Page 37 - Orlicky's Material Requirements Planning

18 PART 1 Perspective

age. We cannot remove the human element, but the damaging aspect of the human ele-
ment (the assignable cause) can be addressed.

Net Effect of Variation on Operations and Supply Chains

MRP Nervousness The APICS Dictionary (New York: Blackstone, 2007, p. 86)
defines nervousness as

The characteristic in an MRP system when minor changes in higher level (e.g., level 0
or 1) records or the master production schedule cause significant timing or quantity
changes in lower level (e.g., 5 or 6) schedules or orders.
APICS meetings have been held since the incorporation of APICS in 1956 to discuss
MRP nervousness and how to manage it. Anyone in purchasing quickly learns the
whiplash caused by even a small change at a higher level in the bill of material. Vertical
dependencies are critical for effective planning and yet at the same time cause the cascade
and amplification of any change. When order multiples, safety stocks, and unrealistic due
dates are added into the equation, the picture quickly can become quite clouded as to
what should be requested of suppliers. Figure 2-4 is meant to depict a wave of nervous-
ness through a bill of materials (BOM). Of course, this figure depicts a single BOM. When
there are shared components across BOMs, that nervousness also translates across bills of
materials.

Supply-Chain Bullwhip Effect Similar to system nervousness within a company,
when considering the effect of variability across a supply chain, the cumulative system
variation is significantly higher than the variation of any one of the parts. A typical sup-
ply chain is represented as a linear linkage from a supplier’s supplier to a customer’s cus-

FIGURE 2-4
101
MRP
nervousness
within a single bill
of material within 201 203 204
a single
company.

301 302 303P 304P

401P 402 403P 404P

501P