Page 430 - Orlicky's Material Requirements Planning

408 PART 4 Looking Backward and Forward

Heuristically, companies can use the following segmentation:

■ High demand variability. This part is subject to frequent spikes.
■ Medium demand variability. This part is subject to occasional spikes.
■ Low demand variability. This part has little to no spike activity—its demand is
relatively stable.
Supply variability is the potential for and severity of disruptions in sources of
supply for this part or SKU number. This can be calculated by examining the variance
of promise dates from actual receipt dates. The caution here is that many of these dates
are often determined and managed initially through critical flaws in how material
requirements planning (MRP) has been used. Finally, the number of alternate sources
for a part or material could factor into the supply variability equation because the net
effect of more sources might be more reliable supply. Supply variability can be consid-
ered as:

■ High supply variability. This part or material has frequent supply disruptions.
■ Medium supply variability. This part or material has occasional supply disruptions.
■ Low supply variability. This part or material has reliable supply (either a highly
reliable single source or multiple alternate sources that can react within the pur-
chasing lead time).

Purchased parts tend to be influenced almost exclusively by supply variability. One
exception is in pure make-to-order environments, where there are no sub-component,
intermediate-component, or end-item buffers. A pure make-to-order environment would
indicate that the inventory positioning factors dictated buffering only for some pur-
chased items. This is an example of why companies cannot skip the inventory position-
ing step. It can dramatically alter which items will end up in which buffer profiles.
Manufactured parts can be subject to both supply and demand variability depend-
ing how the positioning model is formulated. Manufactured parts are less subject to
demand variability if the manufactured item feeds another level of buffered component
or end item. These parts are less subject to supply variability if they consume critical parts
that are replenished strategically. This is due to the dampening nature of the buffer break-
walls. However, in many cases it is usually a blend of being fed by some buffered posi-
tions and feeding only some buffered positions. An example of this type of manufactured
part is one that is used in subassemblies or the end item (some of which might be
buffered) but is also a service part (which might go directly to the customer). This type of
manufactured part probably would be subject to more demand variability than a part
that fed only some buffered subassemblies or end items. It is imperative that companies
carefully apply the positioning factors in Chapter 4.
Distributed parts or SKUs will tend to be affected by one variability type depending
on their respective locations in the internal supply chain. Distributed parts/SKUs at cen-
tral buffers can be largely immune from variability if the downstream positions that they
feed are sized and managed properly and supply is reliable. Part/SKU buffers at down-