Page 152 - Orlicky's Material Requirements Planning

CHAPTER 7 Processing Logic 131

are processed before the next level below, all parent planned orders are developed before
gross requirements are placed on components.
Product structure is the principal constraint on the computation of requirements.
The number of levels in product structures, discussed in Chapter 11, is determined par-
tially by the sequence of steps in which the product is made from raw material to end
item, combining components into parents that then become components of a higher-level
parent, and so on to the top level. The commonality of parts and the inventory buffer
strategy also can affect the product structure. Product-structure depth (number of levels
in its structure) is a major factor in the scope and duration of the MRP data-processing
job and in the work of storing and maintaining the product structure.
Each individual item exists as a uniquely identified physical entity (e.g., a unit of
raw material, a component part, or a subassembly) and also exists physically built into
inventories of one or more parents. In the parents, it has lost its individual identity.
MRP assumes that each parent item in inventory is complete (with all components).
MRP also assumes that released orders to make more of a parent will be accompanied by
the correct quantity of each component. Additional components therefore will be needed
only when more parents have to be made. Hence planned orders for each parent deter-
mine gross requirements for its components. The product structure for parent items in
inventory or work-in-process makes it possible to determine the number of components
in them. Having this traceability is necessary in the event of product recalls or mandato-
ry design changes.
The general rule of MRP planning logic is that net requirements for parent items
expressed as lot-sized planned orders become gross requirements for components (tak-
ing quantity of component per parent into account) in the same time period that parent
orders are to be released. Determining net requirements for a low-level item (the lowest
level carries the highest level number) must include consider ation of the quantity present
under its own identity, as well as all quantities of the item now present in all its parent
and higher-level items.
The previously mentioned link between item inventory records is standard, but the
link between the hierarchy of records and the MPS, the so-called master schedule inter-
face, is susceptible to optional treatment. There are three options to choose from, and for
any given MRP system, the option chosen must be clearly defined if the system is to func-
tion satisfactorily. Figure 7-12 represents a sample MPS in the usual matrix format. This
would be the key input to the MRP system, but the question remains as to the meaning
of the data contained in this schedule. Does the quantity of 100 of end item A in period 1
represent a gross requirement, a production requirement, or a planned order? Its treat-
ment by the MRP system will vary depending on the answer to this question.
If the MPS represents gross requirements, its contents simply would be entered into
the gross requirements schedules of the respective end-item records, and the processing
would be standard (Figure 7-13).
The MRP system will net against both on-hand and on-order quantities, with the
result that only an additional 120 sets of item A compo nents would need to be produced