Material Requirements Planning at A-Cat Corp.
(3 pages of text)
Material requirements planning (MRP) systems have been widely used by manufacturing firms to maintain an optimum flow of inputs for the best production results. By using an MRP system, a firm can prepare a production plan that specifies the number of sub-assemblies that go into a final product along with the exact timeline of an order, from placement to completion.
In the case, an A-CAT employee is assigned the task of preparing an operating plan for the next eight weeks for a product. She has to decide how much to produce to be able to meet the requirements economically, taking into account the forecasted demand. The case examines the intricacies of procurement, warehousing, and processing costs of various material components by critically evaluating different techniques in practice. Using situational scenarios, the case presents lot-sizing techniques — including lot for lot, economic order quantity, least total cost and least unit cost — for balancing costs such as set-up costs, ordering costs, and inventory-holding costs.
This case can be used in a core course on production and operations management for topics such as material requirements planning or inventory management. It can also be effectively utilized in courses on inventory management, materials management, or similar topics. The case is intended to help students learn the basics of MRP systems and use lot-sizing techniques in assessing the scope of cost reduction. It provides a good illustration of a small industry in an undeveloped region that has proactively taken several innovative steps to improve its competitiveness. In this way, the case demonstrates how a small/medium-sized organization, even with resource constraints, can achieve cost reduction by way of inventory management. The case also asks readers to take a holistic view of products and their sub-assemblies, and to identify the opportunities for cost reduction. Techniques and concepts that can be used to address the issues in this case include MRP systems and lot-sizing techniques (lot for lot, economic order quantity, least unit cost, and least total cost).
India, Small, 2010
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