Page 47 - Orlicky's Material Requirements Planning

28 PART 1 Perspective

FIGURE 3-1 Survey Results
90
Survey results.
80
70
60
50

40
30
20

10
0
Poor Inventory Poor Service High Expedite At Least
Performance Level Expense One Effect

material requirements planning (MRP): A set of techniques that uses bill of materi-
al data, inventory data, and the master production schedule to calculate requirements
for materials. It makes recommendations to release replenishment orders for material.
Further, because it is time-phased, it makes recommendations to reschedule open
orders when due dates and need dates are not in phase. Time-phased MRP begins
with the items listed on the Master Production Schedule (MPS) and determines (1) the
quantity of all components and materials required to fabricate those items and (2) the
date that the components and material are required. Time-phased MRP is accom-
plished by exploding the bill of material, adjusting for inventory quantities on hand or
on order, and offsetting the net requirements by the appropriate lead times. 3

Known shortcomings in conventional MRP are summarized in Figure 3-2, with the
effect resulting from the shortcomings identified.
These shortcomings are nothing new to MRP users. The rapidly changing environ-
ment of global manufacturing and the global supply chain is exacerbating these effects
and putting increased pressure on MRP systems and planning personnel.
The continued quest for forecast accuracy has led to the development of improved
forecasting algorithms and sophisticated technology dedicated to forecasting. However
the surprise is that even with all this improvement and sophistication, the overall accu-
racy of the forecast has not improved dramatically. Increased volatility in the market has
offset any gains in methodology. In addition, any realized improvements in forecast do
not translate to overall improvements in customer service and inventory levels. This was

3 APICS Dictionary, 12th ed. (New York: Blackstone, 2008) p. 81.