Thursday, May 24, 2012
Traffic lights in MD07... put them to good use!
In MD07 you get a complete list of all materials assigned to your MRP Controller portfolio. That list has, amongst other information, traffic lights which are colored red, yellow and green. The materials are usually sorted that way, reds first, then yellow, then green (of course, you can change that sorting sequence) indicating where a material falls in terms of its “stock days of supply”.
If you are working in a Make to Stock environment, you should forecast your product’s Sales and cover any variability – the difference between forecasted and actual sales, the lack of adherence to planned lead times and any interruptions – with a safety stock. The type of safety stock I strongly favor over the static safety stock in MRP2, is the dynamic safety stock you can have the system drive by way of the Coverage Profile. This is because it is expressed in days and therefore can be assigned to many products and is visible in MD07, if you know how to set it up and interpret the lights.
A range of coverage profile allows you to set a target safety stock level as well as a maximum stock level. If, for example, you set 5 days as the target and 20 days as the max for a group of products in your warehouse, you are telling the system that there should be enough inventory left over, after you cover your forecast, to get you through 5 days of average sales, should you sell more than what was predicted and forecasted. But the system also cuts the supply (if you have lot sizing EX) so that your inventory never exceeds more than 20 days to be held in stock. Should you work with fixed lot sizes or minimum lot sizes, there might be the occasional excess stock (that’s when you get an exception 25).
The system is now able to plan for these targets but, as we all know, there is variability and not everything will turn out to be on par. But you can monitor these levels with MD07. When calling up your list for the product group for which you have maintained the 5 day target and 20 day max, you can set the traffic lights with a range for
< red >> 5 days >> yellow >> 20 days >> green >
This way you will see a display, where all the products which have less than 5 days of supply in inventory, will be on top of the list with a red light. All the products that have inventory which lasts for at least 5 and less than 15 days will be in yellow and all the products with excess stock over 15 days in green at the bottom of the list.