Page 221 - Orlicky's Material Requirements Planning

200 PART 3 Managing with the MRP System

a state of completion. Thus, when a fabricated part is finished or a subassembly is com-
pleted, it is considered to be on hand, that is, in stock, until it is withdrawn and associat-
ed with an order for a higher-level (parent) item as its component. An MRP system is con-
structed in a way that assumes (as discussed in Chapter 5) that each inventory item under
its control goes into and out of stock at its respective level in the product structure. MRP
also assumes that the BOM accurately reflects this flow. Thus the BOM is expected to
specify not only the composition of a product but also the process stages in that product’s
manufacture. It must define product structure in terms of levels of manufacture, each of
which represents the completion of a step in the buildup of the product. This is vital for
MRP because it establishes, in conjunction with item lead times, the precise timing of
requirements, order releases, and order priorities.
Sometimes there is reluctance toward assigning separate identities to semifinished
and finished items, where the conversion to the finished stage is minor in nature. An
example might be a die casting that is first machined and then receives one of three fin-
ishes, chrome, bronze, or paint, as shown in Figure 11-1.
The three finished items will have to be assigned separate identities if they are to be
ordered and their order priorities planned by the MRP system. This is an example of a sit-
uation where unique item identity (of the finished casting) normally would not exist but
should be an established prerequisite to MRP because otherwise such items would fall
outside the scope of the system and result in loss of control.

Treatment of Transient Subassemblies

Another example of an item identity problem that is almost the opposite of the preced-
ing one is the transient subassembly, sometimes called a phantom. Assemblies of this type
never see a stockroom because they are consumed immediately in the assembly of their

FIGURE 11-1 Painted Bronze Finish Chrome Finish
Unique identity of Part No. 3 Part No. 4 Part No. 5
semifinished and Finished
finished items.

Machined Part No. 2

Raw Casting Part No. 1