discuss the terms Just-in-time (JIT) and Materials Requirements Planning (MRP).
Discuss the terms Just-in-time (JIT) and Materials Requirements Planning (MRP).
With respect to the supply chain, discuss the terms Just-in-time (JIT) and Materials Requirements Planning (MRP). How are they related to maintaining proper levels of inventory.
To even begin this process we need to understand what is Just-in-time (JIT) and Materials Requirement Planning (MRP), so we will start with that first. “The just in time (JIT) inventory system is a management strategy that aligns raw material orders from suppliers directly with production schedules.” (“JIT,” 2018) JIT is usually tied to predetermined stock levels which are monitored by in company systems and orders are placed based on predetermined reorder points. The stock and reorder points are determined within our second topic for the week, MPR. “Materials requirements planning (MRP) is one of the first software-based integrated information systems designed to improve productivity for business. A materials requirements planning information system is a sales forecast-based system used to schedule raw material deliveries and quantities, given assumptions of machine and labor units required to fulfill a sales forecast.” (“MRP,” 2018)
Now that the two systems are defined we need to discuss their importance to an organization and how they both interact and what they can do to ensure the organization has what is needed when it is needed. For JIT to be the most effective and organization needs to conduct MRP to find/build their baseline of inventory. A lot of factors will go into this MRP to include but not all encompassing will be, manufacture lead time, transportation lead time, distance from manufacturing point to our distribution point or our shelves. Other factors to consider are customer demand and available shelving space and warehousing capabilities for the organization. All of these items will require some level of cost to the company and the company needs to weight the risk of each of these cost to their bottom line as well as the level of customer satisfaction they want to meet. The JIT portion of the process comes in after the MRP has set the base line for each item within the organizations final out put and what is required and when. Once materials or final products go out and synchronized system will account and report these numbers to a master system. Once the magic number in the MRP is reached more materials or products are reorder and the process will then repeat itself. If one of these two items, JIT or MRP, are not reported properly or accurately adjust the company will fail in one of two ways, too much on hand product, raising storage and stockage cost, or not having enough on hand inventory, reducing customer satisfaction.
JTI and MRP are important to any type of organization and have to be constantly monitored and adjusted to meet organization needs and if not they will cause issues at some point in the companies life cycle. Properly maintaining these two processes will aid in the success and help keep cost to an effect level, therein ensuring proper asset levels at all times.
Just In Time – JIT. (2018). Retrieved from https://www.investopedia.com/terms/j/jit.asp
Materials Requirements Planning (MRP). (2018). Retrieved from https://www.investopedia.com/terms/m/mrp.asp
Reply 100 words to student higdon 352:
Good Morning Class,
I hope you are all doing well this week.
Just-in-time in reference to the supply chain is exactly as it sounds. It is the process of being on the logistical pulse of your organization by having the right amount of inventory at the right time(Lesson 2). JIT requires a great level of coordination and communication within a company, but can lead to better performance in profitability, leading to consumer savings. The cost savings come from reducing the amount spent on maintaining a large inventory and utilizing that capital in a much more efficient and responsive manner.
Materials Requirements Planning is forecasting based. It attempts to plan the ordering of raw materials and resources around sales demand. It utilizes data from everyone involved in the supply chain to create a highly accurate production schedule(planettogether.com). The lesson mentions that often MRP is not as accurate as it should be due to the reality of unreliable lead times. If companies can gain control of their lead times and stay on schedule this method has true benefits.
It seems as though JIT would at least meet with principles of MRP. Since JIT requires a high level of responsiveness through the organization, using MRP in coordination with JIT could create and optimal flow of inventory. Both JIT and MRP require a good organizational communication. Understanding the demand and reducing lead times are essential in both methods. Both methods are viable options for controlling inventory levels and neither are “one size fit all”. Companies must evaluate the types of products and product variability to help determine what will work best for them.
PlanetTogether. (2016). Simplifying Production with MRP and JIT. Retrieved from https://www.planettogether.com/blog/simplifying-production-with-mrp-and-jit
Lesson 2. Introduction to A Case Study in Supply Chain at Wal-Mart. TLMT352. American Military University.