Uncertainty:

Underlying MRP is the supposition that all required information is known with certainty. However, uncertainties do exist. The two key sources of uncertainty are the forecasts for future sales of the end item and the estimation of the production lead times from one level to another. Usually Forecast uncertainty means that the realization of demand is likely to be different from the forecast of that demand. In the production planning context, it could also mean that updated forecasts of future demands are different from earlier forecasts of those demands. Forecasts must be revised when new orders are accepted, that means prior orders are cancelled, or new information about the marketplace becomes available. That has two implications in the MRP system. One is that all of the lot-sizing decisions that were determined in the last run of the system could be incorrect, and even more problematic, former decisions that are currently being implemented in the production procedure may be incorrect.

The analysis of stochastic inventory models illustrated that an optimal policy included safety stock to protect against the uncertainty of demand. That is, we would order to a level exceeding expected demand. The similar logic can be applied to MRP systems. The manner in which uncertainty transmits itself through a complex multilevel production system is not well understood. Generally for that reason, it is not recommended to include independent safety stock at all levels of the system. Appropriate safety levels can be built into the forecasts for the end item. These will automatically be transmitted down through the system to the lower levels through the explosion calculus.