Page 153 - Orlicky's Material Requirements Planning

132 PART 2 Concepts

FIGURE 7-12
Period
End
Master Item
production 1 2 3 4 5
schedule.
A 100 100 100
B 15 20 25 20 15

C 50 60 60

FIGURE 7-13
Period
MPS interface: Item A
gross Lead time: 1 1 2 3 4 5
requirements.
Gross Requirements 100 100 100
Schedule Receipts 100
On Hand 80 80 80 –20 –20–120
Planned-Order Releases 20 100

20 100

in the first five periods. Under this option, the MPS does not reflect a production plan but
a requirements plan. This is not a recommended treatment—confusion will arise if man-
agement views the schedule as a plan of production, but the MRP system does not treat
it that way.
The second alternative treats the MPS as reflecting production requirements; that is,
300 units of item A are to be finished in the first five periods. In this case, the system must
be programmed to exclude any on-hand quantities (but not on-order quantities) from the
netting pro cess for highest-level items. This requires a modification of the regular pro-
cessing logic, applicable to these items only. This procedure is sound, and it presupposes
that end-item demand has been netted against on-hand inven tories during the prepara-
tion of the MPS. An exam ple of this alternative is shown in Figure 7-14.
Under each of the two alternative treatments just discussed, the MPS, in conjunction
with the MRP system, will “produce” item A in the quantities indicated—the system will
order correct quantities to be assembled or completed, and barring some difficulty, item
A will be available according to what the schedule calls for.
The third option treats the MPS as a schedule of planned-order releases, which
means that the schedule will not “produce” the end items but only their components
(Figure 7-15). The assembly of end items then would have to be ordered apart from the
MRP system, most likely via a final assembly schedule. This may or may not be desirable
depending on the type of product being manufactured. If the end items in the MPS are