Capacity-driven vs. demand-driven material procurement systems

A capacity-driven procurement (CDP) system is an alternative to the demand-driven material requirements planning (MRP) procurement system. The MRP procurement system closely tracks the independent demand, whereas the CDP system decouples the procurement from the independent demand and acquires materials to support a preset operating capacity based on the quantity that can be produced, the quantity that is expected to be sold, and related managerial policies. We use simulation to compare the performance of these two procurement systems in terms of system-related and customer-related performance measures under fairly reasonable practical scenarios. The results show that the CDP system is a viable alternative to the demand-driven MRP system when a production system is not loaded up to its full capacity, and if one can trade off the system-related performance measure for the customer-related PM and ease of control. Furthermore, we argue that when the product demand is uncertain, the CDP system is more suitable to support a pull system of shop floor control than the demand-driven system.