Proceedings of the 13th IFAC Symposium on

Information Control Problems in Manufacturing

Moscow, Russia, June 3-5, 2009

Setting Planning Buffers in MRP Driven

Manufacturing Networks Considering their
Implications on Safety Stock Cost
Christoph Danne ∗ Wilhelm Dangelmaier ∗∗
∗
Heinz Nixdorf Institute, University of Paderborn, Paderborn,
Germany (e-mail: christoph.danne@hni.upb.de)
∗∗
Heinz Nixdorf Institute, University of Paderborn, Paderborn,
Germany (e-mail: wilhelm.dangelmaier@hni.upb.de)

Abstract: Manufacturing companies face an ongoing trend towards more complex production
and distribution networks that evolve dynamically, e.g. due to frequent changes in the product
assortment. The production and distribution systems of many companies that produce large
quantities of customer anonymous products are run according to the established material
requirements planning (MRP) logic. The selection of the right planning parameters and their
continuous adaptation in a dynamic environment is crucial for a cost efficient manufacturing
process. We consider a multi-stage manufacturing system with sequence dependent setup cost,
where demands and demand dates are calculated according to the MRP logic. The throughput
time of each production stage consists of the actual processing time and a planning buffer as
an additional time buffer to create optimisation potential for production sequencing to reduce
setup costs. These time buffers also increase safety stocks held on the considered production
stage or any subsequent production or distribution stage due to increased replenishment lead
times. An optimisation model is formulated to determine cost optimal planning buffers with
consideration of the inventory cost incurred by increasing safety stock. The setup costs incurred
are incorporated via the determination of lot sizes on an aggregate level. We identify two major
subproblems related to the estimation of average setup costs for different planning buffers and
the determination of safety stock costs and propose adequate solutions. The model’s validity is
shown via a case study application for a cloth production process of an international household
product manufacturer.

Keywords: production planning, mrp, setup cost, sequencing, planning buffers, safety stocks,
optimization

1. INTRODUCTION master production schedule (MPS) derived from sales

Production and distribution networks comprise a large
number of interrelated production and transportation pro-
cesses, each requiring its own resources in terms of ma-
chines and time. Planning and controlling such networks
requires a reliable and robust material coordination and
production planning system. The material requirements
planning (MRP) paradigm (Orlicky, 1975) and its exten-
sions are still the system of choice for many real world
scenarios and therefore are widely used in industry. This
is especially true for those industries that produce com-
parably inexpensive products and therefore design their
production system to efficiently produce large batches of
standard products. Fast moving consumer goods (FMCG)
are a popular example of such industries that operate with
a flowshop oriented production layout.
Material requirements planning has proven to be a robust
planning system that yields near optimal results in many
manufacturing scenarios. In industries that operate in
make-to-stock environments where end customers require
immediate product availability, it allows procurement,
production and distribution planning on the basis of a
forecasts on the end product level. Planned requirements
are generated via explosion of the bills of material (BOM)
and the distribution relations in case of decentralised
supply chains.
The configuration of such a system via different planning
parameters is crucial for an efficient operation of the
manufacturing process. An extensive review of literature
on MRP parameters and their effects on the production
system’s performance can be found in Yeung and Wong
(1998). Besides the numerous lot sizing related parameters,
the production stage’s throughput times have to be set to
control the calculation of requirement dates over all pro-
duction and distribution stages. This parameter becomes
even more important if the length of the throughput time
directly determines the cost incurred at the production
stage considered, e.g in terms of setup and scrap cost.
While the basic MRP logic does not require any buffering,
it is unreasonable to assume a fully deterministic operation
of the production system. Alone the fact that the MPS
is often based on uncertain demand forecasts introduces
a high degree of uncertainty into the production sys-

