Application of MRP in industries of Bangladesh : case of an electronics appliance manufacturing plant

Abstract

The present study was conducted on a local electronics applicancc manufacturing company in the context of how the planning of material requirement i, performed. The company is a fabrication'asscmbly organization ".here raw matenals arc procured, processed and assembled. It would nOl be unrealistic to say that the management of indizcnous industries is not very keen to apply the operations management techmques such as inventory conlrol, scheduling, material requirements planning (MRP) etc. This situation can be altributed to a number of failures, But main reason of the orgalli~ation's reluctant attirnde is identified as unawareness of the state-ofthe- an techniques and and benefits <lcmed out of utilizing of these teclmiques, a potential one of which is the "MRP. A general perception lhat the procurement of raw materials either in huge quantity at a time or small quantity from period to period would not have any significant effect on the total cost still prevails in many local companies. But the situation is certainly different and healthier condition can be achieved by adopting and applying these techniques. MRP is applied for planning of fLuurc activities of a company. Data on demand, of the products (MPS), lead times, set-up/ordering costs, holding or carrying costs etc. are required, However in this stlldy previous data of the company for a period of six months from Janllary to June, 2002 were used to analyse and make comparative srndy. It has been found that the procurement of materials applying an estahlishcd algorithm (i.e. Wagner-Whltin approach) instcad of CUTTenl practice (liser defined mcthod) could reduce the tolal invcntory cost quite remarkably. Tnthe lot sizing analysis an educational version pTodliction and operation management software named POM was used, The outcome of the analysis revealed that the company cOlild save as high as \'11 67% of the inventory cost in case of the transformer only. Similar situation is expectcd to prevail for other items also. Moreover, the incorporation ofMRP could facilitate the company in many respecls. There is a potentia! ,cope of improving the current situation through rcduction in the tolal inventory cost, avoidance of reordering, shortfalls of matenal" minimization of idle timc, improvment of the efficiency of operations, delivery of product in a shortcr period, improvment of customer service, increase in productivity, and reduction in the overall cost of products. Howcvcr, it would be required for the company to bring in change in many aspects to adapt the MRP system, the impor!ant of which are the relationship with vendor, consistent quality of the raw materials, the documcntation process, recruitment of skilled manpower, estimating thc reliable lead times elc. S,llIation could be improved further by applying the res lIlts of mathematical model for multiple itcm, lot size and variable lot size taking into consideration of the real-life constraints such as store's space, available fund, transport facilities elc.