Page 410 - Orlicky's Material Requirements Planning

CHAPTER 22 Blueprint for the Future: Demand-Driven MRP Logic 389

1. Strategic Inventory Positioning

The first question of effective inventory management is not “How much inventory
should we have?” Nor is it “When should we make or buy something?” The most fun-
damental question to ask in today’s manufacturing environments is, “Given our system
and environment, where should we position inventory (within BOMs and the facilities)
to have the best protection?” Think of inventory as a breakwall to protect boats in a mari-
na from the roughness of incoming waves. Out on the open ocean, the breakwalls have
to be 50 to 100 feet tall, but in a small lake, the breakwalls are only a couple feet tall. In a
glassy smooth pond, no breakwall is necessary. A company will need to carefully analyze
its environment and then position and build the necessary inventory breakwalls.

2. Buffer Profiles and Level Determination
Once the strategically replenished positions are determined, the target levels of those
buffers have to be set initially based on several factors. Different materials and parts
behave differently, but many also behave nearly the same. Demand-driven MRP groups
parts and materials chosen for strategic replenishment and that behave similarly into
buffer profiles. Buffer profiles take into account important factors, including lead time
(relative to the environment), variability (demand or supply), whether the part is made
or bought or distributed, and whether significant order multiples are involved. These
buffer profiles are made up of zones that produce a unique buffer picture for each part as
their respective individual part traits are applied to the group traits.

3. Dynamic Buffers
Over the course of time, group and individual traits can and will change as new suppliers
and materials are used, new markets are opened and/or old markets deteriorate, and
manufacturing capacities and methods change. Dynamic buffer levels allow the company
to adapt buffers to group and individual part trait changes over time through the use of
several types of adjustments. Thus, as more or less variability is encountered or as a com-
pany’s strategy changes, these buffers adapt and/or are adjusted to fit the environment.

4. Demand-Driven Planning

As discussed earlier in this book, the world of push and promote is dead. The holdovers
of that era, both rules and tools, must be stripped away, greatly changed or enhanced, or
completely reconstructed. Instead of making things too complex or too simple, it is time
to define a planning suite of rules that meet at least two requirements. First is to take
advantage of the sheer computational power of today’s hardware and software. Second
is to take advantage of the new demand-driven approaches. When these two elements
are combined, then there is the best of both worlds: relevant approaches and tools for the
way the world works today and a system that promotes better and quicker decisions and
actions at the planning and execution levels.