978-3-902661-43-2/09/$20.00 © 2009 IFAC 552 10.3182/20090603-3-RU-2001.0064

13th IFAC INCOM (INCOM'09)
Moscow, Russia, June 3-5, 2009
tem. Therefore, different strategies are employed to buffer
against these uncertainties, as discussed e.g. in Whybark
and Williams (1976) and Buzacott and Shanthikumar
(1994). Extensive discussion and a comparison of literature
on uncertainty handling in MRP-driven manufacturing
systems are provided by Koh et al. (2002) and Guide and
Srivastava (2000). The most widely used means to buffer
against uncertainty are safety stocks. This introduces an
additional decision problem for the configuration of the
MRP system, as the positions and dimensions for the
safety stocks have to be determined. Approaches for this
problem are discussed in Graves (1987), Lagodimos and
Anderson (1993) and Ioannou et al. (2004), among others.
There exists a considerable body of literature on MRP pro-
duction planning parameter configuration as well as safety
stock placement in manufacturing systems. However, ap-
proaches to the former problem class do not consider the
effects of production planning parameters on inventories,
especially the safety stocks incurred by increasing through-
put times.
This paper is organised as follows: Section 2 summarises
the problem statement and explains the trade-offs to be
solved in an optimisation model. Section 3 introduces a
formal model for the problem domain. Section 4 presents
the optimisation model and also describes the solution ap-
proaches to related cost estimation subproblems. Section
5 presents the results obtained with the implementation
of the model and its application in a cloth production
scenario for an international household product manufac-
turer.
2. PROBLEM STATEMENT
In this paper, we focus on the determination of produc-
tion planning parameters in MRP systems in terms of
planning buffers and aggregate lot sizes while considering
their effects on setup costs and safety stocks required on
subsequent stages. We consider a multi-stage production
and distribution network, where each stage may either be
a production or transportation process step. The former
transform sets of components into new components or end
products, while the latter change the physical location
of products. The nodes are therefore connected via links
that represent either a where-used relation from the target
product’s BOM or a distribution relation. Each production
process step represents a certain production stage, e.g.
processing on a production line in the flow shop and
therefore has a certain set of products assigned that require
processing on this step.
We assume a make-to-stock (MTS) environment in which
end customer orders for finished products have to be filled
immediately. Therefore, all production and transportation
operations in the network are planned according to the
MRP logic based on uncertain demand forecasts issued by
the final production or distribution stages.
All production stages face long and often sequence depen-
dent setup times. Lot sizes can have technical or economic
restrictions in terms of rounding values, such that each lot
size must be a multiple of this rounding value. Production
stages produce scrap as a fixed amount of material waste
during the start and end of production runs. Sequence
553
dependent setup and scrap cost affect the planning param-
eters, as it becomes important that the production planner
has the flexibility to create sequence optimised production
plans to save setup cost. This implies that each production
process step needs some planning buffer, defined as the
time buffer between the provision of components for a pro-
duction order and the requirement date of that order. In
other words, this is the time interval (measured in days or
shifts, if appropriate) in which the actual production order
can be shifted to reduce the required effort for changeovers
by building setup cost minimal production sequences. The
shorter these time buffers, the fewer possibilities to create
sequence optimised production plans exist and the higher
the average setup costs for each production order. Modern
enterprise resource planning (ERP) systems allow the def-
inition of this parameter, e.g. as the scheduling margin key
in SAP R/3, which determines float periods before and
after production orders (Dickersbach et al., 2005, p. 259).
Increasing planning buffers also increases the throughput
times for that production stage, which has negative impact
on subsequent stages. A longer planning buffer proportion-
ally increases the throughput time for the item considered
and thereby also increases the replenishment lead time
of this item and successor items further downstream. As
some nodes in the network keep safety stocks to buffer
against demand variations over their replenishment lead
time, these safety stocks have to be increased to cover this
increased time interval. Therefore, the additional safety
stock cost incurred on successor stages by increasing plan-
ning buffers have to be considered in the determination of
planning buffers.
Apart from the planning buffers, lot sizes are the sec-
ond class of planning parameters considered. However,
the focus of this work is not on lot sizing models that
determine production lots and sequences on the detailed
planning level. Moreover, we consider planned production
quantities for each production stage and the respective
products over a larger time horizon. This approach allows
a reasonable assessment of the expected setup costs for
different configurations of planning buffers, without the
need to know exact order dates and quantities to render
a detailed production plan. Considering the application
context of MRP parameter adjustment, this is especially
reasonable as the parameters should not be fine tuned to
single demand scenarios, but should be based on more
coarse-grained data in terms of timely aggregated demands
for each product. These assumptions expose parallels to
