Forecast facilitated lot-for-lot ordering in the presence of autocorrelated demand

Forecast facilitated lot-for-lot ordering in the presence of autocorrelated demand

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Article ID: iaor2009924
Country: Netherlands
Volume: 54
Issue: 4
Start Page Number: 840
End Page Number: 850
Publication Date: May 2008
Journal: Computers & Industrial Engineering
Authors: , ,
Keywords: production: MRP
Abstract:

With consistent effort in setup reduction as encouraged by JIT principle, lot-for-lot ordering is gaining popularity in MRP applications. A lot-for-lot order is an immediate copy of the MPS (master production schedule) – direct reflection of demand forecasts. Since all levels of MRP plans are based on MPS, the accuracy of MRP is highly dependent of the accuracy of demand forecasting. In this paper, we are concerned about the impact of forecasting to the performance of a lot-for-lot MRP system when there is notable variability and autocorrelation in the underlying demand process (e.g., an AR(1) process). Specifically under a stationary AR(1) demand, we examine the performance of the MRP based on the most common EWMA forecast model.

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