Page 159 - Orlicky's Material Requirements Planning

138 PART 2 Concepts

MRP process proceeds in regular fashion. Orders for service parts may be generated by a
service warehouse or by an organizationally autonomous service-part department that
maintains an inventory control system of its own.
When external (this term also covers business units of the company other than the
plant using the MRP system under discussion) component-item de mand is expressed in
the form of orders, the supplying plant specifies de livery lead times, which means that
the organization requesting the parts normally must make commitments well in advance
of actual need. Under this arrangement, there tend to be never-ending complaints about
orders being received with less than the agreed-on lead time. The supplying plant typi-
cally regards these orders as firm and noncancellable. Generally speaking, this method of
treating component-item demand between differ ent organizations of a company is never
entirely satisfactory, and delivery service tends to be poor.

Forecasting of Service-Part Demand

In cases where a plant using an MRP system has a service-part respon sibility (rather than
a separate service-part organization ordering from it), the logical and most effective way
to treat service-part demand is to use the time-phased order-point approach. This permits
service parts to be integrated into the MRP system without any need to modify its pro-
cess ing logic.
As mentioned earlier, service-part demand for items in current produc tion has to be
(explicitly or implicitly) forecast, and the forecast quantities, by period, are added to the
gross requirements of the items in question. Time-phased order point simply extends this
principle to cover parts no longer used in current production. The forecast quantities are
recorded in the gross requirements buckets of the inventory records of the respective
items, even though there are no other (parent planned-order) requirements. The particu-
lar statistical techniques used in the past to determine safety stock and to forecast demand
for these items can be retained when they are put under time-phased order point.
Time-phased order point provides the way for smoothly integrating independent-
demand items into an MRP system. The processing logic of this system profitably applies
to service parts that are no longer used in current production despite the fact that the sys-
tem is intended primarily to plan production items. Note that many service parts are sub-
assemblies and that manufactured service parts entail at least one lower (raw material)
level. Time-phased order point permits, as no other technique does, requirements for
component items of service parts to be determined and timed correctly.

Planned-Order Schedules of “Customer” Systems
Demand for component items that comes from sources external to the plant (other units
of the company are viewed as “customers” for these components) can be entered into the
plant’s MRP system by means of planned-order schedules generated by the customer’s
system. This presupposes that a service-part warehouse uses time-phased order point.