Interaction between frequency of rescheduling and the role of safety stock in material requirements planning systems

Abstract

We describe how the frequency of rescheduling permitted in Material Requirements Planning (MBP) systems influences the impact of safety stock on system costs, and its effectiveness in maintaining desired levels of customer service. The results are obtained from approximate analytical models and simulation studies of a single product with stochastic demand and a two-level product structure. The results indicate that in some cases it may be more economical to reschedule infrequently and use safety stock as protection against demand variations. They also indicate that the effect of changing safety stock levels is much more predictable when rescheduling is infrequent, and that increasing safety stock may actually result in degraded performance when rescheduling is frequent.