Page 127 - Orlicky's Material Requirements Planning

106 PART 2 Concepts

The computation of net requirements proceeded in the direction from top to bottom
of the product structure in a level-by-level fashion. This proce dure accounts for, or flush-
es out, component item D in its consumed state “hiding” in higher-level items A, B, and
C that will be used in the manu facture of product X. If the computation proceeded in the
other direction, the where-used traces might lead into other branches of the BOM that do
not apply to product X. For example, an additional quantity of item D might be found
hidden in parent item Y. If it entered into the netting pro cess, the net requirements for
item D would be understated because item Y is not used in the manufacture of truck X.
Net requirements are developed by allocating (reallocating) quantities in inventory
to the quantities of gross requirements in a level-by-level process. The level-by-level net-
ting procedure is laborious, but it cannot be circum vented or shortcut. The net require-
ment on the parent level must be deter mined before the net requirement on the compo-
nent-item level can be determined.
The downward progression from one product level to another is called an explosion.
In executing the explosion, the task is to identify the components of a given parent item
and to ascertain the location (address) of their inven tory records in computer storage so
that they may be retrieved and pro cessed.
The BOM file (or product-structure file) guides the explosion process. Product-
structure data are not operated on but merely consulted by the system to determine com-
ponent identities and quantities “per” (previously illustrated in Figure 6-3). The generic
name of the computer program (software) that organizes and maintains the product-
structure file is the BOM processor. The program also handles the retrieval of individual
BOMs as required during the explosion process.

Lot Sizing

Lot sizing (as defined earlier) is also a factor in the requirements computa tion, and it is anoth-
er reason why the top-to-bottom, level-by-level procedure must be followed. In the preced-
ing example, a tacit assumption was that parent items A, B, and C will be ordered in quanti-
ties equal to the respective net requirements for those items. In reality, though, lot sizing,
where employed, would invalidate this assumption. This is so because the gross requirement
for a component derives directly from the (planned) order quantity of its parent(s).
If we modify the preceding example by stipulating that for gear C, produc tion order
quantities must be multiples of five (because of some consideration in the gear machin-
ing process), the net requirement of 76 will have to be covered by a planned order for 80.
This will increase the gross requirement for forging blank D correspondingly, as illus-
trated in Figure 6-7. When the planned order for 80 gears (parent item) is released, 80
forging blanks (component item) will have to be issued.
Lot sizing, that is, the particular technique used to determine order quan tities for a
given inventory item, therefore affects the requirements for its components. For an MRP
system to be able to carry out a complete explo sion, lot sizing must be part of the proce-
dure, and the respective lot-sizing rules (algorithms) must be incorporated into the com-