The effect of MRP lot sizing on actual cumulative lead times in multi-level systems

Abstract

This study investigates how different lot sizing techniques influence the cumulative lead time for multi-level production-inventory systems controlled by material requirements planning (MRP). Theoretical approaches, a numerical example, as well as simulation are used to analyse and illustrate the combined effect of lot sizing at different product structure levels. It is shown that lot-sizing requirements for more than a single period, such as fixed period requirements, period under quantity, Silver Meal algorithm, as well as economic order quantity will lead to longer actual cumulative lead times than would be expected, when taking the item lead times along the critical path through the product structure into account. Consequently, MRP will underestimate the cumulative lead time and will require a longer planning horizon. We show that the extension of the cumulative lead techniques covering the time is a lot-sizing related phenomenon and cannot be accounted for by, e.g. using safety lead time. Lot-sizing techniques with multi-period coverage will only occasionally provide the 'expected' cumulative lead time. We also show that average and maximum throughput times, as well as throughput time variability increases with increasing time-period coverage of lots.