Hybrid Inventory System
An inventory system combining features of the fixed reorder quantity inventory model and the fixed reorder cycle inventory model. Features of the fixed reorder cycle inventory model and the fixed reorder quantity inventory model can be combined in many different ways. For example, in the order point-periodic review combination system, an order is placed if the inventory level drops below a specified level before the review date; if not, the order quantity is determined at the next review date. Another hybrid inventory system is the optional replenishment model.
Material requirements planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes. Most MRP systems are software-based, but it is possible to conduct MRP by hand as well.
An MRP system is intended to simultaneously meet three objectives:
- Ensure materials are available for production and products are available for delivery to customers.
- Maintain the lowest possible material and product levels in store
- Plan manufacturing activities, delivery schedules and purchasing activities.
JIT focuses on production as it relates not to forecast sales, but to actual orders in-hand. Centered on minimizing waste, JIT controls delivery of raw materials as needed, thereby minimizing the indirect costs of work in progress (WIP) and materials storage. JIT also aims to reduce lead and setup times. Balancing the two goals of avoiding running out of raw materials and at the same time reducing inventory costs is key to JIT processing.
Where MRP and JIT Meet
JIT relies heavily on a stable of reliable suppliers since they become, in effect, remote storage facilities for raw materials. Keeping inventory lean, however, can mean greater risk to production flow. If, for example, a blizzard hits and raw materials cannot be delivered in a timely fashion, JIT methods, at times, cannot respond quickly enough. Unexpected demand increases can also present challenges. However, MRP is helpful in inventory control as well as proactively addressing potential stock shortages.
Both methods attempt to limit waste and lost time in the production process. MRP is more agile when unexpected orders are received or schedule adjustments are needed. This type of system depends on accurate data entry, tracking, and analysis. When utilized properly, advantages include reduced per unit cost of production, improved capacity allocation, and better response to changing market demand.
Employing MRP along with JIT and incorporated into an Advanced Planning and Scheduling system results in a more optimal process flow where realistic contingency plans can be constructed by utilizing what-if scenarios. A manufacturing firm can, thus, always remain proactive rather than reactive when problematic situations develop.