What is Material planning: Definition & Tasks
Material bottlenecks, excessive stock levels, and frantic rush procurements cost time, capital, and nerves: when raw materials are missing, production comes to a halt, or warehouse accounting becomes chaotic, the entire manufacturing process suffers. Materials planning ensures the right amount of material at the right time – but what exactly does materials planning mean and what tasks does it undertake in practice?
1. What is Material planning? Explanation and Definition
The Material planning is the systematic planning, control, and monitoring of material inventories to ensure demand-driven supply of production with minimal tied-up capital. As a concise Definition, material planning converts demand data into concrete purchase and manufacturing orders – always taking into account stock levels, lead times and production plans.
The Explanation in practice: While demand planning merely determines what is needed, material planning decides how much, by whom, at what time and in what way procurement should be arranged. It links strategic planning with operational execution and is thus the "control center" of materials management.
Important: Material planning (encompassing both external procurement (supplier orders) and internal production (production orders for in-house manufacturing). Modern systems operate largely automated and take into account complex dependencies such as bills of materials, lot sizes and safety stock.
2. Goals and Significance of Material planning
The central task of material planning is to provide the right amount of material in the right quality at the right time in the right place – while simultaneously minimizing costs and capital tied up. This is particularly crucial in variant-rich manufacturing with tight delivery deadlines.
Main goals of material planning:
- ✅ Delivery readiness: 95-99% material availability for production and shipping
- ✅ Inventory optimization: Minimal inventories without production risk
- ✅ Cost efficiency: Optimal lot sizes, favorable suppliers, low setup times
- ✅ On-time delivery: Production and delivery on schedule according to customer requirements
- ✅ Flexibility: Quick reaction to order and demand changes
- ⚠️ Trade-off: Delivery readiness vs. capital binding – never maximize both at the same time
3. Core Tasks of Material planning
Material planning comprises a clearly defined scope of tasks, divided into daily routine and strategic planning. Modern ERP systems automate many processes, but the dispatcher remains responsible for approvals, exceptions and optimizations.
| Area of responsibility | Concrete activities | Result |
|---|---|---|
| Area of responsibility Demand determination | Concrete activities Explosion of bills of materials, net requirements calculation, consideration of stock levels and planned receipts | Result Exact demand quantity per material at defined dates |
| Area of responsibility Inventory monitoring | Concrete activities Monitoring reorder points, safety stock, capacity limits | Result Early warning system for stock anomalies |
| Area of responsibility Order proposals | Concrete activities Automatic generation of purchase or production orders according to disposition rules | Result Ready-to-release purchase/production proposals |
| Area of responsibility Lot sizing | Concrete activities Calculation of optimal order quantities (economic lot size, rounding, minimum order quantities) | Result Cost-minimal procurement/production lot |
| Area of responsibility Supplier/Resource planning | Concrete activities Selection of sources based on delivery time, price, quality, capacity | Result Feasible procurement/production dates |
| Area of responsibility Dispatcher decisions | Concrete activities Manual corrections, prioritization, supplier blocks, urgent needs | Result Production-capable planning despite exceptions |
| Area of responsibility Reporting & Analysis | Concrete activities KPIs monitor (delivery reliability, turnover frequency, inventory age), variance analyses | Result Continuous process improvement |
4. Planning Methods: Consumption- vs. Demand-Driven
Depending on the type of material and consumption behavior, different planning methods are used. Choosing the right method is crucial for efficient material planning.
| Method | Suitability | Methods | Advantages | Risks |
|---|---|---|---|---|
| Method Consumption-driven | Suitability C-items, standard parts, regular demand | Methods Order-point method, Min-Max, Periodic demand | Advantages High automations, low planning effort | Risks Under-/over-coverage due to demand forecasts |
| Method Demand-driven | Suitability A- and B-items, manufacturing/customer orders | Methods MRP (Material Requirements Planning), BOM explosion | Advantages Accurate demand coverage, no excess stock | Risks Complex planning, dependent on planned vs. actual data |
| Method Hybrid | Suitability Mixed items, seasonal fluctuations | Methods Combination of both methods with forecasting | Advantages Flexibility, adapt to specific demand situations | Risks More complex parameter control |
- ✅ Rule: C-items (80% of range, 20% of revenue) → consumption-driven
- ✅ Exception: A-items (20% of range, 80% of revenue) → demand-driven
- ⚠️ Trap: All demand-driven = overwhelmed dispatchers
5. Key Metrics and Success Factors of Material planning
Successful material planning is measured by clear KPIs. These metrics help manage processes and identify potential improvements.
