What assumption in MRP makes the implicit assumption of infinite capacity? What is the effect of this assumption on planned lead times? On inventory?

Material Requirements Planning (MRP) is a management system used for production planning and inventory control. It helps businesses determine the required materials and their quantities needed to produce finished goods at a given time. MRP works by breaking down production requirements into various components and determining when these components need to be produced or purchased to meet the overall production schedule.

One of the assumptions in MRP is the concept of infinite capacity, which means that MRP systems assume that there is always enough capacity available to manufacture the required items within the production facility. In other words, MRP assumes that the demand for resources (such as labor, machine time, and space) can always be met within the planned lead times, without any constraints on resources.

The assumption of infinite capacity has a significant impact on planned lead times. Planned lead times are the time it takes for a product to be produced or purchased and delivered to the facility. Since MRP assumes that resources are always available to meet the demand, it can result in unrealistic and misleading lead time estimations. This can cause scheduling issues and delays if the actual capacity of the production facility is not enough to meet the demand during certain periods.

The assumption of infinite capacity also affects inventory levels. As MRP assumes there will always be enough capacity to produce items as per the demand, it may lead to excessive inventory accumulation, especially when actual production capacity is lower than the assumed capacity. Moreover, if resources are not managed effectively and there is a mismatch between actual capacity and assumed capacity, businesses might end up overstocking some items while understocking others. In conclusion, the assumption of infinite capacity in MRP can have a significant impact on planned lead times and inventory. It may lead to unrealistic lead time estimations and inventory mismanagement, affecting the overall efficiency of the production process. It's essential for businesses to be aware of this assumption's limitations while using MRP systems and take necessary measures to ensure accurate capacity planning and inventory management.