Critical Analysis of MRP & JIT

Inventory control systems play a significant role in managing supply chains. Material Requirements Planning (MRP) and Just-in-Time (JIT) systems are directed towards planning and controlling the important characteristics of material flow: how much of what materials flow and when. Since the material flow is at the heart of a manufacturing firm, MRP and JIT are the powerful management tools that could determine the success or failure of an entire manufacturing system. MRP is a supply driven push system of production control that pushes materials into production to meet future needs on a master schedule representing future forecasts. Just in time (JIT) is a demand driven approach where materials are pulled through production by using work centers at shop floor level. Since there is no pushing of materials into production line, visibility to move forward is low in JIT system where as in MRP, a high level of visibility (level of future demand) can be achieved through various forecasting techniques. JIT works well in a pure repetitive manufacturing environment because the master schedule remains applicable on day today basis. A need for constant changes in the product line does not arise unlike in a MRP system. MRP system is inevitable in batch oriented and non-repetitive uses where the factory makes products only to order and each order is a different one. MRP system encourages protecting each part of the operation from disruption being more proactive. The JIT approach takes the opposite view. JIT allows the problems in the production process to be more evident and exposed so that the problems can be closely scrutinized. This is a reactive approach to the problems at the production line which is not always healthy. In JIT the main sacrifice is the capacity utilization. In MRP the buffer stocks as a result of extra production (not always) allow the system to continue working. JIT produces only when needed. Any stoppage in the line of operation will affect the rest of the system, causing stoppages throughout the operation. This will necessarily lead to lower capacity utilization, at least in the short term. However producing just to keep utilization high is also pointless. For a given level of demand, capacity requirements are often lower under JIT conditions. Just in Time production allows companies to reduce both inventory and the entire production chain. It encourages the removal of all surplus, including surplus factories. Under normal business conditions this is not a problem. However, if there is any disruption at any given point in the supply chain, then all production grinds to a halt. For a company which is small and just starting up I feel an MRP ordering system would be better suited if you implemented JIT then as a small company you would be trying to break into a market, if the JIT system goes wrong, then youll be un-able to get your product on the shelves for customers to buy and if this happened on a regular occasion then your reputation from consumers wont be good which is critical from a new companies point of view. On the other hand being a large reputable company with a solid reputation and brand image maybe the JIT system should be implemented as this type of company will be able to invest at making this system a success, as JIT dramatically reduces cost and waste these savings will influence the price of the product in order to compete with other competitors. Cooper Tire & Rubber Company (NYSE: CTB) is a United States based company that specializes in the design, manufacture, marketing and sales of automobiles and truck tires, and subsidiaries that specialize in medium truck, motorcycle and racing tires. In 1998, the company had 11 production facilities in the US, and one international facility. By 2000, Cooper grew to 61 facilities worldwide. What they soon realized were a number of challenges existing in the supply chain model. Through a period of rapid expansion and changing requirements in the industry, increasing pressure was put on the company to not only improve their current operations, but also deliver product in a shorter scheduling window. To overcome these pressures, the company underwent the transition from MRP to JIT. For a company this size, the changes on such a scale were large and the process took a significant amount of time to fully implement. In doing so however, a company which hadn't made significant changes to its operating model in decades was able to adapt to the changing requirements of the industry to remain competitive.