Determining Net Requirements for Material Requirements Planning

Abstract

This paper presents a design guideline for netting systems that determine net requirements, for push-type production ordering. Two alternative netting systems (full and single) are formulated in an N stage production and inventory system. The performances of the two alternatives are discussed through numerically analysing production ordering variations and inventory level variations at each stage in the processes. The results obtained suggest that: (1) the full netting system is preferable at the production stages, where variance in the accumulated forecast consumption error by the immediately succeeding stage is smaller than the variance in the accumulated forecast market demand error over a production ordering interval and the lead time for the stage. (2) The single netting system may be preferable at the other stages, particularly in regard to production ordering variations.

Keywords:

• Push Systems
• Production Ordering
• Inventory
• MRP