Designing a Material Requirements Planning (MRP) System Using Blockchain Technology: A Case Study in Italian Chaizlonat  Furniture Exhibition / Baghdad

1.1 Research problem

The main research problem is represented in the following question: How can an MRP system be designed using blockchain Technology?

From this main question, a set of sub-questions is derived:

1.2 Research objectives

Guided by the research problem and its sub-questions, the objectives of this research are as follows:

1.3 Research importance

The importance of this research lies in the role that blockchain Technology can play in designing an MRP system for the products of the studied site (Italian Chaizlonat Furniture Exhibition), this role represented by timely fulfillment of customer demands for corners with minimal inventory, that lead to reducing costs, increasing profits, and achieving customer satisfaction.

1.4 Research methodology

The research problem needs historical, numerical, and factual data to design MRP system using blockchain Technology at The researched exhibition. Therefore, the researcher adopted the case study methodology, as it is suitable to the nature of the research, which depends on data available in the exhibition’s documents and records, as well as field observations and personal interviews with managers and specialized staff in the studied exhibition.

1.5 Research site

The Italian Chaizlonat Furniture Exhibition/Baghdad was selected as the research site for several reasons:

1.6 Research population, and sample

The Italian Chaizlonat Furniture Exhibition/Baghdad was chosen as a research site. The exhibition includes several products, which represent the research population, such as:

The researcher selected the Corner ES product as the research sample, because of the high demand for this product.

1.7 Sources and methods of data collection

1.8 Research procedural framework

Figure 1 illustrates the research procedural framework, representing the applied pathway of this research.

Figure 1. The research procedural framework – prepared by the researcher.

2.1 The Concept of the MRP system

The Material Requirements Planning (MRP) system is defined as: “A system used for planning and controlling both inventory and production capacity, providing accurate and valuable information on material stocks and major components involved in manufacturing operations, thereby supporting management in meeting its information needs for effective decision-making” (Schroeder and Roger, 2007:336) (Jassim Awad and Khuzam, 2024,2). According to (Krajewski & Malhotra, 2022:481), it is: “A computerized information system developed specifically to help manufacturers manage dependent demand inventory and schedule replenishment orders.”(Javadi et al.,2023:2) describe it as:“An intelligent information system concerned with determining the type, quantities, and timing of raw materials required to achieve production schedules, based on inputs such as the Bill of Materials (BOM), the Master Production Schedule (MPS), lead times, and current inventory levels.”

From the researcher perspective, the MRP system is viewed as an intelligent system aimed at aligning the flow of materials with production needs in an organized and precise manner. This is achieved by analyzing production and demand data and transforming them into effective procurement and manufacturing plans. It serves as a data-driven planning brain that ensures the availability of the required quantities of materials at the right time, while minimizing waste and costs.

2.2 The importance of the MRP system

MRP systems contribute to streamlining the production cycle by calculating net material requirements based on the Master Production Schedule and the Bill of Materials (Dinesh et al., 2014:1171).

The application of MRP systems helps reduce inventory costs, positively reflecting on the financial position of organizations (Rivera Poma et al., 2014:46).

The MRP system provides manufacturers with the ability to quickly adapt to changing market demands by delivering real-time and accurate data on material requirements (Ramadhan et al., 2024:3402).

From the researcher viewpoint, the importance of the MRP system lies in being a fundamental pillar in supply chain management and production operations. It ensures the timely availability of necessary materials, reduces waste levels, and improves operational efficiency. Moreover, with the rapid pace of technological advancement, this system is likely to evolve from a traditional planning tool into an intelligent system capable of highly accurate demand forecasting and adaptive responses to sudden changes in market and production environments.

2.3 Inputs of the MRP system

The master production schedule is an essential component of material requirements planning, detailing the number of finished units required during specific time periods (Krajewski & Malhotra, 2022:483).

The BOM provides a record listing the quantities of components and materials necessary for manufacturing the product (Heizer et al., 2020b:602).

