Page 138 - Orlicky's Material Requirements Planning

CHAPTER 7 Processing Logic 117

The technique signals that an order for 80 or more pieces should be placed to pro-
vide coverage. Let us assume that the status is examined by an in ventory planner on
March 1 and that 80 units of the item, which has a lead time of four weeks, are ordered
on that date. This action proves incorrect in light of more detailed information on inven-
tory status, such as
On hand: 20
On order: 100, due March 10
Required: 110, March 15
90, June 15
This technique of expressing inventory status does not make the adequacy of cov-
erage sufficiently clear. In both these examples, the action signals are false. The message
in the first case should have been, “Reschedule the open order to May 15,” and in the sec-
ond, “An order for at least 80 will have to be placed, but not for another 10 weeks.” The
technique in question does not provide for orders planned for future release (as the sec-
ond of the ex amples illustrates) and in assessing status depends on open orders only.
In an MRP system, all the preceding shortcomings in expressing inventory status are
overcome by expanding the number of status elements and by time-phasing status data.
The classic equation is, in effect, expanded to

A B D – C X
where D quantity is planned for future order release.
The MRP system evaluates the status of each inventory item, automa tically estab-
lishes planned-order coverage, and signals for consistently correct action. Under MRP,
the elements of inventory status (all of them associated with timing information) are
these:
■ Quantity on hand
■ Quantities on order
■ Gross requirement quantities
■ Net requirement quantities
■ Planned-order quantities
These status data can be divided into two categories by type:
1. Inventory data (replenishment)
2. Requirements data

Inventory data consist of on-hand and on-order quantities and their timing. These
data are reported to the system and can be verified by inspection. Requirements data con-
sist of the quantities and timing of gross require ments, net requirements, and planned-
order releases. These data are com puted by the system and can be verified only through
recomputing. This can be done in a regenerative mode (triggered by passage of time) or
net-change mode (triggered by an event).