Effective production control in an automotive industry: MRP vs. demand-driven MRP

Material Requirements Planning (MRP) has deficiencies when dealing with current business environments, marked by a more complex network, a huge variety of products with longer lead time, and uncertain demands. This drives Demand-Driven MRP (DDMRP) approach to deal with those challenges. DDMRP is designed to connect the availability of materials and supplies directly from the actual condition using bills of materials (BOMs). Nevertheless, only few studies have scientifically proved the performance of DDMRP over MRP for controlling production and inventory control. Therefore, this research fills this gap by evaluating and comparing the performance of DDMRP and MRP in terms of level of effective inventory in the system. The evaluation was conducted through a simulation using data from an automotive company in Indonesia. The input parameters of scenarios were given for running the simulation. Based on the simulation, for the observed critical parts, DDMRP gave better results than MRP in terms of lead time and inventory level. DDMRP compressed the lead time part from 52 to 3 days (94% reduced) and, overall, the inventory level was in an effective condition. This suggests that DDMRP is more effective for controlling the production-inventory than MRP.