Page 331 - Orlicky's Material Requirements Planning

310 PART 3 Managing with the MRP System

porated only once a quarter. Reasons exist for these business rules, but they cannot be
quantified sufficiently for incorporation into the simulator. Remember that the computer
tools cannot take over for good management of the company. Materials, capacity, and
other resources have been managed well in the past. The computer tools should not
replace effective management but rather should augment it.
Optimization attempts to calculate the best solution given the bottleneck to achieve
the desired results. The focus of optimization could include most profits, shortest total
lead time, best customer service for a preferred customer, smallest total changeover time,
or making whatever measure that is selected the best that it can be. For optimization to
be effective, a system must be defined for which the demand exceeds the possible supply
so that a constraint can be determined. Optimization then provides the best possible solu-
tion to the problem in terms of this specified objective function. In the process industry,
with its dependent setups and variant production batch sizes, optimization modelers
enable the scheduler to consider a variety of inputs when developing the schedule.

MRP SYSTEM REQUIREMENTS

This section lists the typical requirements and a brief explanation for an effective MRP
system in a process industry. These requirements are not listed in any specific order of
importance.

Supply-chain management. Collaborative forecasting and planning are a real
must for the process industry. Having visibility of customer inventory and channel sell-
out data patterns in addition to the traditional channel sell-in information can provide
proactive requirements information. Promotion, sale price, and competitive impact are
integral in this supply-chain solution. Hard and soft allocation should be allowed in the
system. Soft allocation promises product based on overall volumes. The reality of execu-
tion is that the process for filling orders is first come, first served. A preferred customer
may find itself without any product. Hard allocation makes an assignment of inventory
to a particular customer order. The hard allocation process allows preferred or more prof-
itable customers first availability of the product rather than first come, first served. This
hard allocation also may be supported by contract agreements and pricing. Tolling and
exchanges also can be used for balancing supply and demand within the supply chain.
These data are also necessary to determine where best to place inventory, as discussed in
Chapter 4.

Multiple plants, warehouses, and branches. Most process industries must con-
trol inventory at a number of different physical locations, including multiple factory and
packaging locations, distribution warehouses, and possibly branch retail locations. Some
of the process-industry products are in liquid form and therefore are distributed via pub-
lic or private pipelines. The control parameters for this mode is very different from stan-
dard MRP discrete distribution approaches.