| KPI | Calculation | Target value | Meaning |
|---|---|---|---|
| KPI Delivery readiness | Calculation (On-time deliveries / total deliveries) × 100 | Target value > 98% | Meaning Material availability for production |
| KPI Turnover frequency | Calculation Material consumption / Average inventory | Target value 6-12× annually | Meaning Optimize capital binding |
| KPI Days of stock on hand | Calculation Inventory value / (Material consumption / 365) | Target value 30-90 days | Meaning Measure inventory capital binding |
| KPI Supplier delivery adherence | Calculation (On-time deliveries / Orders) × 100 | Target value > 95% | Meaning Supplier performance |
| KPI Automation rate | Calculation (Automated orders / Total orders) × 100 | Target value > 80% | Meaning Dispatcher relief |
6. Material planning with Abas ERP
Abas is an ERP solution for the mid-market with a focus on production and manufacturing companies, particularly suitable for efficient material planning. As an ERP for SMEs, ERP for manufacturing, and Cloud ERP, Abas offers specific features for materials management.
Abas-specific strengths in material planning:
- ✅ Automatic requirements planning: bill-of-materials explosion, net requirements calculation, consideration of all storage locations
- ✅ Flexible planning methods: consumption- and demand-driven logic configurable
- ✅ Multi-level planning: supply of assemblies and end products simultaneously
- ✅ Lot-size optimization: economical lot sizes, minimum quantities, rounding rules
- ✅ Supplier/Resource control: source determination, capacity checking, approval lists
- ✅ Cloud-capable: material planning also mobile and location-independent
Typical process in Abas:
- Production orders trigger automatic requirement determination
- Abas checks stocks, open orders, lead times
- Purchase/production orders are proposed according to rules
- The dispatcher reviews/approves or adjusts manually
- Abas monitors delivery and updates inventories
Table of Contents
- What is material planning? Explanation and definition
- Goals and importance of material planning
- Core tasks of material planning
- Planning methods: consumption-driven vs. demand-driven
- Key figures and success factors of material planning
- Material planning with Abas ERP
- Tools and automation of material planning
- Common challenges and solutions
- Checklist: recognizing good material planning
- FAQ
Abas ERP Product Brochure
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7. Tools and Automation of Materials Planning
Modern materials planning relies on ERP-supported automation. While simple Excel spreadsheets quickly hit their limits, ERP systems like Abas offer comprehensive functionality.
Automation levels of materials planning:
- ✅ Level 1 – Basic: Manual order proposals, Excel-based requirements planning
- ✅ Level 2 – Standard: ERP with automatic demand planning, stock monitoring
- ✅ Level 3 – Advanced: Automatic order triggering, supplier identification, lot-size optimization
- ✅ Level 4 – Excellent: AI-assisted forecasts, dynamic safety stocks, real-time connectivity
8. Common Challenges and Solutions
Materials planning often fails due to unresolved core problems. Here are the most common challenges and solutions:
- ⚠️ Problem: Inaccurate lead times
Solution: Use actual times from BDE/MES for planning, include buffers - ⚠️ Problem: Missing master data maintenance
Solution: Clearly define responsibilities, establish a maintenance process - ⚠️ Problem: Too many special cases
Solution: ABC-XYZ analysis, standardization of the 80% cases - ❌ Problem: Dispatcher as firefighter
Solution: Establish automation, introduce exception management
9. Checklist: How to Recognize Good Materials Planning
Check your materials planning using this checklist:
- ✅ Order proposals > 80% automated
- ✅ Delivery readiness > 98%
- ✅ Inventory turnover > 8× per year
- ✅ Supplier order reliability > 95%
- ✅ Dispatcher relief noticeable
- ✅ KPIs available and traceable daily
- ✅ Processes standardized and documented
- ✅ Master data up-to-date and complete
What is the difference between demand planning and materials planning?
Requirements planning determines what is needed, material planning decides how and when it is procured. The planning implements the needs assessment.
Which items should be planned based on demand?
A- and B-items (high/medium turnover share) demand-driven, C-items (low turnover share) consumption-driven. ABC-XYZ analysis helps with classification.
What should the safety stock level be?
Safety stock = (Maximum daily demand × Maximum lead time) × safety factor (1.1-1.3). Too low → stockouts, too high → capital tied up.
Does one always need an ERP for material planning?
For more than 1,000 items, multi-stage production, or high delivery pressure, yes. Excel is sufficient only for small-batch manufacturers with fewer than 200 items.
What is the MRP II process?
MRP-II (Manufacturing Resource Planning) expands MRP to include capacity planning, S&OP and financial planning. Modern ERP systems like Abas cover this.