Basics of Min/Max Levels | Overview of MRP
Built right within SAP Business One are best practices in inventory management. With the software, you can achieve a "Good" and "Better" strategy for addressing your inventory management requirements. The "Good" strategy starts with using min/max levels within the item master to maximize your spend on purchased or sales items. The "Better" strategy would be to make the most of the MRP, or Materials Requirements Planning portion of the software. We'll talk in more detail about them.
GOOD: Basics of Using Min/Max Levels in SAP Business One
Minimum and Maximum levels can be applied to items in your inventory. A minimum level is the lowest number of items you need to have on your shelf at any given time. A maximum level is the highest quantity of stock you'd like to have on your shelf at any given time. By setting min/max levels on items, you can be sure you'll have enough stock to support customer orders, but not too much stock that you have excess inventory.
Let's take a look at the Item Master Data, Inventory Data tab:
Here are the fields to add minimum and maximum stock levels for inventory, sales or purchased items.
Entering min/max levels is most helpful when combined with the MRP in order to more accurately plan for purchases.
However, you can also use min/max levels to set alerts on popular items. When you set an alert, the appropriate person will be notified when an item deviates from a minimum stocking level — thus prompting them to place a purchase order for more.
Once you've bought into using min/max levels to maintain proper inventory levels, how does SAP Business One help you to determine what the Min/Max level should be for any particular item? It's easy.... use the Sales Analysis by Items Report to view sales volume information on each item & you can also use the Purchase Analysis by Items Report to analyze purchase volume for each item. Then use whatever inventory management method you desire to determine order point in order to maximize the economic order quantity.
BETTER: Overview of MRP (Materials Requirements Planning) Module in SAP Business One
Material requirements planning (referred to universally as MRP) is a guided process for made or purchased items that looks at inventory item demand, and recommends what items you should buy or make to satisfy demand. Within SAP Business One, MRP looks at inventory item demand through:
- Sales orders
- Bill-of-materials data
- Inventory data
- Scheduled production orders
- Purchase orders
Within SAP Business One is an MRP wizard. This wizard will allow you to choose what to consider when planning either purchase orders (to buy more product) or production orders (to make more product). You can also choose over what period of time you'd like to include in your planning horizon....do you want to have enough stock for just this month, the next 2 months, or the next 12 months — it is up to you.
The output of an MRP run is a set of recommended Purchase or Production Orders, which you can select and execute. Note that in order to run MRP effectively, you are required to set up your items within the item master for MRP through the Item Master, Planning Tab.
For inventory management software, SAP Business One and these built-in tools can help you have the right inventory - at the right time.
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