Page 161 - Orlicky's Material Requirements Planning

140 PART 2 Concepts

planned lead time should equal the transporta tion or delivery-time portion of the total,
for example, one week; at the component level, planned lead time should equal the man-
ufacturing portion of the total, for example, several weeks or months. In Figure 7-17,
these lead times are shown as one and four weeks, respectively. The products can be
linked between different entities in a vertically integrated company or across different
companies of the supply chain.

SYSTEM NERVOUSNESS
A very interesting attribute of material requirements planning is the system’s apparent
hypersensitivity or nervousness. Since file updating is equivalent to replanning, it may
appear that the system calls for continual revision of user action taken previously. This is
of concern especially where due dates of open purchase orders are concerned, when it is
not considered practical to subject these due dates to constant revision. In evaluating this
aspect, it is important to draw a distinction between
■ The system being informed, up to the minute
■ The frequency of action taken on the basis of the information
The latter obviously can be decided on (based on practical considerations) indepen-
dent of the former. A deliberate withholding of user action in the full knowledge of cur-
rent facts is preferable to a lack of action caused by ignorance of those facts. The critic of
a nervous system argues, in effect, that it is better for an inventory and production-plan-
ning system to be out of date. Such an argument cannot be considered seriously.
Nervousness on the level of planning is a virtue, not a drawback, of a net-change MRP sys-
tem. Hypersensitivity on the level of reaction can and should be dampened. Not every
change in inventory status calls for reaction. Many minor changes of the type that other-
wise would require action are absorbed by inventory surpluses that exist as a result of
previous changes and/or inventory management decisions. These surpluses are created
by safety stock, scrap allowances, and temporary excesses in inventory owing to lot siz-
ing, engineering changes, reduced requirements, overshipments, overruns, and prema-
ture deliveries by suppliers. The system constantly strives to use up such temporarily
excessive inventories as early as possible through the net requirements planning process.
Inventory excesses thus are automatically prevented from accumulating, but under nor-
mal conditions, they exist in some measure at any point in time.
Prompt reaction to changes in requirements or other elements of inventory status
generally is called for when requirements increase or when the timing of planned per-
formance advances. For the opposite type of change, a delay in reaction can be tolerated.
Changes can occur every minute of the day. Inventory status is not affected significantly
by most of the updating entries, but certain transactions, for example, unscheduled stock
disbursements, scrap, physical inventory adjustments (short counts), and miscellaneous
demand exceeding forecast, do cause replanning/rebalancing of inventory status.