Chapter 8.1, Problem 8P

Summary Introduction

Interpretation:One of the system for forecasting demand (for MRP) provides data after smoothening demand while the other one aims at better accuracy resulting in ‘spiky’ demand for various planning periods . Highlight the advantages of the first over the second one.

Concept Introduction:The input toMRP is the demand of the final item for which the dependent items are to be managed. Demand of the final item over the planning timeframe can be taken in many ways-ranging from just historical data to forecasting/estimation methods. The forecasting methods can make, rather accurate forecasts, allowing fluctuations during different periods, even if wide. Alternatively, the forecasts can be evened out so as to keep on producing without major fluctuations. (In lean terminology, this is called levelling the load). Each of these i.e forecasts with accuracy or with consistency, has its own advantages and disadvantages.