Managing safety and strategic stocks to improve materials requirements planning performance

Abstract

This paper provides a methodology for managing safety and strategic stocks in materials requirements planning (MRP) environments to face uncertainty in market demand. A set of recommended guidelines suggest where to position, how to dimension and when to replenish both safety and strategic stocks. Trade-offs between stock positioning and dimensioning and between stock positioning and replenishment order triggering are outlined. The study reveals also that most of the decisions are system specific, so that they should be evaluated in a quantitative manner through simulation. A case study is reported, where the benefits from adopting the new proposed methodology lie in achieving the target service level even under peak demand conditions, with the value of safety stocks as a whole growing only by about 20 per cent.

Keywords

MRP inventory management variance control

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