existing lot sizing models known as big bucket models that
allow production of different products within one time
period without necessarily making any statements about
their production sequence (Suerie, 2005, chap. 2). From
our experience in real world applications, we suggest to use
demands and lot sizes aggregated on a weekly or monthly
basis (see case study in section 5).
The trade-offs to be solved in this optimisation are as
follows: First, reducing setup costs by enlarging planning
buffers conflicts with the goal to keep throughput times
and thereby safety stocks on successor stages low. To
out best knowledge, this configuration problem for MRP
systems has not been addressed so far. Second, increasing
lot sizes to reduce the number of changeovers and save
setup and scrap cost conflicts with the requirement of
13th IFAC INCOM (INCOM'09)
Moscow, Russia, June 3-5, 2009
keeping cycle stocks low. Furthermore, pre-production of
large quantities is critical as forecasts become less accurate
with an increasing time horizon (Nahmias, 1997, pp. 61-
62), an aspect we do not consider in our model. We address
this problem for each production stage separately and
therefore formulate a model for a single production stage
but with consideration of the safety stocks implications on
subsequent stages.
3. MODEL FORMULATION
The nomenclature for the variables and parameters used
in our model is listed below. Most of these model elements
are self-explanatory against the background of the problem
statement in section 2.
Symbol Description
s Production stage under consideration
P Set of all products at all stages. The set of
products processed on production stage s
is denoted Ps .
LOC Set of physical locations in the produc-
tion and distribution network
N The nodes of the network defined as the
set of all products at their respective
physical location N ⊂ P × LOC. Ele-
ments i ∈ N are generally called items
and are potential stockpoints.
spi Binary variable indicating whether item
i is a stockpoint or not
T Set of discrete time periods under consid-
eration, indexed t ∈ T
dit Expected demand for item i in period t
Qit Lot size for item i in time period t.
Qrnd
i Rounding value for lot sizes of i.
Xit Binary indicator if i is to be produced in
period t.
P Bs Planning buffer for production schedul-
ing. This is the time buffer between the
provision of components and the require-
ment date of an order, measured in days
or shifts if appropriate.
P Bipen Safety stock penalty cost for increasing
the planning buffer of s by 1 if i ∈ Ps
T Ti Throughput time at item i, defined as the
sum of its actual processing time and the
selected planning buffer
Iit Cycle inventory of i at the end of t
cstp Setup cost for a changeover from i to j
ij
stp
C i (P Bs ) Estimated average setup cost for a pro-
duction order of i given that stage s poses
a planning buffer of P Bs
Ciscrp Scrap cost incurred by a production lot
of i
Ciinv Inventory holding cost incurred by keep-
ing one unit of i on stock over one time
period t ∈ T .
554
The network is spanned by the items i ∈ N and the where-
used relations and distribution relations between them.
Each item is a potential stockpoint. A stockpoint is an item
that holds safety stock to buffer against demand variations
over a certain timespan. This timespan Δti is determined
as the difference of the replenishment lead time for that
item and its service time STi , i.e. the delivery time it
quotes to its successors. If Δti is positive, i holds safety
stock over this time period, indicated as spi = 1. It can
be shown that under certain assumptions, a node either
is a stockpoint that holds safety stock to cover its entire
replenishment lead time or does not hold any safety stock
at all and passes its entire replenishment lead time as the
service time to its successors (Simpson Jr., 1958).
The production process steps s can be considered as
processing on a certain production line and thus have a
set of related products Ps . The lot size rounding values
Qrnd
i result from technical characteristics of the flow shop
oriented production process. The indicator variable Xit
takes a value of 1 if the production quantity Qit is greater
than 0 and 0 otherwise. The cycle inventory Iit indicates
the quantity of i that is still held on stock at the end of
period t.
4. THE PRODUCTION PARAMETER
OPTIMISATION PROBLEM
4.1 Objective function
The objective function sums up the total cost incurred
for production of a certain set of products Ps with ex-
pected demand volumes dit for each i ∈ Ps . The single
constituents are
(1) Setup costs, calculated via the average setup cost for
each item and the number of planned production lots
(2) Scrap costs, calculated via the scrap cost rates and
the number of production lots
(3) Cycle stock holding costs, calculated via the inventory
holding cost rates and the cycle inventory that results
from the decisions about production lots and the
demand quantities
(4) Cost for safety stock incurred by increased planning
buffers, either on i if spi = 1 or on a set of downstream
stockpoints if spi = 0
With this objective function, two major subproblems can
be identified: First, the setup costs depend on the choice
of the length of the planning buffer. Therefore, we need
an estimator function that determines the average setup
cost rate for each i ∈ Ps and planning buffer P Bs . Second,
the costs for safety stock incurred by increased planning
buffers are not readily available. Therefore, we have to
calculate planning buffer penalty costs factors P Bipen for
each i ∈ Ps . The following two sections deal with these
subproblems.
4.2 Generating setup cost estimation functions
The statement that the average setup cost incurred for
a certain product depends on the length of the planning
buffer at the respective production stage has to be quanti-
fied in order to be incorporated in an optimisation model.
In accordance with intuition, the average setup cost can be
13th IFAC INCOM (INCOM'09)
Moscow, Russia, June 3-5, 2009

