A performance analysis of model based inventory policies for procurement of direct material items
A specialized lot size model for procurement of direct material items is applied in a specific manufacturing firm. Simulation studies are utilized for determining the effectiveness of the lot size model for use in a multiproduct MRP production system having a specific product structure. Measures of effectiveness with respect to cost categories including shortage frequency, material costs and holding costs will be obtained based on a range of demand patterns and levels. These studies focus on five end items representative of the population of brands manufactured at the company under consideration. The results of the study provide a methodological basis for system wide implementation of model based material ordering policy.