Page 45 - Orlicky's Material Requirements Planning

26 PART 1 Perspective

connect using five intermediary operators. The first self-dialed long-distance call in the
2
United States took place on November 11, 1951. Today, the Internet and 4G cellular and
satellite-enabled phones make communication instantaneous almost anywhere in the
world. In the last 20 years, there has been significant attention and emphasis from the
software companies on developing supply-chain solutions from both methodologic and
technological perspectives. The development of these highly integrated systems has
enabled a revolution in distribution and logistics between consumers and suppliers.
Information about distribution and logistics is no longer a limitation worldwide. Now it
can be well known what items were sold, when items move, and where those items are
at any point in time. A logistics company can provide real-time updates as parts move
around the world. However, at the heart of any supply chain is manufacturing.
In most supply chains, there are several different manufacturing sites and process-
es that must be coordinated and synchronized effectively to bring a finished item into the
distribution pipeline.
At the heart of every supply chain is manufacturing. At the heart of manufacturing
is MRP. In an attempt to understand supply chain many writers have simplified the sup-
ply chain structure into a straight line. However, supply chains are not the simple linear
structures normally represented as the supplier’s supplier to the customer’s customer.
Supply chains are web-like entities that are difficult to represent graphically. Each com-
pany is linked to several other companies depending on the product and the customers.
These linkages and relationships change as market conditions change. Information flows
across and throughout this web. The heartbeat for that information is the MRP system.
Each node in the web is a different MRP system. An excellent graphic representation of a
supply chain is the cover of this book. Therefore, a primary limitation of any supply chain
will be how well MRP systems perform not just individually on each node but also col-
lectively throughout the web. Simply put, MRP has more impact on and is more relevant
to the effectiveness of today’s supply chain than ever before.
A previous challenge within supply chain management was not having visibility
into what is being moved and its status; now warehouse management and logistics tools
have solved that problem. Now the problem is fundamentally about which specific items
are actually being moved, transported, located and made. What gets put on lathes, weld-
ing jigs, assembly lines, trucks, boats and airplanes is a response to a demand or supply
order generation signal.
Today, due to the increasing complexity of the global manufacturing and supply
landscape the supply order generation signals that move down through our supply
chains have become more and more out of alignment with actual demand.
The traditional planning rules and tools (including forecast based demand genera-
tion) employed by most manufacturers and distributors do not fit the highly volatile and
variable world we live in. Those rules were constructed under a “push and promote”
mentality fueled by production efficiency metrics and a market that was more tolerant of
longer lead times and shortages.

2 Compiled by John Loucks from Synergy Resources.