Mitigating forecast errors by lot-sizing rules in ERP-controlled manufacturing systems

Abstract

As enterprise resource planning (ERP) becomes the dominant management software in manufacturing and distribution systems in various industries, some problems associated with its origin, material requirements planning (MRP), still need to be resolved. We examine the effect of forecasting errors, one of the common operational problems in any business operation, in the context of an ERP-controlled manufacturing system. We consider a mitigating remedy, the use of a lot-sizing rule, to cope with the consequences of forecasting inaccuracy without resorting to costly inventory-oriented buffers. An ERP-controlled manufacturing system is simulated to see how these lot-sizing rules mitigate the forecast errors and subsequently generate acceptable system performance. The simulation results should help ease ERP users' fear of committing another fatal error in demand forecasts, instead encouraging them to consider proper lot-sizing rules to cope with forecast errors.

Monitoring the production of a supply chain with a revisited MRP approach

“…To reach a given service level at each level of the supply chain while minimising the overall holding cost, Inderfurth and Minner (1998) studied the double problem of dimensioning and localising the safety stocks. Ho and Ireland (2012) study the combined effect of lot-sizing rules and dampening procedures to mitigate lead time uncertainty and forecast variations. They provide general guidelines to help MRP users to determine how to select compatible dampening procedure and lot-sizing rule.…”

ERP Adoption and Use in Production Research: An Archival Analysis and Future Research Directions

“…Two articles (3% of the total number of articles reviewed) dealt with software as a service (SaaS) ERPs, and only one (2% of the total number of articles reviewed) was about cloud-based ERP systems. [31]; [24]; [32]; [15]; [16]; [43]; [62]; [67]; [18]; [44]; [63]; [34]; [64]; [68]; [56]; [29]; [35]; [45]; [36]; [37]; [26]; [20]; [65]; [69]; [46]; [71]; [21]; [47]; [48]; [66]; [49]; [39]; [40]; [41]; [22]; [51]; [52]; [70]; [42]; [72]; [60]; [61]; [27]; [28]; [ 4) according to the acknowledged framework developed by [74]. The analysis revealed that, operational ERP benefits are the most represented (28%) in production research than any of the other benefits.…”

A Novel Output Prediction Method in Production Management Based on Parameter Evaluation Using DHNN

“…The purpose of this paper was to examine the impact of the knowledge transfer climate and relationship bonding. Ho and Ireland [3] examined the effect of forecasting errors in the context of an ERP-controlled manufacturing system. Then considered a mitigating remedy, the use of a lot-sizing rule, to cope with the consequences of forecasting inaccuracy without resorting to costly inventoryoriented buffers.…”