Material requirements planning performance effects due to forecast bias and demand uncertainty

The effects of forecast bias and demand uncertainty in a batch production environment are investigated using an integrated MRP planning and execution test bed. The use of inflated planned lead time and safety stock to compensate for forecast error is evaluated. Analysis is performed in terms of meeting both the MPS due dates and customer delivery requirements. Forecast bias and demand uncertainty are shown to affect MPS and delivery performance quite differently. Results also show that increasing either planned lead times or safety stock is effective in improving delivery performance. If demand uncertainty dominates completion time variability, the use of safety stock will achieve delivery objectives with less finished goods inventory.