Page 247 - Orlicky's Material Requirements Planning

226 PART 3 Managing with the MRP System

and new machinery, may take a year or more to acquire, and this is why an MPS should
extend beyond the total cumulative production lead time. The long-horizon function of
resource requirements planning will be reviewed in the next section.

MPS DEVELOPMENT
The specific method of developing an MPS tends to vary from company to company. The
general procedure, however, consists of a number of logical steps (described below) that
can serve as the basic blueprint on which modifications are made depending on the
nature of a particular manufacturing business.

Preparing an MPS
An MPS represents, in effect, the future load on production resources. The load arises
from requirements placed on the plant that reflect the demand for the product being
manufactured. The method of establishing these requirements varies depending on the
industry. In the manufacture of products to stock, future requirements generally are
derived from past demand. In the manufacture to order, the backlog of customer orders
may represent total production requirements. In custom assembly of standard compo-
nents, a mixture of forecasting and customer orders generates requirements. The organi-
zation of the distribution network and field inventory policy also directly affects pro-
duction requirements (see discussion in Chapter 4). In most manufacturing companies,
the requirements placed on a given plant derive from several sources. Identification of
these sources and of the demand they generate constitutes the first step in developing an
MPS. These sources are as follows:

■ Customer orders
■ Dealer orders
■ Finished-goods warehouse requirements
■ Service-part requirements
■ Forecasts
■ Safety stock
■ Orders for stock (stabilization inventory)
■ Interplant orders
Customer orders may constitute the MPS in the case of custom-engineered products,
in contract manufacturing for the government, in industry-supplier situations, or in any
case where the order backlog extends beyond the cumulative production lead time. In
other cases, customer orders are filled by the plant but create requirements via the final
assembly scheduling system on final assembly facilities only. Requirements on the rest of
the factory are conveyed by the MPS, which anticipates component-item demand.
Dealer and warehouse requirements for products constitute another source of demand
that, for purposes of master production scheduling, sometimes may be treated the same