Management Notes

Reference Notes for Management

In mrp, system nervousness is caused by:

In mrp, system nervousness is caused by:


A. management’s attempt to continually respond to minor changes in production requirements.
B. the use of the lot-for-lot approach.
C. management’s marking part of the master production schedule as “not to be rescheduled”.
D. the use of phantom bills of material.
E. management’s attempt to evaluate alternative plans before making a decision.

The Correct Answer Is:

A. management’s attempt to continually respond to minor changes in production requirements.

Correct Answer Explanation: A. management’s attempt to continually respond to minor changes in production requirements.

System nervousness in Material Requirements Planning (MRP) refers to the instability or excessive fluctuations in the production schedule caused by continual adjustments to minor changes in production requirements.

Option A, which states that system nervousness is caused by management’s attempt to continually respond to minor changes in production requirements, is correct for several reasons.

When management reacts to every small change in production requirements by adjusting schedules or production quantities, it leads to frequent alterations in the production plan. Here’s why this is the correct answer:

i. Amplification of Variability: Each adjustment made in response to minor changes can have a cascading effect, amplifying the variability throughout the production process. For instance, increasing the quantity of one component due to a small change might lead to overproduction of other components.

ii. Increased Lead Times: Frequent changes cause disruptions in the supply chain. Repeated adjustments in production schedules can extend lead times as suppliers struggle to meet altered demands, impacting overall production efficiency.

iii. Resource Overutilization or Underutilization: Constant adjustments can result in underutilization or overutilization of resources, leading to inefficiencies in production processes. For example, excessive adjustments might lead to machines being idle due to sudden changes in production plans.

iv. Inventory Fluctuations: Frequent changes can cause inventory levels to fluctuate significantly, leading to excess inventory or stockouts. This inconsistency in inventory levels can further disrupt the stability of the production system.

Now, let’s break down why the other options are not correct:

B. The Lot-for-Lot Approach:

This method involves ordering exactly what is needed to fulfill immediate demands without holding any safety stock. While this approach can lead to fluctuations in inventory levels based on precise requirements, it doesn’t inherently cause system nervousness.

The lot-for-lot approach, if implemented accurately, aims to minimize excess inventory and align orders with immediate needs.

However, it might not be suitable for all scenarios, especially when there are uncertainties or fluctuations in demand or supply. Yet, the fluctuations caused by this approach are typically in response to actual demand changes rather than continuous reactive adjustments.

C. Marking Part of the Master Production Schedule as “Not to be Rescheduled”:

This action involves fixing certain elements of the production schedule to maintain stability. While it can create rigidity in the schedule, preventing changes to specific segments, it doesn’t directly lead to the systemic instability or nervousness observed when continually responding to minor changes.

The “not to be rescheduled” designation is often applied to critical items or fixed production commitments to ensure their consistency in planning, which can indeed limit flexibility but doesn’t inherently cause the system nervousness described.

D. Use of Phantom Bills of Material:

Phantom bills of material represent non-existent subassemblies or components used for planning and estimating material requirements. While the inclusion of phantom bills can add complexity to the production process, they are used as placeholders for planning purposes and don’t directly cause the system nervousness resulting from continual reactive adjustments.

Phantom bills are typically utilized to streamline planning and estimation but do not inherently induce the continual fluctuations in the production schedule.

E. Management’s Attempt to Evaluate Alternative Plans Before Making a Decision:

This approach involves assessing different production plans or alternatives before finalizing a decision. While this deliberation might result in delays in decision-making, it’s not the root cause of system nervousness.

Evaluating alternatives is a prudent practice to select the most viable and efficient production plan. However, this process of evaluation doesn’t inherently lead to the continual reactive adjustments that cause instability and nervousness in the production system.

In essence, while these options might contribute to complexities or limitations within the MRP system, none of them directly align with the primary cause of system nervousness—namely, the continual and reactive adjustments made by management in response to minor changes in production requirements.

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