Assignment:
Explain how MRP can decrease a company's inventory while improving its customer service level. Include a real-life example
Manufacturing is the complex process which requires specific planning. Material requirement planning (MRP) is the inventory management system that helps in managing the manufacturing process. This process helps in scheduling and filing of orders for raw materials which is converted into the finished goods. The MRP system manages the dependent demand items, i.e. those items which need to be used in the manufacturing process. The system breaks down the total requirement of inventory into separate stages which facilitates the production process and helps in keeping the flow at the even level. It also helps in keeping the inventory cost minimum. The MRP contributes in managing inventory and performs the following basic functions:
1. In ensures the adequate stock of the demand dependent items.
2. Helps in maintaining the optimum level of inventory and makes the system most cost effective.
3. This is used in the purchase of the new stock, plan the daily manufacturing process and deliver the finished goods effectively and efficiently.
Thus, MRP is the system which helps in improving the service level for the customers. But one of the major drawbacks of this system is that it includes the investment of huge cost which is possible only for the big organizations. The real life examples requires thousands of iterations which can be time consuming as it is uncommon to have a single run of MRP which takes around 12 to 14 hours. This whole process depends on the speed and availability of the computational power.
References:
1. https://www.slideshare.net/vibhash123/mrp-inventory-management
2. https://www.columbia.edu/~gmg2/4000/pdf/lect_06.pdf