How to Prioritize Replenishment Orders in Demand Driven MRP: A Simulation Study

Demand Driven Material Requirements Planning (DDMRP) assumes that a production order is generated for replenishment when the inventory position, given by the net flow equation, is below a given level. Literature on this production planning and control system suggests prioritizing open orders on the shop floor based on the inventory buffer status. However, the performance of buffer-oriented priority dispatching largely remains unknown. Using discrete event simulation, this study suggests that buffer-oriented dispatching based on the net flow equation outperforms due date-oriented dispatching rules and first-come-first-served. The performance impact depends, however, on the reorder quantity associated with the production orders. These results have important implications for industrial practice.