Compare and contrast MRP systems and order-point systems of managing inventories.When do firms prefer MRP systems to order-point systems?
Can MRP systems be used while managing capacity in a factory?
Provide sufficient justification for your answer.

Question

Compare and contrast MRP systems and order-point systems of managing inventories.When do firms prefer MRP systems to order-point systems?
 Can MRP systems be used while managing capacity in a factory?
 Provide sufficient justification for your answer.

Quizplus · Accepted Answer

MRP systems vs. order-point systems.
Dependent vs. independent demand.
Requirement vs. replenishment philosophy.
Lumpy and predictable demand vs. random demand pattern.
Managing all types of inventories with equal priority vs. prioritizing high dollar value inventory items (ABC classification).
Objectives focused inward toward meeting manufacturing needs vs. objectives focused outward towards meeting customer needs.
A Type II MRP system (also referred to as manufacturing resource planning system) is a closed-loop system that controls for both the inventories and the capacity required for production. If there is insufficient capacity, a Type II system either changes the capacity or modifies the master schedule to adjust for the given capacity.

Compare and Contrast MRP Systems and Order-Point Systems of Managing