Revised MRP for reducing inventory level and smoothing order releases: a case in manufacturing industry

Marco D’Avino*, Valerio De Simone and Massimiliano M. Schiraldi

Department of Enterprise Engineering Operations, Management Research Group,

University of Rome ‘Tor Vergata’, Roma, Italy

(Received 27 July 2012; final version received 15 December 2012)

IM 37

Although material requirement planning (MRP) systems are widely used in manufacturing companies, they exhibit significant drawbacks.

Rev MRP algorithm has been developed in order to reduce the system nervousness, generate a more regular pattern of order released and lower inventory levels.

The aim of this paper is to test the Rev MRP algorithm on the case of one of the largest Italian manufacturing companies of home appliances.

The company provided 10 three sets of real data, referring to three different runs of their MRP.

Results showed that the Rev MRP outperformed the company’s MRP smoothing the production order releases, eliminating overshoots and drastically reducing the inventory levels along the supply chain, even in case of frequent forecasts updates.

Keywords:

supply chain integration; MRP; procurement; inventory management; bullwhip effect; lumpy demand