Setup Cstp estimator RLT3 ! RLT2

matrix function
Algorithm: stp
Generate random C x
product sets x 1
Build sequences x
Calculate average
x x
x SS6
setup cost
x
PB
Fig. 1. Calculation of setup cost estimation function
reduced if the sequencing procedure has more possibilities
to bring forward or postpone production orders so they
can be combined with similar products. In order to use this
rationale in a quantitative model, we deduce an estimator
stp
function C i : N → R that determines the average setup
cost for a product i and a given planning buffer P Bs . This
value indicates that each time a production order for i has
to be scheduled on s with the ability to shift the order
for P Bs time periods, the expected setup cost incurred by
stp
this production order is C i (P Bs ).
In order to obtain such a function, we consider the setup
matrix Csstp whose values cstp
ij indicate the setup cost
incurred by a changeover from i to j. We use a simulation
approach to generate the estimator function from these
matrices by calculating a large number of random setup
sequences for a given value of P Bs . Let zP Bs be the
number of production orders that are produced during
stp
the time P Bs . We calculate C i (P Bs ) as the average of
the setup cost incurred by production order for i in the
setup cost optimal sequence of i ∪ P, where P are zP Bs − 1
products randomly selected from Ps \i. The number of
materials to sequence zP Bs + 1 is usually small enough
to use standard optimisation procedures for this task. The
procedure of the simulation thus is as follows:
cstp
Σ ←0
for nsim iterations do
Generate P by randomly selecting zP Bs − 1 products
from Ps \{i}
Create cost optimal production sequence for P ∪ i
cstp stp stp
Σ ← cΣ + cji with j being the predecessor of i in
the optimised production sequence
end for
stp
C i (P Bs ) ← cstp
Σ /n
sim
stp
Figure 1 shows the steps required to derive C i (P Bs ).
The result is a monotonically decreasing function of P Bs .
As the algorithm has to be executed for each possible value
of P Bs , its domain must be restricted to a maximum value
P Bsmax . This is reasonable because the marginal utility of
longer planning buffers is decreasing with larger values for
P Bs , such that practitioners should be able to define one
such value beyond which the additional savings in setup
costs are negligible. Thus, the estimator function must
stp
be rewritten as C i : {1, . . . , P Bsmax } → R for practical
applications.
4.3 Determining safety stock penalty cost
As described in the preceding section, the average setup
costs tend to decrease with longer planning buffers. When
determining the planning buffers for a single production
3 4
SS5 z5 ˜ V 5 ˜ RLT5  TT5
RLT2 pen
| ' PB 5 ˜ RLT 5
2 5
z6 ˜ V 6 ˜ RLT6  TT6
pen
| 'PB6 ˜ RLT6
6
pen pen
PB1 pen 'PB4  'PB5
Fig. 2. Calculation of safety stock penalty cost factors
stage, this decrease in setup costs is offset by increased
safety stocks of subsequent items due to increased replen-
ishment lead times. In order to ensure that the optimisa-
tion model actually determines the parameters that yield
minimum overall cost, safety stock penalty cost has to be
incurred for an increment of the planning buffer.
The rationale for this calculation is as follows: Increment-
ing the planning buffer on stage s increases the replen-
ishment lead time on some subsequent items that are
stockpoints and that are on a critical path downstream
the network. Whether or not an increase of P Bs has an
impact on a successor item j depends on whether or not
j’s direct predecessor with maximum replenishment lead
time is on a path from i ∈ Ps to j. If so, the increase of
P Bs does affect the maximum replenishment lead time of
j and therefore the safety stocks required. An example is
depicted in figure 2.
In order to estimate the additional safety stock cost, means
to determine the required safety stock for a stockpoint
i ∈ N, spi = 1 are required. While there exists a large
number of such safety stock formulae, all take the basic
form of

