Comparing Inventory Costs of Different Lot-Sizing Methods in a Material Requirements Planning System: A Case Study of a Plastic Bag Factory
DOI: 10.14416/j.ind.tech.2020.06.002
Keywords:
Material requirements planning, Heuristic lot sizing, Wagner-Whitin MethodAbstract
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.
References
[2] R. Aryanto, H. Sarjono and I. Widyasari (2010) Material Requirement Planning (MRP) to Increase the Tire Manufacturing Rentability, World Automation Congress Biannual Conference, Proceeding, 1-15.
[3] S. Kumar and D. Meade, Has MRP Run Its Course? A Review of Contemporary Developments in Planning Systems, Industrial & Management System, 2002, 102(8), 453-462.
[4] J. Heizer, B. Rendar and C. Munson, Operations Management: Sustainability and Supply Chain Management, 12th Ed., Pearson Education Limited, Essex, England, 2016.
[5] C.M. Wong and B.H. Kleiner, Fundamental of Material Requirements Planning, Management Research News, 2001, 24, 9-12.
[6] A.A. Silver, D.F. Pyke and D.J. Thomas, Inventory and Production Management in Supply Chains, 4th Ed., CRC Press, FL, USA, 2017.
[7] H.M. Wagner and T.M. Whitin, Dynamic Version of the Economic Lot Size Model, Management Science, 1958, 5(1), 89-96.
[8] N. Hasanati, E. Permatasari, N. Nurhasanah and S. Hidayat Implementation of Material Requirement Planning (MRP) on Raw Material Order Planning System for Garment Industry, IOP Conference Series: Materials Science and Engineering, 2019, 528(1), Art. No.012064, 1-8.
[9] A. Lasya and Y. Handayati, Material Requirement Planning Analysis in Micro, Small and Medium Enterprise Case Study: Grooveline - an Apparel Outsourcing Company Final Project, Journal of Business and Management, 2015, 4(3), 317-329.
[10] H.C. Bahl and N. Bahl, An Empirical Comparison of Lot-Sizing Methods Available in an ERP System, California Journal of Operations Management, 2009, 7, 77-83.
[11] L. Baciarello, M. D’Avino, R. Onori and M.M. Schiraldi, Lot Sizing Heuristics Performance, International Journal of Engineering Business Management, 2013, 5(6), 1-10.
[12] J. Uansamer and O. Kittithreerapronchai (2014) Chemical Inventory Management in Tire Cord Fabric Industry Using Lot Sizing, The Journal of KMUTNB, 24(2), 308-317. (in Thai)
