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MRP systems - basic inputs
It has been estimated that in the USA where MRP was originated and developed by Oliver Wight and George Plossl (1985), virtually all Fortune 500 manufacturing companies with annual sales of $10 million or more, use an MRP system. In the United Kingdom, it has been estimated that more than 70 per cent of all manufacturing companies use MRP systems. MRP is widely used throughout the world including the Middle and Far East and in Japan.
Dependent demand implies the process of calculating from the end product backwards to the raw material level, determining at each stage the exact requirements. This is precisely how MRP operates.
However, there are two important steps which must be taken before that can be achieved. Firstly, there must be a database containing the required information. This database comprises information relating to the current inventory holding and the structure of the final product.
The next few paragraphs contain some important terminology.
opportunity cost
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