Managing Inventory in Supply Chain (MRP & DRP)

Question 1

Define Materials Requirements Planning

Answer 1

deals specifically with supplying materials and component parts whose demand depends on the demand for a specific end product

consists of a set of logically related procedures, decision rules, and records designed to translate a master production schedule into time-phased net inventory requirements and the planned coverage of such requirements for each component item needed to implement this plan

Question 2

Which are the elements used by MRP?

Answer 2

1. Master production schedule (MPS)
2. Bill of materials file (BOM)
3. Inventory status file (ISF)
4. MRP program
5. Outputs and reports

Question 3

What is MRP II? (Manufacturing Resource Planning)

Answer 3

MRPII incorporates the value stream all the way through the manufacturing facility to the shipping dock where the product is packaged and sent to the end customer. That value stream includes production planning, machine capacity scheduling, demand forecasting and analysis modules, and quality tracking tools. MRPII also has tools for tracking employee attendance, labor contribution and productivity.

Question 4

Define Distribution Requirements Planning

Answer 4

The purpose is to more accurately forecast demand and to explode that information back to develop production schedules.

A firm can minimize inbound inventory in conjunction with production schedules.

Outbound (finished goods) inventory is minimized

Question 5

What are the basic principles of VMI (Vendor Mananged Inventory)

Answer 5

The supplier and its customer agree on which products are to be managed using in the customer’s distribution centers.

An agreement is made on reorder points and economic order quantities for each of these products.

As these products are shipped from the customer’s distribution center, the customer notifies the supplier, by SKU, of the volumes shipped on a real-time basis.

Question 6

DRP develops a projection for each SKU requiring the following:

Answer 6

1 Forecast of demand for each SKU
2 Current inventory level of the SKU (balance on hand, BOH)
3 Target safety stock
4 Recommended replenishment quantity
5 Lead time for replenishment