Stocki = μi · RLTi + zi σi RLTi (1)
     
lead time demand safety stock
with μi being the mean demand per period, σi the stan-
dard deviation of the demand distribution, RLTi the re-
plenishment lead time and zi a safety factor that de-
pends on the desired service level and the uncertainty, i.e.
the demand variation that the safety stock should buffer
against. The calculation of this safety factor depends on
the assumptions about the demand distribution and the
type of service level employed. While we do not impose
any restrictions on these characteristics, we assume that
the uncertainty in terms of the forecast error is normally
distributed and the desired service level is expressed as a
β-service level, i.e. the proportion of demand that is met
from stock. For this case, the required safety factor zi is
computed via the standard loss function Φ(·) of the normal
probability distribution. For the sake of brevity, details
are omitted here and the reader is referred to Axsäter
(2006, pp. 96-101), Nahmias (1997, pp. 272 et seqq.) and
Minner (2000, pp. 36-40) for more details on this safety
stock model and alternative calculations of the safety stock
factor for different distributions and service levels.
According to this rationale, the computation of planning
buffer penalty cost factors P Bipen for each product i ∈ Ps
is as follows:
1: for each i ∈ Ps do
2: P Bipen ← 0

555
13th IFAC INCOM (INCOM'09)
Moscow, Russia, June 3-5, 2009

3: if spi = 1 then penalty cost rates P Bipen to formulate the optimisation

4: P Bipen ← ΔP Bipen problem.
5: else
6: S.push(SU CC(i)) The objective function sums up the cost components
7: while |S| > 0 do described in section 4.1. The average setup cost for the
8: j = S.pop() selected planning buffer is incurred in each period where a
9: if spj = 1 then product is produced (3a), just like the scrap cost (3b). For
 each period where there is positive cycle stock, inventory
10: if RLTi = k∈W (i,j) T Tk then
costs are incurred for the mean stock level in that period
11: P Bipen ← P Bipen + ΔP Bjpen (3c). The last summand adds the penalty cost according
12: end if to the length of the selected planning buffer.
13: else
14: S.push(SU CC(i))  stp
15: end if min C i (P Bs ) · Xit (3a)
16: end while t∈T i∈Ps
17: end if 
18: end for + Ciscrp · Xit (3b)
t∈T i∈Ps
For each product i processed on the production stage   C inv
under consideration, a penalty cost factor is calculated + i
· (Iit + Iit−1 ) (3c)
2
by summing up the marginal additional cost incurred t∈T i∈Ps

on all first stockpoints on paths from i downstream the + |T | · Ciinv · P Bipen · P Bs (3d)
network. If i itself is a stockpoint, the marginal cost are i∈Ps
set to the marginal cost of this node and the outer loop
continues with the next product (lines 3-5). If i is not ∗ ∗
a stockpoint, all its successors are put on a stack S and 
t=t 
t=t

are processed iteratively (lines 6-7). Each element of this s.t. Qit ≥ dit ∀t∗ ∈ T, i ∈ Ps (3e)
stack is again checked for the stockpoint property. If a t=0 t=0

