Contrast the Significance of the Term Lead Time in the Traditional Eoq Context and in an Mrp System.
Question 1 - Contrast the significance of the term lead time in the traditional EOQ context and in an MRP system.
In the traditional context, lead time is fixed—either as a discrete time or as a probability distribution. Such lead time constancy or variation is outside of the inventory model. Lead time in an MRP system is assumed to be a variable. While specific lead times are stated for planning purposes, these times may be speeded up or delayed as conditions warrant. Indeed, it is this ability to detect needed changes in lead times, either by expediting or de-expediting, that many users cite as one of the most valuable features of MRP.
MRP has had some degree of success in environments where requirements are relatively certain and demand and lead time variability are not excessive. A remanufacturing operation, in contrast, is typified by a great deal of variability and uncertainty due to the very nature of repair. The experimental methodology involved the development of computer simulation models of EOQ and MRP systems. Demand uncertainty, demand variability, and lead time variability were then varied at three levels each to develop a full factorial experimental design. The results were used to test EOQ and MRP using two different performance measures: average number of awaiting parts (AWP) days per repair and total annual inventory cost.
The results lend support for the use of MRP in a remanufacturing environment. The number of AWP days was significantly reduced from that of the EOQ system, albeit at an increased inventory cost. When the two measures are combined, however, MRP appears to outperform EOQ in aggregate.
Economic order quantity is the stage of inventory that minimizes the total inventory investment costs and ordering costs. It is one of the oldest traditional invention scheduling models. The structure used to decide this order size is also known as Wilson EOQ Model or Wilson Formula. The model was developed by F. W. Harris in 1913, but R. H.
In the traditional context, lead time is fixed—either as a discrete time or as a probability distribution. Such lead time constancy or variation is outside of the inventory model. Lead time in an MRP system is assumed to be a variable. While specific lead times are stated for planning purposes, these times may be speeded up or delayed as conditions warrant. Indeed, it is this ability to detect needed changes in lead times, either by expediting or de-expediting, that many users cite as one of the most valuable features of MRP.
MRP has had some degree of success in environments where requirements are relatively certain and demand and lead time variability are not excessive. A remanufacturing operation, in contrast, is typified by a great deal of variability and uncertainty due to the very nature of repair. The experimental methodology involved the development of computer simulation models of EOQ and MRP systems. Demand uncertainty, demand variability, and lead time variability were then varied at three levels each to develop a full factorial experimental design. The results were used to test EOQ and MRP using two different performance measures: average number of awaiting parts (AWP) days per repair and total annual inventory cost.
The results lend support for the use of MRP in a remanufacturing environment. The number of AWP days was significantly reduced from that of the EOQ system, albeit at an increased inventory cost. When the two measures are combined, however, MRP appears to outperform EOQ in aggregate.
Economic order quantity is the stage of inventory that minimizes the total inventory investment costs and ordering costs. It is one of the oldest traditional invention scheduling models. The structure used to decide this order size is also known as Wilson EOQ Model or Wilson Formula. The model was developed by F. W. Harris in 1913, but R. H.
References: http://www.referenceforbusiness.com/small/Mail-Op/Material-Requirements-Planning-MRP.html http://www.enotes.com/small-business-encyclopedia/material-requirements-planning-mrp http://bizcovering.com/business/economic-order-quantity/#ixzz0wEp5To00 http://bizcovering.com/business/economic-order-quantity/#ixzz0wEnomPIB http://webcache.googleusercontent.com/search?q=cache:YnOQ7qQmT9IJ:www.innomet.ee/innomet/ERPKoolitus/Safety%2520Stock%2520and%2520Safety%2520Lead%2520TimesExcercise.doc+what+is+the+role+of+safety+stock+in+an+mrp+system&cd=8&hl=en&ct=clnk&gl=za http://www.isfaq.com/employment/22254.html