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Safety Stock versus Safety Time in MRP Controlled Production Systems

Author

Listed:
  • J. A. Buzacott

    (Faculty of Administrative Studies, York University, 4700 Keele Street, North York, Ontario, Canada M3J 1P3)

  • J. G. Shanthikumar

    (University of California, Berkeley, California 94720)

Abstract

The two management set parameters which determine the performance of a material requirements planning (MRP) system are the lead time and the safety stock. The appropriate values of these parameters are influenced by the accuracy of forecasts over the lead time, the variability of processing time and the degree of congestion, together with the costs of inventory and shortages. These influences are explored using stochastic models of a single stage manufacturing system for which work release is controlled using MRP. The major conclusion is that safety time is usually only preferable to safety stock when it is possible to make accurate forecasts of future required shipments over the lead time, otherwise safety stock is more robust in coping with changes in customer requirements in the lead time or with fluctuations in forecasts of lead time demand.

Suggested Citation

  • J. A. Buzacott & J. G. Shanthikumar, 1994. "Safety Stock versus Safety Time in MRP Controlled Production Systems," Management Science, INFORMS, vol. 40(12), pages 1678-1689, December.
    • Handle: RePEc:inm:ormnsc:v:40:y:1994:i:12:p:1678-1689
    DOI: 10.1287/mnsc.40.12.1678
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