Safety Stocks in MRP—Systems with Emergency Setups for Components

Material Requirements Planning or Manufacturing Resource Planning (MRP) systems originally were designed for a deterministic environment. Often, however, demand for finished products is uncertain and some type of buffering mechanism is necessary to provide desired levels of service. When the schedule is replanned each period, as typically is done, variability of demand may manifest itself in the form of early or “emergency” production runs. Safety stock may serve to avert some or most of these emergency production runs. We have developed a heuristic algorithm which is shown to provide extremely good guidelines for setting safety stock levels.