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Managerial Application Of Information Technology Essay

3879 words - 16 pages

Does a MRP system provide value to an organization?
IS535: Managerial Applications of Information Technology
Dr. Mario Missakian

a. Does a MRP system provide value to an organization 4
i. Value added by MRP system 4
b. The problem 4
i. Frequent Back Orders 4
ii. High Inventory Levels 4
c. Benefits of MRP System 5
i. How will ABC, Inc. benefit 5
d. High Level Approach 6
i. Assessment of resources and costs
ii. Presentation to Management 6
e. Audience 6
i. Who will benefit 6
ii. How the beneficiaries will benefit 6
iii. The role of senior ...view middle of the document...

Implementation 12
iii. Action Plan 13
b. Value of this Approach 13
i. Benefits and Results 13
c. Conclusion and Overall Recommendation 14
d. Summary of Milestones 14
References 15

Does a MRP system provide value to an organization?
According to Anderson and Schroeder (1984), Material Resource Planning (MRP) systems can offer a number of potential benefits to manufacturing organizations. Some of such benefits include helping production managers to minimize inventory levels and the associated carrying costs, track material requirements, determine the most economical lot sizes or batch quantities for orders, compute quantities needed as safety stock, allocate production time among various products, and plan for future capacity needs. The information generated by MRP systems is useful in other areas of the organization as well.
The manufacturing functions of most manufacturing companies are the engines that drive profitability within the organization. Thus, companies are quick to spend significant amount of money implementing MRP systems within their organization because having such a system is deemed a standard industry requirement for manufacturing companies. The issue that this project will seek to answer is whether implementing such a system will be a value add proposition for ABC, Inc., a medical device company located in Eatontown, New Jersey.
The problem
Delays due to poor materials planning can cause significant and constant late product deliveries. It can also add additional costs like the extra labor or overtime needed to finish the job after materials are re-ordered. Ordering rush materials can also have extra processing or shipping costs from the vendor. ABC, Inc. has recently been besieged with high sales back orders and high inventory levels. All of this has a negative effect for management, as they are unable to make informed decisions without a clear view of the company’s position The Company is thus seeking for ways to address this problem that has affected the company’s net income.

Benefits of MRP System
The benefits that ABC, Inc. is seeking to achieve through the implement of the MRP system can be summed up as follows:
1. Reduce Excess Inventory
2. Reduce Component Shortages
3. Improve Shipping Performance
4. Improve Customer Service
5. Improve Productivity
6. Simplified and Accurate Scheduling
7. Reduce Purchasing Cost
8. Improve Production Schedules
9. Reduce Manufacturing Cost
10. Reduce Lead Times
11. Reduce Overtime
12. Less Scrap and Rework
13. Higher Production Quality
It is very important to point out that MRP systems do have several potential drawbacks that could derail a successful implementation. Since MRP relies upon accurate input information, If a company has not maintained good inventory records or has not updated its bills of materials with all pertinent changes, it may encounter serious problems with the outputs of...

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