2.4 MRP Parameter Governance
Material Requirements Planning (MRP) is a deterministic engine. It possesses no intuition. It calculates demand strictly based on the variables you program into the Item Master. If the Minimum Order Quantity (MOQ) is wrong, you accumulate dead stock. If the Safety Stock is arbitrary, you oscillate between shortage and excess. Parameters are not static data entry fields; they are the control rods of the supply chain reactor. Uncontrolled adjustments destabilize the entire procurement signal.
Parameter Architecture & Ownership
To maintain system integrity, write access to specific parameters must be segregated by function.
Commercial Constraints (Supplier-Defined)
- Parameters: MOQ, Order Multiple (Pack Size), Standard Cost.
- Owner: Sourcing / Procurement.
- Source: Vendor Contract or Quotation.
- Rule: These values must mirror physical reality. If the vendor sells in packs of 1,000, setting the ERP to 1 guarantees a receiving discrepancy or a rejected PO.
Strategic Buffers (Internal Strategy)
- Parameters: Safety Stock (SS), Reorder Point (ROP), Days of Supply.
- Owner: Planning / Supply Chain Manager.
- Source: Statistical calculation based on demand volatility ($\sigma_{demand}$) and lead time variance ($\sigma_{LT}$).
- Rule: These are financial levers. Increasing SS requires working capital approval.
Planning Policies (Logic)
- Parameters: Order Policy (Lot-for-Lot, Fixed Period Supply), Shrinkage/Yield Factor.
- Owner: Master Scheduler.
- Source: Production methodology (Batch vs. Flow).
The Change Control Protocol
Do not change parameters based on "gut feeling" or a single bad week. Changes require evidence.
The "Evidence" Rule:
No parameter change > 10% is permitted without a documented source.
- Valid Evidence: New Supplier Quote, PCN (Product Change Notification), or calculated change in consumption rate (Quarterly Average).
- Invalid Evidence: "I'm worried about this part."
Logic: When to Trigger a Change
If Demand Volatility Increases:
- Then Recalculate Safety Stock.
- Formula: Cover the variance, not just the average.
- Constraint: If Cost > Class A threshold, seek Finance approval before increasing inventory liability.
If Supplier Imposes Allocation:
- Then Update Lead Time (See Ch 2.2) AND Switch Order Policy to "Fixed Period".
- Why: Batching orders into larger buckets often secures priority slotting at the vendor.
If MOQ > 6 Months of Demand:
- Then Flag for Engineering Review.
- Action: The carrying cost of this inventory likely exceeds the cost of redesigning the board to use a standard component.
The Parameter Change Log
Auditability is defense. When the warehouse is full of obsolete parts, the audit log explains why the system ordered them.
Maintain a "Parameter Change Log" (system-based or manual control document):
Date | Part Number | Parameter | Old Value | New Value | Reason Code | Approver |
10/24 | RES-0402-1K | MOQ | 5,000 | 10,000 | Vendor PCN (New Reel Size) | J. Doe |
10/25 | MCU-STM32 | Safety Stock | 0 | 500 | New Customer Contract (Risk Buy) | S. Smith |
11/01 | CONN-USB | Order Policy | L4L | Fixed (4 Wks) | Consolidate Freight Costs | Director |
Pro-Tip: Lock the "Order Multiple" field in your ERP. If a part comes in reels of 3,000, receiving 3,001 is physically impossible and causes "orphaned inventory" errors in the WMS (Warehouse Management System).
Governance Cadence
Parameter hygiene requires routine scrubbing. Data rot sets in quickly.
- Quarterly Review (The "Sweep"):
- Action: Compare current MOQ/LT against the last 3 receipts.
- Logic: If you consistently order 5,000 but the system says MOQ=1,000, update the system to 5,000 to align with practice.
- Annual ABC Re-Classification:
- Action: Re-rank items based on current spend.
- Logic: An item that was "Class C" last year might be "Class A" today due to volume spikes. Its Safety Stock policy must change from "Loose" to "Tight."
Final Checklist
Control Point | Requirement | Critical Threshold |
Segregation | Sourcing owns MOQ; Planning owns SS | 100% |
Integrity | Multiples match Pack Size | Zero Receiving Errors |
Audit Trail | Change Log Maintained | Mandatory for all changes |
Finance Gate | Inventory Value Increase | Approval > $5k Impact |
Evidence | Data source cited for change | Quote / Usage Report |
Cadence | Parameter Review | Quarterly |