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A Comparison of Reorder Point and Material Requirements Planning Inventory Control Logic *
Author(s) -
Jacobs F. Robert,
Whybark D. Clay
Publication year - 1992
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1992.tb00392.x
Subject(s) - reorder point , inventory control , operations research , service level , perpetual inventory , computer science , material requirements planning , point (geometry) , control (management) , lead time , inventory management , cycle count , preference , inventory cost , inventory theory , inventory valuation , operations management , business , economics , microeconomics , economic order quantity , mathematics , marketing , supply chain , production (economics) , geometry , artificial intelligence
This paper reports the results of simulation experiments that compared the inventory efficiency (i.e., the customer service level provided by a given level of inventory) for two different inventory policies. One of these policies uses time‐phased information on future demands like that found in material requirements planning (MRP) systems, while the other (the reorder point or ROP policy) relies on forecasts implicitly based on average past demands. After establishing that the MRP policies dominate for reasonable conditions, the uncertainty of the forecasts was manipulated until the policy preference was reversed. It requires a very perverse relationship between the forecast and actual demand before ROP beats MRP on inventory efficiency.