Inventory records are an important tool for displaying stock status, indicating the number of available parts and those still in transit to the organization. Industrial organizations typically hold inventory of raw materials, parts, work-in-progress, and finished goods. In some cases, inventory is distributed across distribution centers or intermediate warehouses at different levels of the supply chain.Holding inventory is essentially a capital freeze, and the cost of maintaining inventory often ranges between 20%–40% of the total inventory value, highlighting the importance of minimizing the creation of what is known as “dead stock” (Jacobs et al., 2008:83).

Second Axis: Blockchain Technology.

2.4 The emergence, development, and concept of blockchain technology

Blockchain Technology represents a modern digital transformation comparable to the fundamental global shift that occurred with the advent of Internet services. Owing to its numerous features and advantages, blockchain contributes to addressing current challenges in the world of finance and business, particularly those related to storing, securing, processing, and auditing all transactional records by verifying their execution efficiently.

The first seeds of the “distributed ledger” concept appeared in 1976 in a scientific article entitled “New Directions in Cryptography”, where the need for new cryptographic systems that reduce dependence on centralized distribution channels was discussed (Diffie & Hellman, 2019:144) (Mhaibes and Qadir, 2022: 13). This laid the foundation for the decentralized systems on which blockchain technology would later be built.

In 1982, (David Chaum) introduced a revolutionary concept in his research on the “blind signature,” in which he proposed an untraceable electronic payment system based on cryptographic structures that conceal user identities (AI-Housni, 2019: 29). This was considered one of the earliest attempts to develop digital currencies based on privacy principles.

Some scholars interpret blockchain Technology as a mechanism designed to protect customers by ensuring the secure delivery of goods and achieving customer objectives throughout the supply chain. Blockchain provides a decentralized, peer-to-peer distributed network that relies on an immutable ledger, eliminating the need for a central authority to verify transactions, whether financial or non-financial. This results in the creation of reliable and tamper-resistant records (Abdallah & Nizamuddin, 2023b:2). (Shi et al., 2020:2) emphasized that blockchain, by providing privacy and security, forms the foundation that enables electronic health records, allowing patients to control their data. Thus, data security is critical when processing, transmitting, and retrieving patient records digitally across various applications. (Hanafi et al., 2023:3) defined blockchain as an accounting Technology that enables the transfer of asset ownership and the accurate recording of financial transactions. It integrates with modern technological developments, offering a secure way to record financial transactions and reducing accounting errors.

From the researcher perspective, blockchain Technology represents a strategic, decentralized Technology system used to record, document, and track operational processes and products across production and distribution stages among stakeholders within the value chain—securely, transparently, and without the need for intermediaries. Each transaction creates an encrypted block that is chronologically linked to the previous one, enhancing data reliability, improving operational monitoring efficiency, and ensuring process quality.

2.5 Characteristics of blockchain technology

Immutability is a fundamental property of blockchain Technology. The interconnection of blocks forms a key factor in preventing modification or alteration of recorded data. Once data is entered and documented within the blockchain, it becomes unchangeable, ensuring the preservation of user identities and reinforcing anonymity (Amponsah et al., 2021:448).

Decentralization refers to the transfer of legal and political authority in areas such as planning, decision-making, and the management of public functions from central entities to lower levels with local or specialized authority. In this sense, decentralization reduces central dominance and distributes authority across a network of relatively independent units (Saraphaivanich et al., 2022:11).

Blockchain contributes to reducing information asymmetry among parties and enhances the ability to verify transactions with ease and precision (Falwadiya & Dhingra, 2022:493).

Blockchain enables organizations to selectively share data within the network, granting them the ability to maintain confidentiality of sensitive information while ensuring the availability of necessary data to relevant parties. This achieves a balance between transparency and confidentiality requirements (Smith, 2022:19).

From the researcher point of view, integrating blockchain Technology into production, operations, and business management holds promising potential to enhance transparency, efficiency, and security. Future-oriented features include integration with the Internet of Things (IoT) for real-time product tracking and the adoption of smart contracts to automate processes and reduce human intervention, thereby lowering risks of fraud and manipulation. Advanced encryption Technologys can also be employed to safeguard sensitive business data without sacrificing overall transparency. Furthermore, blockchain can enable decentralized supply chain management systems, improving organizational responsiveness to risks and market changes.

