Reduce Inventory Investment:

While fixed order quantity and order point systems are used to plan orders for a raw material, the order quantity plus safety stock remains in inventory until the raw materials end item appears in the Master Production Schedule (MPS). Because these facades can be several weeks apart, the pattern of inventory levels is long periods of full inventories interspersed with brief periods of low levels. Alternatively in MRP, orders for raw materials are timed to arrive at approximately the time at which raw materials end item appears in the MPS. The pattern of inventory levels in MRP is long periods with low levels of inventory, interspersed with brief periods of full inventories. The impact of MRP on raw- materials inventory levels is therefore dramatically reduced by using average inventory levels.