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Materials planning – efficient procurement of materials for the company

Published: · Last updated: · 10 min reading time

In today’s world, a company needs a sophisticated system for procuring its materials. The material should be available in sufficient numbers within the company, but there should be no excess stock to unnecessarily drive up warehousing costs. With a view to Industry 4.0, the Internet of Things, and the associated automation and digitalization, it is more important than ever that the entire process around material procurement is well planned. More and more demands are being placed on companies in this regard. Therefore, in this blog post, we discuss (automatic) material planning.

What is material planning?

Certain materials are required in a company. These materials can be individual parts or complete assemblies. Material planning ensures that the materials are available to the company at the right time and in the right type and quantity. The required material is compared with the current material stock via production orders and parts lists. Based on this information, replenishment lead times are used to plan and execute orders.

What tasks belong to material planning?

The following tasks, among others, are performed by materials planning:

  • Keeping inventory costs as low as possible.
  • Increase readiness for delivery at suppliers.
  • Determine the type of material for the requirement.
  • Determine the time of procurement of the required material.
  • Determine the required quantity to be procured.
  • Inventory calculation: The target requirement is compared with the actual condition. The difference is the requirement, which must be procured and ordered.
  • Calculation of the order quantity: The required demand (target demand) must be planned and ordered so that it can be procured in a cost-saving manner via several purchase orders.

What are the types of demand?

Different types of demand are distinguished. Some of them are:

What are the advantages of (automatic) material planning?

Problems during material procurement and production can occur when there are delays and disruptions in the procurement process. As a result, delivery dates cannot be met, and the entire production process comes to a halt or even a complete standstill. This is especially the case when material requirements planning is not used.
Using material requirements planning in a company, therefore, offers several advantages:

  • Ensuring on-time deliveries with procurement based on demand and consumption.
  • Storage costs are reduced.
  • Stocks are optimally adjusted.
  • Time-exact supplies are made possible under consideration and adjustment of changed environmental conditions.
  • Lead times of the material are reduced.
  • Delays in procurement, as well as failures, are avoided.
  • IT-supported shipment tracking with the help of batch and serial number management ensures that the current status of material procurement is always guaranteed.
  • After the demand has been determined, the structure for the manufacturing process is set up, resulting in a better overview.
  • Make-or-buy decisions are facilitated. In the case of make-or-buy decisions, whether products are to be procured from external manufacturers or manufactured in-house must be decided.

What does automated material planning mean?

Everyday materials planning, as already mentioned, means that stocks in the company are monitored, and orders are triggered accordingly when supplies are low.

In automated materials planning, the computer-aided system ensures that orders are executed automatically. At the same time, the system always keeps an eye on the availability of the material. This ensures that there is always sufficient material available.

These conditions must be fulfilled for automated material requirements planning

For material requirements planning to be automated, it must adhere to specific procedures. These procedures determine the management of the enterprise. The ideal process of material procurement is such that the entire procurement process, starting with the determination of material requirements through the necessary ordering, to the delivery in the company and the final delivery to the customer takes place without complications. Automated inventory planning is intended to ensure that no incorrect items are ordered and no over-or under-procurement occurs. Over-procurement is when too much of the required material has been ordered, and this now becomes stock. In the case of under-procurement, too little material was ordered. This then causes production bottlenecks. In the case of over-procurement, the additional problem arises that storage costs skyrocket due to too much material being available, as space must be open for the excess material. In addition, extra material ties up the company’s capital.

Several factors are necessary for automated material planning to run smoothly:

  • MRP controller: (material) planning would not work without the MRP controller. The MRP controller is the “conductor” of the entire MRP process. The MRP controller determines how much material must be in stock at all times. In this way, he ensures that no material is missing. Necessary for the MRP controller is the reorder level. The reorder point is the stock level at which material that is needed must be ordered again. The MRP controller must know at all times when the reorder level must be higher or lower. Especially when it comes to seasonal items, the MRP controller must keep this in mind and adjust the reorder level accordingly. The MRP controller must react promptly to fluctuations and events with a feel for the circumstances to ensure the correct inventory.


  • Buyer: The buyer ensures that the required materials are ordered from the respective suppliers. He is responsible for the contractual framework conditions (delivery conditions) and negotiates these with the suppliers. Among other things, the delivery terms must specify the planned delivery time and the lot size. The lot size is the quantity that the supplier must deliver at a specific time. The lot size must be selected in such a way that there is always an ideal lead time. To ensure that the reorder point is always chosen correctly, the planned delivery time comes into play. Suppose a purchase order has a delivery time of several weeks. In that case, it is the task of the MRP controller to enter the reorder point in the system accordingly so that more of the required material is ordered. It is advisable to always choose short delivery times or order from suppliers who have a short delivery time. This avoids delivery bottlenecks and prevents the product from being stalled due to a lack of material. It makes sense for the purchaser to contractually obligate a substitute supplier in addition to the leading supplier. If the main supplier can no longer deliver due to supply bottlenecks or company bankruptcy, the second supplier is the necessary backup. This ensures that delivery problems can be responded to quickly.


  • Dunning department: The dunning department is an essential component of an automated material disposition. If a supplier does not supply on time and is substantially delayed, this has severe effects on the enterprise’s production. In this case, the dunning department must remind the supplier to fulfill his obligations under the contract executed with him. Thus it is guaranteed that the supplier keeps to its commitments and the delivery times are, if possible, always kept.


  • Secondary supplier: As mentioned briefly, the buyer should always ensure that a secondary supplier always serves as a backup solution. In unforeseen situations, this is of immense importance to react quickly and avoid supply bottlenecks. Often the reorder level is tightly calculated. If the leading supplier should now fail, the company is threatened with economic damage because its customers can no longer be supplied. Planned delivery time and lot size agreed with the actual supplier must also be decided with the replacement supplier so that there are no significant differences in deliveries.


  • Automated system: In this complex process, the computerized system ensures that the responsible department or person (for example, the buyer or MRP controller) is reminded by the system when the stock has fallen to a critical level and needs to be reordered. Even if a supplier causes incorrect deliveries, the system ensures that the dunning system sends a reminder to the supplier. If, for example, the stock level is too low, the intelligent software automatically orders the required material.

Software for materials management

Materials management implies that the product is supplied with material. Material includes raw materials, auxiliary materials, and supplies, as well as vendor parts. Materials management consists of all operations of disposition, determination of demand, planning of the required order quantity, and unlimited storage. This includes the transport of materials within the company and the waste that is generated.

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