Determining requirements: The basis for on-time procurement of materials and goods
With regard to materials planning, it is important to ensure the procurement of required goods and materials on schedule. The less capital is tied up and the better production is supplied with goods, the better. The prerequisite for this, however, is a realistic determination of demand, which is always the basis for a demand-based or consumption-controlled disposition.
We explain the differences in needs assessment and highlight the advantages and disadvantages of each approach.
Definition needs assessment
What material requirements exist by time and quantity? The answer to this question is not as simple as it seems at first glance. This is because requirements determination, also known as requirements planning or procurement planning, knows various procedures. But before we go into this in more detail, the first step is to look at how needs are met in the first place. Make-or-buy decisions are used to determine, among other things, whether the strategy is more likely to involve in-house or external production - as part of the higher-level material requirements planning. Demand assessment, on the other hand, focuses on short- or medium-term demand, which is further subdivided into primary, secondary and tertiary demand.
Note: Not only the costs for the procurement of requirements play a role, but also dependencies such as external batch sizes in production, which must also be considered in the context of transport and storage costs in general.
Overview of different types of requirements determination
In the context of logistics, demand-driven or consumption-driven scheduling is primarily used to determine demand. The basis for this is the determination of the number of parts or products required.
A key aspect of Just-In-Time (JIT) delivery is the pre-determined provision of materials and their immediate further processing. The bearing is only minimally dimensioned and production is almost completely bearingless. Demand-driven scheduling is mainly found in areas with production operations where there is a high, precisely calculable demand for goods. Especially for large-volume goods with high value (so-called AX parts), for example vehicle seats in car production.
Demand-driven scheduling follows the principle that parts are only produced or procured when there is a specific need. Here, bills of material are used to determine the dependent requirements. Storage costs are quite low, but this method requires precision and solid planning.
In this form of requirements determination, only those goods are planned that are regularly required and can therefore be produced or procured according to schedule. The smaller the random fluctuations and the better the consumption can be quantified on the basis of previous values, the more efficient is a consumption-controlled disposition. Conversely, this type of demand assessment is associated with higher inventory costs and potential supply risks, mainly due to inadequate demand forecasting.