MRP and inventories (Q1068698)

Multi-stage production-inventory systems are considered. Such systems can be described as networks of production stages, separated by inventory points. Inventories may emerge for several well-known reasons, such as lot-sizing, buffering against uncertainty, or anticipating future demand- increases. In this paper we focus on the function of inventories to buffer against uncertainty, especially against demand uncertainty. Operations research models have since long been used to set stock norms. A danger of setting stock norms is that it removes the pressure to reduce uncertainties and fluctuations. This danger is stressed by the manufacturing resources planning (MRP-II) approach. One of the elements of this approach directed to the reduction of the need to use stocks is the formalization of the possibility of rescheduling the work-in-process. The only safety stocks which are allowed in an MRP-II approach (roughly speaking) are stocks at the master production scheduling (MPS) level (end-items or sub-assemblies). The approach has not led to software which much possibilities to generate and use safety stocks at other levels. The software users, however, in many cases like to have some stock at more levels than only the MPS level. Such stocks can be attractive because of lower added value or higher commonality. The subject of the paper is the possibility to use the MRP approach and MRP software to make an effective use of stocks at various levels in the product structure. The best possibility turns out to be hedging, which is a specific kind of overestimation of the MPS.