The Integration of Cost and Capacity Considerations in Material Requirements Planning Systems

Within the sequential framework of material requirements planning (MRP), a master production schedule (MPS) of end-item production is prepared and a bill-of-material processor is used to convert the MPS into a plan for needed subassemblies, parts, and materials. This study examines the impact of different procedures for considering inventory-related costs and capacity limitations in the two phases of planning: master production scheduling and bill-of-material (BOM) processing. A total of nine procedures are considered for integrating the two phases of planning. The results indicate that the integrated procedures have a significant effect on the trade-offs among inventory-related costs, work load variations, over/under time costs, and excess work loads. Further, the results suggest that the method used to develop the MPS has the primary influence on these trade-offs, but the method used by the BOM processor can sometimes have a moderating effect.