How to release orders in order to minimise system inventory and system nervousness?

On the initiative of Baan, a global ERP-software supplier, and DAF Trucks, a Dutch truck manufacturer, research was carried out to find the optimal order release decisions. This article describes the impact of these decisions on the amount of system inventory and the system nervousness. With the use of a simulation tool different scenarios were modelled. In the simulation experiment the following parameters were evaluated: (i) The use of MRP versus the use of Line Requirements Planning (LRP) for planning orders; (ii) The use of lot-sizes with a fixed order quantity (FOQ) versus a period order quantity (POQ); (iii) Releasing order with complete series versus releasing orders without complete series. All the scenarios were evaluated for a more deterministic (10% demand variability) and a more stochastic (100% demand variability) environment. The first goal was to obtain a predetermined service level, the second goal was to minimise inventory and the third goal was to minimise nervousness. With an equal service level in all scenarios, LRP with releasing orders without complete series outperformed MRP in all scenarios concerning inventory. For minimising nervousness the use of FOQs instead of POQs performed better. So for minimising both inventory and nervousness LRP with order release without complete series and FOQs should be chosen.