Dynamics GP – Did You Know: IRP
Targeted Industries: Distribution and Distribution with Assembly Work Orders (Manufacturing Light)
Solution: Dynamics GP 2018 Build 18.4
Modules: Purchase Order Processing & Inventory
Inventory management can be a key component for the balance sheet and should be managed to be lean as possible. Inventory needs to be managed so that we don’t carry too much inventory on the balance sheet and we don’t run out when fulfilling orders or when manufacturing assembly workorders.
What is the right amount of inventory to have on-hand ready to sell or use? A question many companies ponder and experiment with so they can become more operational efficient and with less carrying costs.
Microsoft Dynamics GP offers advanced tools with the Distribution series. The distribution series includes Sales Order/Invoicing, Purchase Order Management, Inventory Control and Light Duty Manufacturing.
This article will focus on the inventory module and the purchasing module. Our goal will be to provide tools to assist in managing the optimum inventory quantities.
IRP or Item Resource Planning is a concept available that provides a “MRP” type experience for inventory purchasing buyers.
IRP offers MIN/MAX configurations by item by site. This is a way to have the system to monitor inventory quantities against all demands such as sales orders, assembly work orders or issuing inventory to projects and incoming purchase orders. IRP has the ability to mark items or flag them to participate in the purchase order generator feature. Things like vendor lead time and safety stock can be considered when suggesting to a buyer the amounts of inventory that are needed to keep us in line with our MIN/MAX carrying quantities.
Here is a screen shot in the setup of an item in the Cards area:
The IRP window can be accessed from the Item Card Go To option or under Inventory > Cards > Item Resource Planning
Here the site WAREHOUSE is being examined. For this item/site combination, we are flagging the order policy to use PO Gen. PO Generator is an automated feature GP has to create purchase orders for items in a critical stage according to the setup flags. These flags are the Order Point QTY, Order-Up-To-Level, Safety Stock and purchasing lead time.
GP will monitor these parameters and create suggestions to a buyer(s) on what needs to be ordered from the supplier vendors. One step further is the automatic creation of purchase orders that can be generated and emailed to the suppliers using the PO Gen window (shown later)
In this scenario, this item/site will flag GP to create a Purchase order anytime the quantity for the site falls to 100 or below. When this happens, we have flagged GP to order up to 1.000 of these items and the vendor has an average lead time of 5 days.
By using our system information and the PO Generator option the system advises we need to purchase this item. Below are the windows that contain information as you process. The yellow yield sign lets us know something is missing. When we drill down on the item, we see the unit cost is 0.00 and the PO Gen will not complete until we address the unit cost. These things can be added on the fly while automatically creating your purchase orders. A huge time saver!
These tools can be used for centralized purchasing across many sites or can be independent site by site. We can also use the buyer and planner features to assign these items to buyers or planners. Then a planner can be responsible for a group of inventory items used at all locations so that a relationship with vendors can be fostered in hopes of volume pricing forgiveness.
By using the IRP or item resource planning feature, GP will function like MRP letting a company know where they stand on their inventory, what needs to be purchased to meet demand and automate the creation of the purchase orders. These tools will contribute to your operational efficiencies for managing inventory.
Important to note, the GP light manufacturing which uses bill of materials and assembly work orders also participates in the IRP process. So if you are a light assembly manufacturer you can use GP to plan your work orders while leveraging the IRP features making your shop run lean with respects to your inventory.
Assembly work orders are created from a BOM in GP. The work orders can in three different statuses:
- Work Order Entry
- Not Released
- Scheduled but not released. The work order is in a scheduled status but raw material or other components have not been released from inventory
- Scheduled and on the shop floor for production. The work order has been released to the shop floor and has decreased raw material or other component quantities. The process will now convert the BOM into a Finished Good.