Page 42 - Orlicky's Material Requirements Planning

CHAPTER 2 MRP in the Modern World 23

FIGURE 2-8 Aggregated Reliable
Supply Requirement Output/Availability
Stock buffer.
Stock Level
Cumulative Cumulative
Supply Variability Demand Variability

Pre-Buffer Sequence of Events Consumer of Stock

Figure 2-8 is a depiction of a stock buffer. Variability hits it from both directions. This
is depicted by the “Cumulative Supply Variability” and “Cumulative Demand
Variability” arrows flowing into the bucket icon. The smoother lines flowing out of the
bucket icon represent the reliable availability on the consumption side and an aggregat-
ed supply requirement on the source side. Within the bucket icon, the sawtooth line rep-
resents stock levels fluctuating.
Stock buffering plays a critical role in the new rules for MRP. While min-max and
supermarkets still have relevance, safety stock does not. Safety stock is an antiquated
concept replaced by “strategically replenished buffers.” Strategically replenished buffers
are applied to strategic part positions. Determining these strategic part positions is dis-
cussed in Chapter 23. These strategically replenished buffers provide the planning, exe-
cution visibility, and priority management companies need to sustain success. Just as a
supply chain has strong interrelationships, there are inherent connections between the
three types of buffers (time, capacity, and stock). In most cases, the lack of one will neces-
sitate the use of additional amounts of the others.

MATERIALS OR CAPACITY:
WHERE TO FOCUS FIRST?

The core driver behind the changes felt by every manufacturing company today is that
global capacity now exceeds global demand. Where companies struggled to wring every
bit of output out of scarce capacity in the late 1990s, now most companies worldwide
have more internal capacity than market demand for their products. The assumptions
made in the earliest days of MRP that there was infinite capacity are probably more real-
istic today than when MRP was first developed.
Even when a company has capacity issues, many of these issues are due to sched-
ule deviations and expedites related to material shortages. Additionally, capacity effi-
ciencies will be easier to drive if demand signals are better synchronized with supply sig-
nals. Most capacity improvements are rendered impotent because the materials planning
system cannot synchronize these signals adequately in the more complex manufacturing
and supply landscape of the twenty-first century. Thus, in most cases, materials have