Monthly Demand settings do not need to be perfect
Sample Item MRP Settings:
Order Policy = Stocking Demand
Monthly Demand + Safety = 30
Supply Days = 30
For the Stocking (Monthly Demand) order policy, the goal is to have an item on hand to meet a high probability of your anticipated sales and usage needs. Your monthly sales and usage values cover your expected demand and your monthly Safety Factor value covers potential volatility. Your supply days setting determines the frequency of your Jobs (M Items) or Purchase Orders (P Items).
In reality, it is expected that you will have quite a bit of variability on your actual sales/usage versus your MRP monthly demand settings. DBA is very forgiving and you do not have to be exact on your settings to get very good results.
Here are a few possible usage scenarios to demonstrate the flexibility of DBA demand driven stocking:
Actual Usage = Exactly on Target with MRP Monthly Demand Estimates
In our example, if you exactly sold or issued 30 units a month, your Jobs and Purchase Orders frequency would be equal to your Supply Days and would be spaced 30 days apart. The graph above shows the case of perfect uniform daily usage exactly equal to your MRP settings total monthly demand. This would be very unlikely to occur so perfectly in reality, but it does illustrate the supply day interval.
Actual Usage Less than MRP Monthly Demand Estimates
If you actually sell or issue less units of an item than your MRP total monthly demand you would expect the quantity on hand to last a bit longer than your 30 days supply days target. For example, your next Job or PO might be 40 days apart instead of 30.
Important Safeguard: New Jobs/POs are always triggered by actual demand. Even if your MRP demand settings are much greater than your actual usage, the system will not continue to create more Jobs or Purchase Orders. Your on-hand quantity will just last longer than your supply days target. This built in safeguard is a major improvement over forecast based systems and/or blanket purchase methods that can continue to create inventory even when actual demand lags.
Actual Usage Greater than MRP Monthly Demand Estimates
If you sell or issue more units of an item than your MRP total monthly demand, you would expect the interval between your Jobs and Purchase Orders to be less than your Supply Days target of 30 days.
Actual Usage Exceeds your Stock on Hand
Your goal for stocking items is to have stock on hand to cover most demand scenarios that you expect to encounter. It is still possible that your actual demand exceeds your stock on hand and you run out of stock. Maybe you got a big sale or an unexpected uptick in business (congratulations!). In this case, MRP will create a Job or Purchase Order to meet this demand and it will set the requirement to the date where your projected quantity goes negative. The Job or PO will show up in the Late Supply screen to help you manage your expected shipment dates and communicate your new dates with your customers. The Job will also automatically receive higher priority in all work center queues that it passes through because it will be late against its requirement date.
DBA Tip: Do your best to put in usage + safety values that cover a high probability of your anticipated usage scenarios. The goal is to have the item on hand for immediate use in Sales Orders and Jobs. Do not panic if you have the fortune of selling more than expected. The system will create Jobs to fill this shortage and the system priority in Work Centers will help you get back on track automatically.