Page 412 - Orlicky's Material Requirements Planning

C HAP TE R 23

Strategic Inventory

Positioning

The first step in demand-driven material requirements planning (DDMRP) is to thor-
oughly consider where inventory should be placed. The six positioning factors from
Chapter 4 are used to determine the initial positioning strategy. Below and in Figure 23-1
is a summary of those factors.
1. Customer tolerance time
2. Market potential lead time
3. Variable rate of demand
4. Variable rate of supply
5. Inventory leverage and flexibility
6. The protection of key operational areas.

Under DDMRP, these six factors are applied systematically across the entire bill
of material (BOM), routing structure, manufacturing facilities, and supply chain to
determine the best positions for purchased, manufactured, and finished items (includ-
ing service parts). The bigger the manufacturing or supply-chain system these factors
are applied to, the more significant the results from better synchronization can be.
Later in this book we will examine the impact of the solution on an integrated supply
chain.

ASR LEAD TIME: A NEW TYPE OF LEAD TIME
The positioning example from Chapter 4 began by using manufacturing and cumulative
lead times (MLT and CLT) as factors for determining the right position. Within the exam-
ple, however, a critical point can be realized; there is actually another type of lead time

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