Page 282 - Orlicky's Material Requirements Planning

CHAPTER 14 System Effectiveness: A Function of Design and Use 261

FIGURE 14-1
Period
Planning horizon
and cumulative 1 2 3 4 5 6 7 8 9 10 11 12 13
lead time.
Assembly
Current Period
Lead Time: 3
Subassembly
Lead Time: 3
Fabrication
Lead Time: 5
Procurement
Lead Time: 4

Planning Horizon

effective planning horizon for this item therefore is only three periods. Although its time-
phased inventory record would show 13 time buckets for planned-order releases, the last
10 always would have zero contents.
One of the consequences of very short horizons at low component-item levels is the
inability to apply a lot-sizing technique such as least unit cost or least total cost effectively
simply because of a lack of sufficient net requirements data. This was discussed in
Chapter 8.
Another, even more serious consequence of an inadequate planning horizon is a
lack of visibility for purposes of capacity requirements planning. In the Figure 14-1 exam-
ple, a complete load for fabrication operations cannot be projected beyond three periods
(in period 4 and beyond, orders not at present planned by the system will be released
eventually and will add to the load), which severely reduces the usefulness of the capac-
ity requirements report or load report. It is, of course, precisely on the low (fabricated
part) level that load visibility is most desirable.
A special case is the situation where the planning horizon is ample both in the MPS
and in the MRP system, but management insists on specifically authorizing each “man-
ufacturing order” or “product lot” in the MPS for release into production. This means
that a quantity of an end item in the MPS cannot be processed by the MRP system unless
and until management authorizes it. The lead time for this release that management rec-
ognizes tends to be arbitrary and usually on the short side. Additional delay also may be
caused by the sign-off procedure.
With time-phased MRP, such a procedure for authorizing production is quite unnec-
essary and, in fact, undesirable. The MRP system plans the ordering of each component
item on its individual merit, that is, according to its lead time and those of its parents on
higher levels. The system orders the right items at the right time, not sooner and not later,
which means that the production commitment goes into effect gradually. The entire prod-