4.1 Preparing the Master Production Schedule (MPS) for 2024 year

To implement the MRP system, the monthly production plan for the (Corner ES) product must be converted into weekly plans, in order to design an MRP system accordingly, as shown in Table 1. It should be noted that the system design will rely on data from the first and second weeks of January 2024.

4.2 Preparing the product structure and bill of materials (BOM) for the corner product

In order to prepare product structure and Bill of Materials (BOM) for the corner product, it is necessary to determine the quantities of parts and components required to product one corner. Table 2 illustrates the quantities of parts and components needed for producing one corner unit.

According to Table 2, Figure 3 illustrates the structure of the corner product.

Figure 3. The structure of the quantities of the parts and components of one corner.

Source: Prepared by the researcher based on the exhibition’s records.

because some parts such as (Internal Structure, Upholstery Part, Base Frame, Support System, Upholstery Padding, Upholstery Cover) require only a few hours of production, they will be integrated into the production time of the preceding or subsequent levels. For example:

4.3 Designing web-based system of the MRP blockchain platform

The developed system is a web-based Material Requirements Planning (MRP) platform integrated with blockchain technology to ensure transparency, traceability, and immutability of production and supply chain records. The system is for general use and it is not only designed for this company.

The system is built using the Flask framework (Python) and provides a user-friendly graphical interface for managing materials, products, production orders, and supply chain activities. After a user login to the system as Supervisor, Factory operator or Provider. The main page appeared according to the user’s roles. The architecture of the MRP–Blockchain integration is designed as a modular layered system, combining a web application layer with a blockchain ledger layer.

These Layers are as follow:

The main dashboard of the web-based MRP system showing key modules in figure 4.

Figure 4. The main dashboard of the web-based MRP system showing key modules.

The system includes several interconnected modules:

Figure 5. Material management interface.

Figure 6. Product management and BOM interface.

Figure 7. Production order management page.

Figure 8. MRP calculation results interface.

Figure 9. Blockchain explorer view showing transaction records.

Figure 10. Blockchain transaction history showing recorded operations.

Figure 11. Supply chain relationship visualization.

Module Interaction to Simplified Data Flow:

The interaction between modules are as follow;

4.4 Data that uploaded on the blockchain between the exhibition and suppliers

To provide the necessary information for direct supply via blockchain and to reduce the time wasted in exchanging information through Traditional methods between the suppliers and the exhibition management, the data to be uploaded on the blockchain records is divided into two categories:

4.5 Supply procedures will reduce by adopting blockchain technology

Table 3 illustrates the procurement procedures before and after adopting blockchain Technology.

4.6 Lead times for each part or component before and after using blockchain technology

Table 4 illustrates the lead times for each part before and after adopting blockchain Technology.

4.7 Time production structure for the corner after adopting blockchain technology

Figure 12 illustrates the overall time production structure of corner based on the new lead times resulting from the reduction in time and procedures. This duration is constant for all weeks of the year 2024, as it represents the calculated production and supply lead times of the parts and components after applying blockchain Technology.

Figure 12. Corner structure based on the new lead times resulting from reduced time and procedures.

From Figure 12, the total duration required for the production and supply of the corner is approximately 11 weeks.

4.8 Designing the material requirements planning (MRP) system for parts and components to produce the required quantities of corner units for the first and second weeks of january 2024

4.9 Comparison between actual situation and proposed method

In order to select the better system, it is necessary to compare the actual situation with the proposed method by sit of criteria to compare the results of the two methods for January (Week 1 and Week 2) as shown in Table 9.

From Table 9, it is clear that the best method for the exhibition to plan for its requirement from parts and components to product the corners is Material Requirements Planning system using blockchain Technology, This result were reached due to the superiority of this method in all comparison criteria between the two methods.

7.1 Conclusions

7.2 Recommendations

Based on the conclusions, the researchers recommends the following: