Page 104 - Orlicky's Material Requirements Planning

C HAP TE R 5

Principles of Materials

Requirements Planning

As mentioned in Chapter 4, the alternative choice to statistical inventory control is
material requirements planning (MRP), an approach that recognizes the realities of
demand existing in a manufac turing environment. This approach is eminently suitable
for the manage ment of inventories subject to dependent demand because it does not rely
on any assumptions regarding patterns of demand and inventory depletion. The MRP
approach does, however, assume certain characteristics of the product and of the process
used in its manu facture. This chapter reviews these and other assumptions, prerequisites,
and principles that an MRP system employs.

TIME PHASING

Time phasing means adding the dimension of time to inventory-status data by recording
and storing the information on either specific dates or plan ning periods with which the
respective quantities are associated. In the older era of inventory control, status of a given
item normally was shown in the system’s records as consisting of only the quantity on
hand and the quantity on order. When physical disbursements of the item reduced the
sum of these two quantities to some predetermined minimum or reorder point, it was
time to place a replenishment order.
This approach was refined around 1950 with the introduction of the perpetual
inventory control concept. The principal idea behind this concept was to maintain some-
what expanded status information “perpetually” up to date by posting inventory trans-
actions as they took place. This innovation largely was made feasible by the availability
of better office equipment, par ticularly Kardex and punched-card data-processing instal-
lations, which streamlined the clerical tasks of posting and calculation.
Inventory-status information was expanded by adding data on require ments
(demand) and availability (the difference between the quantity required and the sum of

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