Comparing Inventory Costs of Different Lot-Sizing Methods in a Material Requirements Planning System: A Case Study of a Plastic Bag Factory
Keywords:Material requirements planning, Heuristic lot sizing, Wagner-Whitin Method
The plastic bag factory in this study has never established material requirements planning (MRP) systems and any specific lot-sizing method. Employees have ordered raw materials based on their experiences. Hence, this research aimed to create an MRP in order to compare inventory costs of different lot sizing methods by the actual inventory cost for the period from July to December 2017. The case of turbid white polyethylene plastic bead was specifically chosen for the study since it was mostly used in the factory’s production during the study period. Five heuristic lot sizing methods consisting of (1) Lot for Lot, (2) Period Order Quantity, (3) Part Period Balancing, (4) Silver-Meal, and (5) Least Unit Cost were used. Moreover, the optimal Wagner-Whitin lot-sizing method was also used. The inventory cost of each method was compared with the factory’s actual inventory cost. It was found that the actual inventory cost of the factory during the study period was 4,495.8 THB. The inventory cost of the optimal Wagner-Whitin method was 2,222.3 THB. Every heuristic lot size method had less inventory cost than the actual inventory cost. The best heuristic method in this case study was the Silver-Meal with an inventory cost of 2,240.5 THB. The findings, therefore, indicated that the factory should apply Silver-Meal heuristic lot-sizing method because it reduced the factory’s inventory cost for the study period by 50.16%. Moreover, the cost of the Silver-Meal method was less than that of the optimal Wagner-Whitin about 1% while its algorithm is simpler and easier to use.
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