Page 144 - Orlicky's Material Requirements Planning

CHAPTER 7 Processing Logic 123

FIGURE 7-7
Period
Alternative Total
method of net 1 2 3 4 5 6 7 8
requirements
display. Gross Requirements 20 25 15 12 72
Scheduled Receipts 30 30
On Hand 23 23 3 33 8 8 –7 –19 –19 –19

ficult to interpret, little additional skill is actually required for interpretation. The dis-
crete, period-by-period net requirements need not be mentally calculated from the cumu-
lative figures but can, in fact, be read directly from the record. This is due to the fact that
in all periods that have net requirements, these net requirements equal gross require-
ments except for those periods during which inventory either runs out or is added to by
a new receipt. Figure 7-7 provides an ex ample. The first net requirement of seven in peri-
od 6 is shown as such, and the subsequent net requirements equal gross requirements,
that is, 12 and 0. Note also that the last (cumulative) net requirements figure, –19, equals
the total net requirements for the eight periods covered by the record.
The timing of component gross requirements is linked directly to time -phased par-
ent planned-order due dates. Planned-order quantities are determined by ordering poli-
cies that select lot-sizing techniques specified by users. Different techniques can be
applied to different items or item classes.
MRP covers net requirements with planned orders for future release. Planning hori-
zons should extend far enough into the future so that all components of the MPS end
items have at least one net requirement and one planned order. Chapter 8 gives details of
lead-time–planning-horizon relationships.
To generate a planned order correctly, MRP must deter mine

1. The timing of order completion (due) date
2. The timing of order release (start) date
3. The order quantity

The timing of order completion must coincide with the timing of the net require-
ments being covered if shortages are to be prevented.

Safety Stock and Net Requirements

Earlier there was mention of the fact that the planning of safety stock on the item level
affects the calculation of net requirements. For purposes of this calculation, the quantity
of safety stock is either subtracted from the on-hand quantity or added to the gross
requirement. Either alternative produces the same effect, namely, a corresponding
increase in net requirements and sometimes a shift of the first net requirement one peri-
od forward. In the Figure 7-7 example, had there been a safety stock of two units, the pro-
jected on-hand and net requirements quantities would have been as shown in Figure 7-8.