Page 156 - Orlicky's Material Requirements Planning

CHAPTER 7 Processing Logic 135

a replenishment order of 50 is planned to arrive at that time. Offsetting for lead time, the
planned-order release is scheduled for period 3. In period 8, the quantity on hand (34 +
50) once again will be less than 100, and another planned order, scheduled for re lease in
period 6, will cover this. The results are identical to those obtained under statistical order
point (note that the previously computed order point of 134 is reached some time in peri-
od 3, at which time the replenishment order is planned to be released), except that under
time-phased order point an entire schedule of planned replenishment orders is devel-
oped instead of one order at a time, as is done under the conventional statistical order-
point approach.
Actually, the term time-phased order point is a misnomer because no order point as
such is used for any purpose, and its value (134 in our case) is not even computed by the
system. The MRP logic takes over and provides for ordering at the right time. The value
of the order point need not be known because the replenishment order is not being trig-
gered by it but rather by the on-hand quantity dropping down to the safety-stock level
and the lead-time offset timing the order correctly.
The MRP system requires no modification for purposes of implementing time-
phased order point. The system treats the independent-demand item exactly the same
way it handles any item for which safety stock is specified (see Figure 7-8). The time-
phased order point does everything its conven tional counterpart does, and in addition, it
provides the capabilities to:

1. Keep open-order due dates valid
2. Furnish the capacity system with a planned-order schedule
3. Plan gross requirements for the item’s component material(s)

This means that both dependent- and independent-demand manufactured items
can be covered by the same priority planning system, and the relative priorities of all
shop orders can be kept valid. The MRP logic keeps reevaluating the validity of open-
order due dates, and such orders are rescheduled in accordance with the dates of actual
need. This is especially significant for items under time-phased order-point con trol
because their gross and net requirements are expected to keep changing owing to fore-
cast error.
When time-phased order point is used properly, open orders for items under its con-
trol are being continually rescheduled backward and forward so as to make their due
dates coincide with dates of (projected) actual need and to keep their relative priorities
valid. If this is done, it can be seen that the system will maintain the correct inventory sta-
tus and correct coverage irrespective of the vagaries of actual demand. A close monitor-
ing of the efficacy of the forecasting model, tracking signals, and so on therefore loses its
importance. The time-phased order point works well even when forecasting is poor, as
will be explored further in Chapter 10. It also has been suggested that close monitoring
of forecasts via tracking signals is less important. This ignores the effects of nervousness
on good execution by suppliers and production plants. MRP programs cope easily with
a myriad of changes; production sometimes cannot react with the same agility.