Material replenishment is simply the act of replacing parts and materials that have been used. A company may decide to maintain a supply of a certain part. As they use or sell these items, they will reach a point at which they will order more in the hope that they will receive the replacements before the supply runs out. There are many methods of managing resupply/replenishment.
Demand is the use or requirement for an item or product. For end items (products), demand is primarily customer orders but may also include transfers to another facility or warehouse, internal use (as part of a kit or larger product), samples, or items for testing, for example. Demand for components and materials is primarily for use in production of higher-level assemblies or products, and for service or replacement parts. Components and materials may also be sold or transferred to other corporate divisions or plants.
Advanced planning systems provide another way to plan material requirements using a different planning methodology. Both APS and MRP calculate the materials and schedules to manufacture products. MRP is the calculation methodology at the core of most enterprise resource planning (ERP) systems. It creates plans based on projected forecasts and assumes infinite resources such as capacity. APS can plan materials and schedules, but it factors in constraints such as limited production capacity in manufacturing processes (such as, painting, heat treatment, and testing). APS uses these constraints to create a plan that can be executed in the time required.
Cumulative material lead time, or CMLT, is the total time required to manufacture a product. It uses the product’s bill of materials (BOM) to calculate the maximum time needed to procure raw materials and components from outside sources, to assemble subcomponents, and for the final build of the product and testing. That maximum time to complete the entire process is the cumulative material lead time.
Kanban is a manual material management technique that uses a physical signal like a card, a tag, or an empty bin to trigger replenishment. Kanban, a Japanese word meaning “card,” is primarily used to move parts to point-of-use locations within a factory, but it is also used to trigger production in a feeder line or focused factory, initiate purchase orders or releases for purchased parts, and for other supply chain uses. Modern ERP software systems may include an electronic Kanban function.
DDMRP works with and within traditional MRP, replacing the MRP “push” replenishment process with a visually oriented “pull” demand-driven methodology for strategically important parts. MRP continues to handle its planning processes and the replenishment of non-strategic parts. DDMRP is available to handle changes to demand and is an optional add-on from ERP vendors.
Make to order (MTO) is a sales and manufacturing strategy where customers can customize the product to their specifications during the sales process. Examples include custom kitchen cabinetry or a luxury custom vehicle. Production of the final product only starts after the customer sales order has been received. Because of that, MTO manufacturers cannot rely on forecasts. Since MTO products are all customized, the lead time to deliver is longer compared to products that are prebuilt and shipped from stock. Tools such as DDMRP and advanced planning systems (APS) are useful because they react to volatile demand and help deliver product quicker.