stockpoint is encountered, its marginal safety stock cost
are added to i’s penalty cost rate (line 11). Exceptions
are those stockpoints whose replenishment lead time is
bigger than the aggregate throughput times of all nodes on
the path W (i, j) from i to j, as their replenishment lead
times are not directly affected by changes in P Bs (line
10). For all elements of the stack that are not stockpoints,
their successors are put onto the stack and thus processed
next (line 14). In summary, the algorithm performs a sort
of depth-first-search for stockpoints starting in i for each
i ∈ Ps , summing up the marginal safety stock costs for all
relevant stockpoints encountered.
Equation 1 indicates that the safety stock at a node does
not increase linearly with its replenishment lead time.
This is a problem for the determination of a marginal
safety stock cost rate ΔP Bspen , as the actual safety stock
costs do not increase linearly. Therefore, we use a linear
approximation of the safety stock cost formula by fixing a
maximum replenishment lead time Timax and approximat-
ing the marginal safety stock cost by
σ i · zi
ΔP Bipen =  max (2)
Ti
This formula yields a cost factor that linearly approxi-
mates the safety stock cost between 0 and Timax . For more
details on this approximation and an application in the
context of a safety stock placement problem, the reader is
referred to Minner (2000, pp. 152-153). Timax can be set
to RLTi + T Ti if P Bs = P Bsmax , which is the maximum
time that might have to be covered with safety stock.
4.4 Model formulation
With the above mentioned subproblems solved, we can use
stp
the estimator function C i (P Bs ) and the planning buffer
Iit−1 + Qit − dit = Iit ∀t ∈ T, i ∈ Ps (3f)
M · Xit ≥ Qit (3g)
Qit = k · Qrnd k ∈ N0 , ∀t ∈ T, i ∈ Ps (3h)
i
Xit ∈ {0, 1} , Qit ∈ R ∀t ∈ T, i ∈ Ps (3i)
Iit ∈ R ∀t ∈ T ∪ {0}, i ∈ Ps (3j)
P Bspen ∈ {1, . . . , P Bsmax } (3k)
Restriction 3e assures that the demand is always covered
by the production quantities, while 3f enforces the vari-
able Iit to always represent the correct cycle stock for
each product. Restriction 3g sets the binary production
quantity indicator variable, with M being an arbitrary but
sufficiently large value. Restriction 3h enforces the planned
lot sizes to be multiples of the lot size rounding value.
One problem with this problem formulation is the fact that
3a makes the objective function non-linear and thus basi-
cally impedes the use of standard linear solvers to obtain
optimal solutions to this problem. In order to circumvent
this problem, we again make use of the fact that the
domain of P Bs is limited to the set {1, . . . , P Bsmax } (see
section 4.2). In our application, we solved the optimisation
problem separately for all candidate values of P Bs and
then selected the optimal solution by direct comparison of
the respective objective function values.
5. CASE STUDY APPLICATION
We used this model in an application scenario from the
context of fast moving consumer goods (FMCG) indus-
tries. More precisely, we analysed one production stage of
the cloth production process of an international household
products company. The production process can be divided
into the major stages of base production and converting.
The former comprises all activities required to produce the
base products in high volumes. The main activity of the

