Supply chain is an organizational system that involves the moving goods and services from the supplier to the consumer. Supply chain activities ensure the transfer of raw materials, natural resources and other finished products are delivered to the consumer. In the complicated supply chain structures, used products re-enter the supply chain from any point (Dolgui, & Prodhon, 2007). Supply chain has parties indirectly or directly involved in fulfilling the customers’ requests. It does not only include suppliers and manufactures but also consumers, retailers, wholesalers and transporters. Supply chain also involves a constant flow of funds, information and products between different stages of product distribution. In supply chain just-in-time (JIT) system and material requirement planning (MRP), play a very important role in the maintenance of proper inventory level.
Just-in-time JIT is an inventory strategy organizations employ to decrease waste and increase efficiency through the receiving of goods as they are required in the production process (Mistry, 2005). Therefore, JIT helps a company in a great way to reduce costs in the production process. Desperate organizational functions like logistics, sourcing and planning can often produce good results by improving performance in supply chain operations. The adoption of JIT principles, makes production cost effective, customer responsive and more efficient (Mistry, 2005). Companies which practice the JIT principles have a competitive advantage over those that do not practice. The basic principle of JIT system in an organization is to have the right amount of inventory production demand and processes to meet its customer’s needs. The closer organizations get to JIT situation, the more they are responsive to their customers. The less a company spends to store a particular product and carry inventory the less they optimize logistics and transportation operations. The application of JIT by a company ultimately translates into saving strategy (Mistry, 2005).
Material Requirement Planning (MRP)
Material requirement planning (MRP) can be referred as an inventory and planning control system that is used in managing the manufacturing process. Although the MRP system is software-based, it can be conducted by the use of hands. The MRP system has three main objectives. To begin with this systems ensures that production materials are always available and finished products are also available on demand. The second objective is to maintain the lowest product and material levels in the store (Dolgui, & Prodhon, 2007). The last objective of MRP is the planning of purchasing activities, delivery schedule and manufacturing activities. The main functions of an MRP system are inventory control such as elementary scheduling and the bill of material processing. Through an effective application of MRP, organizations are able to maintain low inventory levels. Manufacturing companies face the same daily practice problem (customers always want the products they order in the shortest time possible). A level planning is therefore required. To have a competitive advantage in the market place, companies should be able to control the quantity and type of goods they purchase. They should also plan which products are produced and their quantity so as to meet the future customer demand (Dolgui, & Prodhon, 2007).
The downside of JIT is and MRP is that they are continuum. This is to mean, the more an organization gets to systems they more they are entitled to benefits. However, reducing inventories will only make organization spend more. Little inventory measures lead a company to a competitive disadvantage to its competitors. Therefore, through the right application of these distribution principles, a company is most likely to gain a competitive advantage over its competitors. These systems not only belong to the managers but also it belong to business functions of the company. Therefore, they requires a cross-functional team work in a coordinated framework with a common goal.
Dolgui, A., & Prodhon, C. (2007). Supply planning under uncertainties in MRP environments: A state of the art. Annual Reviews in Control, 31(2), 269-279.
Mistry, J. J. (2005). Origins of profitability through JIT processes in the supply chain. Industrial Management & Data Systems, 105(6), 752-768.
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