The order point method is to determine the order point according to the demand forecast during the inventory replenishment period and to maintain a certain safe inventory reserve. Safety stock is set to cope with the fluctuation of demand. Once the inventory reserve is lower than the pre-specified quantity, that is, the order point, an order to replenish the inventory will be issued.
The basic formula of order point is:
Order point = demand in unit time zone x order lead time+safety stock.
Most of the basic assumptions of the order point method are wrong, and many problems will be encountered in practical use. The ordering point assumes that the demand for various materials is independent of each other and the material demand is continuous. But the reality is that we should order products instead of materials, and each material is related; In the manufacturing industry, the demand for product parts is unbalanced and unstable, and the consumption of inventory is intermittent.
In order to solve the shortcomings of order point method, MRP (Material Resource Planning) came into being.
There are three differences between MRP and order point method:
There is no time coordinate in traditional inventory. The contents of the record usually only contain inventory and ordered quantity.
Inventory+ordered quantity