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Inventory Ramp-Up Plans to Anticipate Capacity Constraints at Manufacturers using Microsoft Dynamics 365 for Finance and Operations

by Scott Hamilton
Consultant and Author, The Manufacturing Guild

Author’s Note: This 2-part article illustrates creative uses of safety stock requirements and the Minimum Key, in this case to support inventory ramp-up plans. The first part involved a simple case and reviewed two variations of using a Minimum Key, whereas this second part involves a more complex case. The illustrations presented here will hopefully stimulate ideas for other creative uses.

Some manufacturers have capacity constraints that make it difficult to satisfy requirements during periods of high seasonal demand, especially manufacturers of consumer products. These firms often build additional inventory during the periods before the high season to anticipate the capacity constraints. This helps achieve level-loaded production across the periods. As one solution approach, the planners can use inventory ramp-up plans as part of the S&OP (Sales and Operation Planning) game plans for selected high-volume products. The lack of an explicit ramp-up plan means that planners need to manually account for it.

This article illustrates one approach to these inventory ramp-up plans to anticipate capacity constraints, where the definition of an item-specific ramp-up plan employs the combination of a Minimum Quantity and a Minimum Key to calculate safety stock requirements. These considerations are reflected in the following sections within the article.

  1. Example of Capacity Constraints during periods of high season Demand
  2. Example of a Minimum Key to indicate an item’s Ramp-Up Plan
  3. Example of the item’s Net Requirements information with the Ramp-Up Plan
  4. Example of Capacity Load based on Demand Forecasts and Ramp-up Plans
  5. Ramp-Up Plans as part of the S&OP Game Plans for an Item
  6. Case Studies of Ramp-Up Plans
  7. Summary

The approach applies to manufacturers using Microsoft Dynamics 365 for Finance and Operations (D365FO) or previous versions of Dynamics AX such as AX 2012 R3 or AX 2012. The article includes screenshots reflecting the D365FO user interface, but the screenshots could have reflected the user interface in the previous software versions.

The article builds on the Microsoft documentation about safety stock fulfillment for items, and extends other articles about using the Minimum Key for indicating due dates for safety stock requirements and inventory ramp-up plans for stocking a new distribution center.

1. Example of Capacity Constraints during periods of high season Demand

An example of capacity constraints during periods of high season demand provides the starting point for further explanation. In this example, a key resource (labeled Machine A1) acts as the capacity constraint, and Figure 1 illustrates the graphical analysis of the resource’s weekly capacity loads for the June-to-January periods. High season demand occurs during the October-to-December time periods. The capacity requirements reflect planned production orders generated by master scheduling logic based on demand forecasts and infinity capacity assumptions. The infinite capacity assumption is defined by the Master Plan policy for planned production orders, as shown on the right side of the figure.

Figure 1. Example of the Capacity Load for a Resource based on Demand Forecasts and infinite capacity assumptions

The figure illustrates the time periods of high season demand (October-to-December) that would result in overloaded periods for the resource. The overloaded periods require 150% of available capacity. The displayed information reflects the selected format of the graph (indicated in the figure) and choices within the dialogue for “Configure chart content”, such as expressing the load as a percentage of available capacity and displaying weekly increments for a specified range of dates.

2. Example of a Minimum Key to indicate an item’s Ramp-Up Plan

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About Scott Hamilton

Scott Hamilton has consulted globally with several hundred manufacturing/distribution companies on SCM and ERP issues. His publications include multiple books about SCM using Dynamics 365FO/AX, two textbooks about SCM/ERP, and 100+ articles in Scott has been a frequent speaker at Microsoft and user group conferences around the world, and a 10-time winner of the rarely given Microsoft MVP award.

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