Page 462 - Orlicky's Material Requirements Planning

440 PART 4 Looking Backward and Forward

FIGURE 26-5
FPA [27/10 days]
Indented BOM PPA [25 days]
with different part SAE [17/2 days]
designations and ICD [2 days]
ASRLT factored PPC [10 days]
in.
PPB [15 days]
SAF [2 days]
ICB [14/10 days]
SAC [4/2 days]
ICA [2 days]
PPI [10 days]
PPJ [10 days]
SAD [12/10 days]
ICC [2 days]
SAB [14/10 days]
PPE [10 days]
PPF [2 days]
SAA [4/2 days]
PPG [10 days]
PPH [2 days]
PPD [2 days]

Available Stock Equation

It is important to note that the buffer level driving demand generation is based on an
available stock equation. Available stock is calculated by taking on-hand balance on-order
stock (also referred to as open supply) – unfulfilled qualified actual demand. Definitions
of each from the APICS Dictionary are as follows:
on-hand balance: The quantity shown in the inventory records as being physically in
stock.
on-order stock: The total of all outstanding replenishment orders. The on-order bal-
ance increases when a new order is released, and it decreases when material is
received against an order or when an order is canceled

actual demand: Actual demand is composed of customer orders (and often alloca-
tions of items, ingredients, or raw materials to production or distribution). 2

Using actual demand removes forecasted orders from the equation. It is important
to note, however, that the preceding available stock equation uses “qualified” actual
demand. For stocked parts, actual demand is qualified by the combination of time and

2 Ibid, p. 3.