify strengths and weaknesses of each scenario. Finally, communicate findings by presenting results in a clear manner, then implement changes based on the what-if analysis.

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Ahmed Elsayed

Dynamic and results-driven Supply Chain and Sales Professional combined experience in inventory management, demand forecasting, procurement, sales operations, and customer care|
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Define clear objectives for scenarios like demand changes or supply disruptions. Use reliable, up-to-date data for inputs like forecasts and lead times. Simulate multiple scenarios (e.g., demand surges, capacity changes). Focus on key metrics like stock levels, delivery times, and costs. Test buffer strategies (safety stock, lead time buffers) to improve flexibility. Collaborate across teams for diverse input and validation. Document and compare results to refine decisions. Use advanced ERP tools for accurate, real-time analysis.

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What are the best tools or methods for performing what-if analysis for MRP contingency planning?

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1 What is what-if analysis?

2 Why is what-if analysis important for MRP?

3 How to perform what-if analysis for MRP?

4 What are the best practices for what-if analysis for MRP?

Material Requirements Planning (MRP)

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