Optimizing planned lead times for enhancing performance of MRP systems

Material Requirements Planning (MRP) systems are frequently used in discrete parts manufacturing to determine planned order releases. This paper proposes a mixed integer program (MIP) model to determine the optimal values of planned lead times to be used by an MRP system. The MIP contains a set of integrated constraints that determine planned orders similar to how an MRP system would while executing these planned orders under capacity and component availability constraints. The model includes an optional fixed-periods lot sizing policy and minimizes the costs of excess finished and in-process inventories, setups, backorders, exceeding capacity (e.g. outsourcing), and changes in planned lead times. Experimental results - using data from a DRAM manufacturer - indicate that the proposed method of determining planned lead times is superior to a commonly used ad hoc method for determining the planned lead times used by an MRP system.