Explain how MRP can decrease a company’s inventory while improving its customer service level. Include a real-life example. Your initial post should be 200-250 words.

Many companies used to stock all raw materials required for manufacturing a product but that means unnecessarily high inventory costs. Apart from that, it is entirely possible that demand may vary and some of the raw materials will still be short. An MRP is a computerized system which has information required to take decisions related to the inventory. The inventory needs to be right for the manufacturing to go ahead as per schedule and MRP helps in managing the dependent demand side of manufacturing. Data needed for MRP is the master production schedule, the bill of materials and inventory records. The master schedule lists out the materials needed and the bill of materials lists the components of the product to be manufactured and shows the relationship between the components. The inventory records update the items to be replenished as they get added or used (Vonderembse, 2013). MRP helps in having the right balance of the items required for manufacturing as it works towards finding out the right inventory required for production and thereby manage optimum inventory levels. Sales can therefore be more clear on their communication with clients on the delivery dates and this helps in improving customer satisfaction levels.

Vonderembse, M. A., & White, G. P. (2013). Operations management [Electronic version]. Retrieved from https://content.ashford.edu/