Material Planning - Meaning & Factors

Published in Operations and Supply Chain Terms by MBA Skool Team, Last Updated: December 29, 2020

What is Material Planning?

Material planning is the scientific method of planning and determining the requirements of consumables, raw materials, spare parts and other miscellaneous materials essential for the production plan implementation. This plan forms a sub- component of the overall organizational plan, hence it is always derived from the overall organizational plan. Material planning essentially carries out the process of forecasting and planning of procurement of materials.

Material Planning Factors

There are two major factors influencing the material planning, they are:

1. Macro factors: These include factors such as business cycles, import and export p [policies, price trends, credit policy and other global factors.

2. Micro factors: These factors include the internal organization factors such as production plan, investments, corporate policies, inventory holding. Other essential factors such as the time of procurement, working capital, acceptable inventory levels, delegation of power seasonality also influence the material planning.

Materials Planning

The key factors influencing material planning can also be shown as inputs from:

1. Based on the forecasting & project management type.

2. Total manufacturing order & service order.

3. Capacity which needs to be produced as well as distribution metrics.

4. Finally, depending upon the purchase order & customer order.

Material Planning can be carried out by:

1. Requirement based on past consumption

2. Material Resource Planning (MRP): MRP starts with the production plan of the concerned manufacturing. Once the annual production plan is determined, the material requirement is calculated by detailed analysis of materials not in use, the ones not in use and requiring procurement, lead time of procurement etc.

Hence, this concludes the definition of Material Planning along with its overview.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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