Page 234 - Orlicky's Material Requirements Planning

CHAPTER 11 Product Definition 213

The suboptional parts are, by necessity, doubly overplanned. Breaking out suboptions is
an alternative to treating the suboption as an option in its own right, that is:
Option
Four-wheel construction: 100
Three-wheel construction, single wheel: 200
Three-wheel construction, double wheel: 125
Under this approach, items common to the three-wheel options will be unnecessar-
ily overplanned. In our example, 275 sets of items common to three-wheel construction
would be planned under the option/suboption approach and 325 sets under the straight
option approach.
It can be seen that the lack of modularization in product design (so-called integrated
design), of which option combinations that cannot be disentangled and options within
options are examples, entails more investment in safety-stock inventory and makes inven-
tory management more difficult. This is due to a high forecast error in forecasting option
combinations and the need for double overplanning in the case of options within options.

Planning BOMs

To return to the previous modularization example and to recap the steps taken up to this
point, end-product numbers (codes) have been abolished, and their BOMs have been
done away with as unnecessary for purposes of MRP, where the final product that for-
merly served as the end item in the BOM level 1 items (and in one case level 2 items) has
been promoted to end-item status. This procedure established a new, modular planning
BOM suitable for forecasting, master scheduling, and MRP.
The job of restructuring is not finished, however. The former level 1 items used with
option combinations, D14, H23, and so on, that have been excluded from the planning
BOM cannot simply be abolished. These items eventually will have to be assembled, and
the production control system has to be able to place orders for these items, schedule them,
and requisition their components. These BOMs therefore must be retained for the purpos-
es just mentioned, as well as for industrial engineering and cost-accounting purposes.

Segregating Common from Unique Parts
Earlier it was mentioned that one of the two reasons for modularization is to disentangle
option combinations for purposes of forecasting and master production scheduling. The
other objective of modularization, that is, segregating common from unique (optional)
parts for purposes of inventory minimization, however, has not been fully met in the
example we have been working with.
In modularizing the BOMs, level 1 items in the example were assigned to groups by
option. However, at least some of those items were assumed to be assemblies, and they
may contain common components. For example, a subassembly that is used only with