Page 157 - Orlicky's Material Requirements Planning

136 PART 2 Concepts

There is one more advantage to planning and controlling independent -demand
items by means of time-phased order point. In a manufacturing environment, when such
items are under the control of this technique, the capacity requirements report can reflect
a complete load with good visibil ity because planned-order schedules spanning the plan-
ning horizon are available to the capacity requirements planning system for all items.
This will be reviewed in more detail in Chapter 14.

Known Future Demand
Time-phased order point allows a known future lump requirement to be entered correct-
ly and processed, in contrast to the conventional order point, which is quite unequipped
to handle a situation of this type. For example, a service part that is forecast, based on
past usage, at 25 units per period may be ordered by a customer in a quantity of 200, to
be delivered at some specified future date. With conventional order point, the question is
whether an order for 200 should be released immediately even though the lead time is
less than the delivery time or it should be released at the proper (later) time. In the latter
case, the problem is what special pro cedure to institute so as not to miss the (future) order
release date.
The statistical order point technique itself will, of course, reorder when the invento-
ry drops down to the order-point quantity, whenever that may happen. Moreover, once
the order for 200 is released, it will increase the (on-hand plus on-order) inventory corre-
spondingly, and this will tend to act to prevent another replenishment order from being
released until the order in question is shipped. By then it may be impossible to meet reg-
ular service-part demand if stock on hand has been depleted. With time-phased order
point, none of these problems arises. The order for 200 is simply entered as a gross
requirement in the appropriate bucket of the inventory record and is added to whatever
quantity has been forecast for that period to cover regular demand. No more need be
done because the sys tem will automatically order correctly, at the proper time, to cover
both forecast and known future demand.

Effect on Management of Parts Service
Time-phased order point is an outgrowth and extension of the MRP system, and it is
interesting to note what effect on the service-part function such a system tends to have.
Historically, this function in a manufacturing company has been evolving toward orga-
nizational separation and indepen dence from the manufacturing function in general and
production and inventory control in particular. This has been caused primarily by the
marketing nature of a service-part inventory and by the marketing orienta tion of the peo-
ple in charge of this inventory. In this evolutionary process, service-part stock is first seg-
regated from production-part stock physically to prevent manufacturing personnel from
borrowing service parts for pur poses of production. Such borrowing is done to cover
shortages caused primarily by deficiencies in the inventory control system. Next comes a