Riordan

MRP for Riordan Electric Fans

According to Chase, Jacobs, and Aquilano (2006) “the main purposes of a basic materials requirements planning (MRP) system are to control inventory levels, assign operating priorities for items, and plan capacity to load the production system” (p. 635). MRP uses lot size rule in order to manufacture sufficient goods as needed while avoiding stockouts. Riordan’s manufacturing plant at Hangzhou, China manufactures the electric fans from assembled units purchased by the purchasing department and maintains proper stock quantities to meet timed customer demand, and adequate stock of polymer material, but does not stock electric motors for manufacture of the electric fans. The bills of materials for the manufacturer of engine fans are mainly electric motors and polymer material, which are assembled and processed to create finished goods which are put in the finished goods inventory where they can be sold to customers as they make the orders. (University of Phoenix, 2013)

With materials being required for production and dependent on annual forecasts and customers’ estimated yearly requirements, the plant has difficulty effectively estimating the exact material requirements in the short term for the production of the random orders from customers. Therefore, this presents a problem in planning production and estimating the optimal amount of inventory to maintain. Thus, the MRP of the manufacturing process should be reviewed in order to optimize production according to customer orders by taking into account how supply and demand of electric fans vary. This is where the new process design comes into account, which is shown below.

New Process Design

The production process that is currently applied by the plant in producing electric fans is primarily based on the forecast of previous years’ production and on quantity demanded by customers who want customized products. This has resulted to an average of 93 % on the goods...