In this article the discussion is somewhat more elaborate and improved approach, called Materials Requirement Planning (MRP), which has been developed in recent years and gaining popularity in Industry. This is different from earlier classical approach to inventory management and control.

MRP is a new solution to an old problem: having stock of material always on hand when needed without carrying excess inventory. Highly dependent upon computer technology, MRP is most helpful to firms with finished goods or end products which are made from a number of components and which are also subject to uneven or lumpy demand. The technique separates the various components and co-ordinates purchasing and delivery with production.

This results in material arriving exactly when needed for production and, at the same time, reduces the length of time when materials are held in stock. MRP plans and controls goods on order and generates data for determining when and what specific material will be needed to meet the previously planned production schedule.

In its bare essence, MRP operates on the lines as shown below.


Inputs from management and sales are Customers’ orders. Based on these orders are placed for production in the company or to Purchase department for procuring from outside sources for input stocks.
Basic inventory information would be provided by regular inventory records. MRP would then co-ordinate the above information with a bill of material, usually prepared by production engineers. The bill of materials is not simply a list of parts, but is ‘structured’, meaning that, it indicates the manner in which a product is put together from parts into sub-assemblies and then into final assemblies. The items listed can then be time phased and made into a Master schedule, which becomes a prime tool of MRP.

The Master schedule can be thought of as ‘production forecast’, which in turn can generate material and capacity records over a period of time, taking into account, the inter-dependency of these requirements. The above structure, MRP, then issues orders for materials either through purchasing or through the internal manufacturing facility.

Just in Time (JIT):

Popularly known in its acronym JIT that is “just in time� is highly discussed in materials management circles these days. The concept is alternatively known as ZIPS (zero inventory production system), MAN (materials as needed), NOT (nick of time), or ZIN (zero inventories).

As a concept, JIT means that virtually no inventories are held at any stage of production and that the exact number of units is brought to each successive stages of production at the right time.

The JIT concept originated from the Motomachi plant of Toyota in Japan, where the system has been perfected and results achieved. The plant has a long line of trucks waiting outside with full loads of automotive parts and components for the assembly lines. As soon as one truck comes out at one end of the plant, another gets inside. There is no warehouse for the parts. Upholstered seats, for example, are fed to production line directly from the back of the truck.

The JIT concept assumes certain conditions which are found wanting in our industries. Its successful implementation needs a complete restructuring of the industry, so that all ancillary industries and suppliers of inventory operate in the vicinity of the main industry to avoid problems of transportation. If the suppliers are located at considerable distances and there is more than one supplier, problem in delivery are bound to arise. There should be one supplier and the products supplied must be of the best quality to prevent rejections and consequent delays.

Another pre-requisite for the successful implementation of the ZIN concept is the introduction of redesigned cooling and auxiliaries to achieve rapid change over set-ups in order to reduce the batch sizes.

In India this concept is fast catching up and companies like Larsen & Toubro, Maruti and few others with Japanese collaboration were able to implement this to some extent meaning for at least high value items.