Abstract
Although companies can obtain major benefits from material requirements planning (MRP) serious difficulties are usually encountered during the implementation phase. This paper highlights these difficulties and then goes on to show how they can be overcome if MRP is viewed as a ‘standard’ investment decision with quantifiable objectives. The financial evaluation techniques developed at UMIST are described and a comprehensive list of costs and benefits relating to MRP is given, with 76 factors being listed. These factors, selected to prevent double counting, ensure that each potential benefit is directly quantifiable, rather than being simply described as ‘positive but intangible’. The paper then goes on to describe a systematic method of defining and quantifying the benefits listed. Finally, because MRP represents a major investment decision, it is shown that the ability to conduct a comprehensive discounted cash flow (DCF) analysis enables the main savings to be identified, thereby ensuring that the implementation strategy can be designed to optimize both the operational and financial advantages.
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