Page 125 - Orlicky's Material Requirements Planning

104 PART 2 Concepts

FIGURE 6-5 Product
X
Level 0 (Truck)
Parent-
component Parent
relationship.
Component
Assembly
A
Level 1 (Transmission)
Parent

Component
Subassembly
Level 2 B (Gearbox)
Parent

Component
Part
Level 3 C (Gear)
Parent

Component
Semifinished Part
Level 4 D
(Forging Blank)
Parent

Component
Raw Material
Level 5 E
(Steel)

The concept of the product level is usually associated with relatively complex assem-
bled products that contain many (typically 6 to 10) levels. But any manufactured product,
no matter how simple, involves at least two and probably more levels. A one-piece wrench
has at least three levels, that is, steel, forging blank, and finished wrench. A nuts-and-bolts
manufac turer purchases steel rod (one level) that is drawn into wire (another level) from
which a screw (a third level) is formed. Even the simplest products assembled from man-
ufactured components have at least three and most likely more levels.
In determining net requirements for a low-level (note that the lowest level carries
the highest number) inventory item, the quantity that exists under its own identity, as
well as any quantities existing as (consumed) compo nents of parent items, parents of par-
ent items, and so on, must be accounted for. The basic logic of “netting” requirements is
best demonstrated through an example. Let us assume that 100 trucks X are to be pro-
duced and that the following are in inventory (on hand and on order):