Abstract
The inventory requirements planning (IRP) system is a decision-support tool that Lucent has used to determine its buffering requirements for parts in a time-phased provisioning system. It measured the deviation of actual supply and demand from their planned values and, using the historical profile of these deviations, determined the safety-stock levels Lucent needed to meet the desired service levels. In doing so, it quantified the relationships among the inventory drivers: supply intervals, demand and supply variability, desired service levels, and part proliferation. It used these drivers to identify and drive initiatives to improve processes to reduce uncertainty in the provisioning process. Several Lucent locations have used the IRP system to realign inventories and to improve service in various manufacturing and distribution facilities. The IRP system's value has been recognized through several awards. It also contributed to Lucent's receiving the Malcolm Baldrige Award in 1992 (as a part of AT&T Corporation) and subsequently the INFORMS Prize in 1998.
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