556
13th IFAC INCOM (INCOM'09)
Moscow, Russia, June 3-5, 2009
80.000 €
60.000 €
40.000 €
20.000 €
0€
1 2 3 4 5 6 7 8 9 10
Planning buffer
Setup PB Penalty Scrap Cycle Stock
Fig. 3. Application results for different P Bs
converting stage is packaging, possibly after some smaller
assembly and converting activities. Generally, sequence
dependence of setups is more critical in base production
than in converting stages, as setups are often longer and
comprise cleaning activities that depend on the predeces-
sor product in the production plan. Therefore, we selected
the economically most important production line in the
base production section for this analysis. The production
and distribution network was build for the part of the cloth
assortment that accounts for 90% of the annual sales in
this product category, which resulted in a network with
1567 nodes, of which 37 cloth base materials are processed
on the considered production stage. The great difference
between the total number of nodes and the number of
products on the considered production stage is due to the
fact that the number of raw materials and localised end
products is by far bigger than the number of cloth base
materials. The network was configured according to the
current real world as-is situation, especially with respect
to the selected stockpoints. Demand and forecast devia-
tion data was derived as historical values on a monthly
basis. For the determination of safety stocks, we assumed
immediate order fulfilment with a β-service level of 95%
on the end product level.
The entire network model as well as the procedures to
generate these models from the data from the company’s
ERP system was implemented in Java. The optimisation
model was solved with CPLEX 10.1. For each possible
configuration of P Bs ∈ {1, . . . , 10}, the setup cost function
was generated as described in section 4.2 and a separate
optimisation problem instance was generated and solved.
Figure 3 shows the cost distribution for the all possible
configurations of P Bspen . Each bar indicates the total cost
as well as the proportion of each individual constituent.
One can clearly identify the anti-proportional behaviour
of setup and safety stock costs as the planning buffer
increases. For this scenario, the configuration of P Bs = 4
yields minimum overall cost. With the results provided,
the definition of the planning buffer does not have to rely
on intuition and experience, but can be backed with a
quantitative model.
557
6. OUTLOOK
The approach presented in this paper is a first quanti-
tative model for setting additional planning buffers on
production stages in MRP driven systems. Extensions
of the theoretical model comprise the integration of a
more detailed lot sizing model. Furthermore, the risk of
capacity bottlenecks in the case of small planning buffers
is a major influence that is worth consideration. In the
practical application, we also used the model for what-if
analysis to analyse how changes in the product assortment
affect the considered planning parameters. This opens in-
teresting application scenarios in the context of assortment
complexity management, which will be one focus of future
research.
REFERENCES
Axsäter, S. (2006). Inventory Control. International
Series In Operations Research & Management Science.
Springer.
Buzacott, J. and Shanthikumar, J. (1994). Safety stock
versus safety time in MRP controlled production sys-
tems. Management Science, 40(12), 1678–1689.
Dickersbach, J., Keller, G., and Weihrauch, K. (2005).
Production Planning and Control with SAP. SAP Press.
Graves, S.C. (1987). Safety stocks in manufacturing sys-
tems. Working paper 1894-87, Sloan School of Manage-
ment, Massachusetts Institute of Technology.
Guide, V.D.R. and Srivastava, R. (2000). A review of
techniques for buffering against uncertainty with MRP
systems. Production Planning and Control, 11(3), 223–
233.
Ioannou, G., Prastacos, G., and Skintzi, G. (2004). In-
ventory positioning in multiple product supply chains.
Annals of Operations Research, 126(1–4), 195–213.
Koh, S.C.L., Saad, S.M., and Jones, M.H. (2002). Un-
certainty under MRP-planned manufacture: review and
categorization. International Journal of Production Re-
search, 40, 2399–2421.
Lagodimos, A. and Anderson, E. (1993). Optimal posi-
tioning of safety stocks in MRP. International Journal
of Production Research, 31(8), 1797–1813.
Minner, S. (2000). Strategic Safety Stocks in Supply
Chains, volume 490 of Lecture Notes in Economics and
Mathematical Systems. Springer.
Nahmias, S. (1997). Production and Operations Analysis.
McGraw-Hill, third edition.
Orlicky, J. (1975). Material requirements planning.
McGraw-Hill, New York.
Simpson Jr., K.F. (1958). In-process inventories. Opera-
tions Research, 6(6), 863–873.
Suerie, C. (2005). Time Continuity in Discrete Time
Models - New Approaches for Production Planning in
Process Industries, volume 552 of Lecture Notes in
Economics and Mathematical Systems. Springer.
Whybark, D.C. and Williams, J.G. (1976). Material re-
quirements planning under uncertainty. Decision Sci-
ences, 7(4), 595–606.
Yeung, J.H.Y. and Wong, W.C.K. (1998). Parameters
affecting the effectiveness of MRP systems: a review.
International Journal of Production Research, 36(2),
313–332.