Reducing MRP nervousness with the proportional Order-Up-To policy


Material Requirements Planning (MRP) systems regulate raw material inventory (RMI) levels by periodically issuing call-off orders and order forecasts to suppliers. These orders and forecasts change with each regeneration of the MRP plan, often resulting in a costly effect called MRP nervousness. The manufacturer receives orders from customers, sets production targets, and issues replenishment orders to the supplier. A typical manufacturing echelon of a supply chain comprises of three lead times; the lead time experienced by the customer, the lead time required by the shop floor to produce finished goods inventory (FGI), and the lead time the supplier requires to deliver RMI. If a customer is willing to wait for the product, their advanced demand information (ADI) can lead to lower FGI levels/costs. However, how the ADI affects MRP nervousness is unknown. Using value stream maps and control theory, we model and analyse a manufacturing supply chain echelon to understand how the three lead times influence the MRP nervousness in the future order guidance given to the supplier.

The Second Operations Analytics Workshop, 15th-16th April, KULeuven, BELGIUM