Academy of Entrepreneurship Journal (Print ISSN: 1087-9595; Online ISSN: 1528-2686)


Materials requirements planning: Performance evaluation of lot-sizing techniques

Author(s): Sabah M. Al-Najjar

The main objective of this study is to evaluate the performance of eight widely used lot-sizing techniques for Materials Requirements Planning in manufacturing firms. After presenting the logic of each method along with its advantages and disadvantages. A case example was used to prepare the Materials Requirements schedule. The performance of each method was based on four criteria: ordering (or set up cost), carrying cost, total inventory cost, and average on hand inventory. The eight lot-sizing techniques were compared and ranked on the four criteria. The comparison revealed that no single technique dominates the other techniques on all criteria. The ranking of the techniques provided some guidelines to direct management's priorities, and to explore the trade-offs between the lot-sizing methods. Although this study is limited to a case example, but its findings provide guidelines as to which method to apply to achieve a certain criterion. The study could be extended to include lead time, safety stock, different product structure, variable demand patterns, and it could include MRP coupled with capacity requirements. The findings of this study may enhance the skills of managers and practitioners in selecting the best lot-sizing technique to achieve cost saving and better performance. Due to the diversity of lot-sizing techniques it would be quite difficult for managers, without some guidelines, to select the suitable method for planning the requirements of dependent parts and subassemblies. This study is important because it augments our knowledge about inventory systems in general, and on MRP systems oriented towards manufacturing firms in specific.

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