Challenges of MRP | Inventory | Enterprise Resource Planning

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Challenges of Material requirement Planning - Homework 5
  Production and Inventory Modeling 1. a. Signifcance o Aggregate planning and Material Requirement Planning Aggregate planning is a platform that binds all operations of the productioncompany by managing its capacity and demand thereby help in achievingand maintaining a balance between operational, nancial goal as well asstaying in line with the strategic objective of the company. Therefore,aggregate planning helps to attain the set nancial goals by reducing overallvariable cost of production, meet customers' demand and reduce wait time.Aggregate planning and material requirement planning helps to control theinventory investment by reducing unnecessary stocing while maintainingminimum inventory level. !ith these minimum inventory levels, cost of material requirement is well planned to reduce costs, tracing the materialsin inventory becomes easy and further ensures the right quantity is orderedat the right time through all lot orders. aterial planning helps to smoothensutili#ation of capacity while allocating correct time that matches demandforecast. $% helps in scheduling purchases &order quantity of necessarymaterials and also determine cash (ow requirement based on thesematerials needed, determine their delivery date based on the nal dispatchschedules.  )ig 1.1* Aggregate planning process b. Challenges o MRP 1. aster schedule are used to drive the input for most $% system. Themaster schedule is developed from forecast &which based on itscharacteristics, is always in inaccurate through interactive process of thesales and operation departments, in which the end item requirement is at itsbest, a guess. !hen this end requirement is used, it create a push + basedsystem and error and con(icts results in constant tension between ademand+ driven and push+based techniques that create misalignment. . -ntegrity of data used as inputs in $% leads to $%'s shortcoming andor poor implementation thereby creating chronic and frequent shortages atvarious stages of production, purchase and material schedules. This situationcauses poor inventory performances where there e/ist e/cess wrongmaterial, too little right material, high obsolescence and low inventoryreturns which degenerate into poor service level when customer's demandcannot be met correctly and promptly, this maes the customer to price suchproduct low or stop patroni#ing. since the wrong material are many in theinventory, waste and high e/pedite+related e/penses occurs.0. omple/ity of supply chain and product structure as well as non (e/ibilityof $% to respond to actual maret requirements and consumption lead tocompromise such as attempt to create better forecasting algorithms,over(attening the bill of materials by removing certain levels originallydened for the product and process, and dumbing down of the $% systemthrough the removal of some of the integrated nature of the planningthereby altering the interrelationships within the system, this leads to losingthe precise timing attribute of the system. References.  1. http*aggregate+planning.htm. http*
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