Page 175 - Orlicky's Material Requirements Planning

154 PART 2 Concepts

covered by the prospective lot is compared with the EPP, and the look-ahead process is
stepped if the cost equals or exceeds the EPP.
The look-ahead test is always made first. If it fails (i.e., if the possibility of covering
an additional period is ruled out), the look-back test is made. Now what is being checked
is the possibility of adding the quantity of requirements in the last period covered by the
order in question to the next lot, that is, decreasing the size of the first lot. The look-back
can be demonstrated on the following net requirements schedule:

Period: 1 2 3 4 5 6 7 8 9
Net requirements: 20 40 30 15 30 25 50 20 40
Planned orders: X ← X

With an EPP of 100, the first lot of 90 would cover periods 1 through 3, and the next
lot would be keyed to period 4. A look-back to period 3 indicates that it would cost 60
part-periods to carry stock covering this requirement, whereas it would cost only 15 part-
periods to carry the period 4 requirement if the second lot were keyed to period 3. A
tradeoff therefore is indicated: The second lot is keyed to period 3, and the first lot is
reduced to 60 units. The complete planned-order schedule after look-back appears in
Figure 8-12.
On first reading, it seems that the special features of PPB on the effectiveness of the
LTC approach. On reflection, however, the look-ahead/look-back proposition proves
dubious, and its logic is murky. Let us return to the example of look-ahead:

Period: 1 2 3 4 5 6 7 8 9
Net requirements: 20 40 30 10 40 30 35 20 40
Planned orders: X X →

It is obviously true that it is cheaper to carry 10 units for three periods than 40 units
for one period, but this is not the only consequence of the look-ahead adjustment. The 30
in period 6 also will be carried for one period less. The 35 in period 7, however, would not
have incurred any carrying cost had the look-ahead not been employed, but now it will
cost 70 part-periods. The look-ahead feature of PPB simply does not look far enough
ahead. When the adjustment is made, it tends to change the timing (and coverage) of all
subsequent planned orders in the schedule, with results that the technique is oblivious of.
In our example, the look-ahead adjustment saves a total of 130 part-periods and
incurs a new cost of 100 part-periods. The last lot of 60, however, entails only 40 part-peri-

FIGURE 8-12
Period 1 2 3 4 5 6 7 8 9 Total
Part-period
Net Requirements 20 40 30 15 30 25 50 20 40 270
balancing with
look-back.
without look-ahead 90 70 110 270
Coverage
with look-ahead 60 75 95 40 270