Page 108 - Orlicky's Material Requirements Planning

CHAPTER 5 Principles of Materials Requirements Planning 87

A variation of the lot requirements planning approach is the so-called single-period
requirements planning system. All product lots scheduled for a given period, usually a
month, are combined, in effect, into a superlot that is then treated as an individual lot in
lot requirements planning. The principal output of systems of this type is an item-by-item
listing (by lot or by period) or order action required without an indication of exactly
when action is to be taken on each of the items.
Methods of planning by product lot had been in use at a time when the job of
detailed time phasing was too big for a punched-card installation, in the sense that mil-
lions of card equivalents would have had to be processed (sorted, collated, summary-
punched, etc.) at relatively slow card-handling speeds. It would have taken days or
weeks to complete the job. This was state of the art at the time. Refer to Appendix D for
more detail on the technological evolution occurring during this time. Lot require ments
planning systems, at one time representing a significant advancement in inventory con-
trol state of the art and superior to the statistical order-point approach, became obsolete
when the computer was introduced. At that point, time phasing of inventory-status data
became feasible and practical.
Time-phased order point is a modern technique of planning and control ling inventory
items subject to independent demand. It is eminently suitable for service parts, finished
products in factory stock, and field warehouse items. The system processing logic is iden-
tical to MRP (see Chapter 7) except for the manner in which item demand is arrived at.
Requirements for independent-demand items are forecast (using any forecasting tech-
nique the user selects) because they cannot be calcu lated. Any service part that is manu-
factured has, however, at least one com ponent item (e.g., raw material) that is then treat-
ed the same as any other item in an MRP system.
MRP calculates item demand and time-phases all inventory-status data in time
increments as fine as the user has specified. MRP represents the ultimate approach to
manu facturing inventory management. Concepts of MRP, the processing logic of an MRP
system, and related techniques will be discussed in the balance of this chapter and in the
chapters that follow.

PREREQUISITES AND ASSUMPTIONS OF MRP
Unlike the goddess Athena, MRP did not spring into being in full splendor and fully
armed. In some rudimentary form, it has no doubt existed as long as manufacturing. The
idea of planning what is really required by comparing what is a total requirement to what
is on hand is as old as any shopping trip to plan meals for the week. It has been evolving
grad ually, moving onto successively higher plateaus with every enhancement in data-
processing capability. MRP had its origin “on the firing line” of a plant. It has been
painstakingly developed into its present stage of relative perfection by practicing inven-
tory managers and inventory planners.
It never made sense to the practitioner to stock thousand-dollar castings, for
instance, and to reorder them in economic lot quantities when he or she could determine