Engineering Costs and Production Economy vol:6 pages:67-75
Research in MRP usually assumes demand to be deterministic. However, in industrial situations uncertainties in demand may have a considerable influence on the efficiency of an MRP system. Therefore lot sizing and safety stock decisions should also be investigated under conditions of uncertain demand.
This paper investigates the effect of time varying and uncertain demand on various lot sizing and safety stock policies. Simulation results are presented for a case study of a Belgian firm facing high forecast errors. Results are also presented for a hypothetical simulation experiment which was designed in order to gain insight into the cost effectiveness of single level lot sizing heuristics when applied on a rolling schedule basis with demand uncertainty.
The main finding of the paper is that demand uncertainty has a tremendous influence on the cost effectiveness of lot sizing heuristics.