Page 445 - Orlicky's Material Requirements Planning

C HAP TE R 25

Dynamic Buffers

Over the course of time, the conditions that placed parts/stock-keeping units (SKUs)
into certain buffer profiles, as well as their individual traits, can and will change. New
suppliers and materials are used, new markets are opened and grow while others deteri-
orate, and manufacturing capacity and methods change. These changes will affect the
inputs into the buffer equation. Letting buffer levels adjust themselves to these changes
allows a company to adapt its working capital to a dynamic environment. There are three
types of adjustments to be considered: recalculated adjustments, planned adjustments,
and manual adjustments.

RECALCULATED ADJUSTMENTS

The first category of adjustment is most often automated (the manner of automation will
be greatly determined by the planning system’s capabilities). There are two types of recal-
culated buffer adjustments: average daily usage (ADU)–based adjustments and zone
occurrence–based adjustments. While both approaches are discussed, the recommenda-
tion is for ADU-based adjustments.

ADU-Based Recalculation

As more or less variability is encountered through time, buffers should adapt and change
to fit the environment. An easy way to do this is to recalculate the ADU based on a rolling
horizon. The length and frequency of the horizon are user-defined. In most cases, the
usage frequency is daily (thus ADU). The length of the rolling time horizon, however, is
specific to the environment. Some companies may choose a 3-month rolling horizon,
whereas others feel compelled to use 12 months. Too short of a rolling horizon may yield
buffer changes that are overreactive. Too long of a horizon may yield changes that are
underreactive. Regardless of what the length of the horizon is that a company settles on
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