Page 117 - Orlicky's Material Requirements Planning

96 PART 2 Concepts

Order action relative to purchased items takes place in two steps: a requisition
placed on purchasing by inventory control and a subsequent order placed on a vendor
selected by purchasing. The types of order action that effect a revision of action taken pre-
viously are limited to the following:

■ Increase in order quantity
■ Decrease in order quantity
■ Order cancellation
■ Advancement of order due date
■ Deferment of order due date
■ Order suspension (indefinite deferment)
To generate information for correct order action is not the only objective of an MRP
system, which also serves other functions (discussed in Chapter 7), but it is the primary
one. It is not much different from the objective of other (non-MRP) inventory systems in
intent. The difference lies in the respective systems’ ability to realize this intent. Order
point systems, in particular, have difficulty in ordering the right quantity of an item (see
the discussion of EOQ in Chapter 4) at the right time (see Figure 1-4), and their ability to
order with a valid order due date is even more ques tionable. As to the ability of such sys-
tems to revise previous order action, they have virtually none.
MRP systems meet their objective by computing net requirements for each invento-
ry item, time phasing them, and determining their proper coverage. The basic function of
MRP is the con version of gross requirements into net requirements so that the latter may
be covered by (correctly timed) shop orders and purchase orders.
The netting process consists of a calculation of gross requirements and of allocating
existing inventories (quantities on hand and on order) against these gross requirements.
For example:
Gross requirements: 120
On hand: 25
On order: 50 75
Net requirements: 45
If safety stock is planned for the item in question—this is not usual under MRP, but
the system presents no obstacle—the net requirements would be increased by the quan-
tity of the safety stock as follows:
Gross requirements: 120
On hand: 25
On order: 50
75
Safety stock: –20 55
Net requirements: 65