Materials management - supply chain management, Finance Basics

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Materials Management - Supply Chain Management

Materials management was once a task undertaken without the assistance of computers. Today it is unthinkable as the speed of calculation and co-ordination is beyond the capability of most manual systems. Consideration of life before computers is considered as well as the introduction of advanced computer based systems. This section is described under the following headings:

  • ? MRP systems and how they function
  • ? Traditional inventory control based on the calculation of EOQ
  • ? MRP systems - basic inputs
  • ? Materials requirements calculations
  • ? MRP systems and how they function:


Differences in planning, scheduling and control between high-volume and intermittent systems are usually substantial. Both may produce finished goods for inventory. The periodic or intermittent nature of production of parts, components and products, especially in the latter case, produces an immensely complex scheduling problem. This problem is made more complex when the final product varies from a simple item consisting of a few components to a highly engineered product constructed from many thousands of parts. For instance, it is not uncommon for larger companies, such as Boeing, Black & Decker or BAe systems to have a database of 50,000 different part numbers. (For specific examples of how organisations use MRP see Information systems.)

In the previous section, inventory control (of independent demand items) has been considered. Co-ordination of schedules for intermittent systems, especially for highly engineered products, is through materials requirements planning (MRP). This is important as the investment in software packages to support MRP is substantial. It is also important to note that the term MRP was coined by software vendors. The packaged software once known as MRP has developed into manufacturing resource planning (MRP II) and more recently Enterprise Resource Planning (ERP). There is even mention of ERP II. The prominent vendors of these packages are known as the JBOPS companies: J. D. Edwards; BAAN; Oracle; Peoplesoft and SAP. These packages are expensive with costs varying from $10 - $400m for a full implementation.

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