Just in time manufacturing responds to current demand
Time to Shipment MRP is designed for just in time manufacturing, which only responds to current demand that needs action now. Forecasts of all types, including the multi-bucket forecasts in old-style MRP systems as well as future jobs and blanket purchase orders, attempt to align future supply with projected demand and are consequently vulnerable to shortages and over-stocking.
Time to Shipment MRP does not include forecast planning
Time to Shipment MRP does not include forecast planning because it is counter-productive and incompatible with just in time manufacturing. Instead, stock replenishment planning is used to generate supply pipelines that are self-adjusting to actual demand.
Manual forecast planning is prone to shortages and over-stocking
Many small businesses use manual forecast type planning methods such as future job explosions and blanket purchase orders to synchronize long-term supply with projected demand. Forecast type planning is counter-productive because it is prone to shortages and propagates over-stocking.
Forecast supply always differs from actual demand because no one can predict the future with pinpoint precision. When forecast supply for an item is less than actual demand, a shortage occurs. When forecast supply is greater than actual demand, over-stocking occurs and continues propagating unless scheduled quantities are reduced in coordination with suppliers. Inventory easily gets out of control.
Future jobs are tentative and subject to frequent changes
Future jobs are tentative by nature and require frequent quantity changes, date changes, and cancellations to stay synchronized with actual demand, as well as component changes to stay current with latest BOM specifications. Modifying or cancelling jobs is highly problematic because of interdependencies with other jobs and purchase orders that may already be in progress.
Demand-driven jobs are firmly set
By contrast, Time to Shipment MRP only generates jobs in response to current demand that needs action now. Demand-driven jobs are firmly set without being subject to the quantity changes, date changes, cancellations, and specification changes that are commonly required with future jobs.
Supply pipeline planning triggers demand-driven jobs and POs
Instead of trying to synchronize supply and demand with future jobs and blanket purchase orders, Time to Shipment MRP uses supply pipeline planning to ensure that stocking order policy items trigger demand-driven jobs and purchase orders at regular intervals without shortages and over-stocking.
Stock replenishment is triggered by actual demand at regular intervals using dynamic Reorder Points and Min Order quantities. A monthly Sales or Usage rate and Safety Factor buffer are incorporated into the Reorder Point and a Supply Days interval is incorporated into the Min Order quantity.
For low-value items, a fixed monthly Safety Factor buffer can be used without a monthly demand rate to provide a “set it and forget it” setting that can be left indefinitely as is without need for periodic review.
A supply pipeline is self-adjusting
Unlike future jobs and blanket purchase orders, a supply pipeline is self-adjusting in response to actual demand. When actual demand for an item is greater than the monthly demand rate and safety buffer, replenishment is triggered earlier than the supply days interval, which minimizes the duration of any shortage that may occur. When demand is less than the monthly demand rate and safety buffer, replenishment is delayed until it is needed, which automatically caps stock on hand and prevents over-stocking.