Question

Consider order point inventory control methods and design strategy for designing manufacturing planning and control (MPC) systems … (a) What is the difference between dependent and independent demand and how do they determine inventory management procedures? (b) What considerations are necessary when determining organizational criteria? (c) How does joint determination of order point and order quality control parameters allow savings in inventory-related cost? (d) What steps are involved in designing MPC systems? (e) What is the role of competitive strategy in MPC system design? Your final assignment should be between 1,000-to-1500-words, include at least five (5) reputable sources, and written in APA Style.

Answer 1

(a) What is the difference between dependent and independent demand and how do they determine inventory management procedures?

Dependent Demand : When the demand for one product depends on the depend for another product, it is said to be dependent demand. For example : Demand for the raw materials are dependent on the demand for the finished products.

Independent demand : When the demand for one product is not dependent on the another products demand it is said to be independent demand. For example : Demand for the finished goods is entirely depends on the customers order sales forecast and other external forces.

The inventory management procedure is different for both dependent demand and independent demand.

When considering finished goods (independent demand) inventory management system it is managed by the processes such as customer order, sales forecast and supply chain management. It is manged through ERP, ERP and JIT

When considering raw materials (dependent demand) inventory management system it is managed by analysis lead times, delivery capacity and delivery schedules. The processes like logistics time, transit time in transportation and warehouse planning are to be analysed and coordinated for the purpose.

(b) What considerations are necessary when determining organizational criteria?

It is important for any organisations to consider certain criteria in inventory management procedure. Following are the important organisational criteria to consider:

• COST - there are several cost factor which influence the inventory management. Different cost reduction techniques to be analysed and coordinated for the very purpose of inventoru management system. Techniques such as JIT and lead times are the major cosiderations to minimise the cost at stock levels.
• CONSIGNMENT INVENTORY - To reduce the cost of inventory consignment inventory relationship should be considered. That is the bills for the expenses should be billed based on usage and not on the basis of delivery of products.
• LEAD TIME AND DELIVERY TIME - Lead time is very important in inventory management system. Here the warehousing, tranport and other costs to be importantly considered for inventory mangement system.
• SAFETY STOCK - Safety stock considers demand, lead time and service levels to maintain proper inventory management system.

(c) How does joint determination of order point and order quality control parameters allow savings in inventory-related cost?

Demand forecasting and sales forecast helps to reduce the inventory cost. Product life cycle and demand patterns helps to determine the inventory level .Order point and oder quantity level with increased communication with suppliers helps to save the cost in MOQs. Hence more frequent orders cn be placed which helps in different situations. A full inventory plan which includes safety stock levels helps to determine the inventory related stocks. EOQ managemnt techniques helps to reduce the inventory costs.

(d) What steps are involved in designing MPC systems?

MPC - MANUFACTURING PLANNING AND CONTROL SYSTEM:

There are 5 steps in MPC system.

1. Strategic Business Plan
2. S&OP - Sales and operations plan
3. MPS - Master Production Schedule
4. MRP - Material Requirement Planning
5. PAC - Purchasing and Production activity Control

(e) What is the role of competitive strategy in MPC system design?

In inventory management system the MRP and JIT systems are effectively coordinating in MPC system. Improved company's effective performance and reduced inventory cost helps in integrating with companies competitive strategy and MPC system. Analysis the company's market requirements helps in company's competitive strategy. By developing company's MPS system and company's production related process systems are difficult to design but very helpful in playing the role with company's competitive strategy.