Companies are always trying to manage their raw materials stock levels through inventory control systems. Such systems track materials from when bought, in stock to their final destination to customers. An inventory control system monitors materials’ movement, usage, and storage. Inventory levels must be managed to ensure that organizations are keeping the optimal amount of each product. Inventory is created to serve customers’ demands. According to Vonderembse & White (2013), “Dependent demand is usually demand for an item that is generated by a company’s production process” (chap. 9.5). Material Requirements Planning (MRP) is the system companies typically use to manage inventory for dependent demand items.
An MRP inventory control system can set reorder points and keep track of the company purchase orders to maintain a functional supply chain. Modern companies use MRP computerized systems, which need production data to generate the right inventory control decisions. Vonderembse & White (2013), states that “The three most crucial data requirements of MRP are the master production schedule, bill of materials, and inventory records” (chap. 9.5). The ultimate goal of using MRP is to maximize the company’s profits while the least amount of inventory possible is sitting in the warehouse. Organizations must do this without compromising customer satisfaction. So, using MRP, the company will place purchase orders for materials and parts to arrive in time to meet the requirements of the master schedule. This way, the company will reduce the number of its items in inventory. By adequately planning the purchasing process with MRP, the company will acquire the components needed to meet the demand of its products, thus avoiding potential delivery delays to customers. Delivering products on time will improve the company’s customer service level.
MRP software can be a great option when organizations struggle with multiple manufacturing process elements. Many companies have implemented an MRP system, and it has benefitted their businesses in different ways. Bland (2021), mentions three companies that have implemented an MRP system. One of them is Northvale Korting (UK), which produces control valves for the automotive, petrochemical, marine, nuclear, water treatment, oil & gas industries.References
Vonderembse, M. A., & White, G. P. (2013). Operations management. Bridgepoint Education.
Bland, A. (2021, August 10). 3 Companies Using an MRP System. Unleashed Software. https://www.unleashedsoftware.com/blog/3-companies-using-an-mrp-system (Links to an external site.)
Vincent’s Post;
Hello Class,
Material requirements planning, or MRP, is an inventory system used for calculating materials required and components needed in order to manufacture a product. The MRP takes into calculations two main parts; the master schedule file and the bill of materials file. As stated by Vonderembse & White (2013), “For MRP purposes, the master schedule is what “drives” the system and generates material requirements.” Depending on what the company is manufacturing, the master schedule file may take place during the finished-products level or at the level of components and subassemblies. The bill of materials file is what is used when determining what components of a product are requires and also the quantities of those components in order to make the product.
The primary goal of MRP is to make sure that materials and components are ready and available when they are needed during the production process and the manufacturing takes place on a strategic schedule. Ineffective inventory management can lead to higher inventory costs. Implementing MRP can decrease unnecessary inventory levels while also efficiently manufacturing products. When products are manufactured efficiently and in a timely manner, the customer benefits because they can rely on you and they don’t have to deal with inconvenient out of stock or delivery issues.
I work in retail and for a large corporation department store. Our systems are constantly analyzing inventory data and determining what is sold, what is on-hand, and what is needed in order to replenish products appropriately while also avoiding having too much inventory of a single product. While this might be a slightly different type of inventory management due to us not actually manufacturing products, it has a similar concept.
Vonderembse, M. A., & White, G. P. (2013). Operations management [Electronic version]. Retrieved From https://content.ashford.edu/books/AUBUS644.13.2/sections/sec9.5
Perpetual versus Periodic Inventory Systems
Guided Response: Respond to at least two of your classmates’ posts. Rationalize or challenge opinions of others. Include alternate opinions, ideas, and/or additional aspects and considerations. Include reference
Zachary’s post:
The perpetual inventory system continuously inventories levels (Vonderembse & White, 2013, section 10.2), while the periodic inventory system examines the levels on a specific date and time (Vonderembse & White, 2013, section 10.2). Neither system is better than the other but as used in different ways. For example, at the company that I work for, the office supplies are inventoried every other Wednesday and stock is delivered the following on day. Order levels have been determined and once the quantity goes below that level stock are ordered to replenish. This system works well because there is typically not a need for large amounts of office supplies.
My wife works for FYE, a music and entertainment store, in the local mall. Their inventory is in a point-of-sale system and uses the perpetual inventory system. Once a DVD is purchased by a customer, the company’s warehouse is notified instantly via computer notification and a determination is made (also, instantly) on whether or not to send a new copy back to the store. This system connects his store with all the stores in the company. When there is an increase in sales area, the computer system sends additional copies to the store that has sold the originals as well as the surrounding locations. Both inventory systems are useful in their respective application. The firm would never need to have continuous review of its office supply level and FYE would never able to place inventory orders every other week. The key to operating a success inventory system is to understand which one fits the organizations needs best.