Page 480 - Orlicky's Material Requirements Planning

C HAP TE R 2 7

Highly Visible and

Collaborative Execution

The P in MRP stands for planning. As has been already discussed, material requirements
planning (MRP) inherently has been a planning system and not an execution system.
Conventional MRP systems lack real-time and focused visibility to actual and relative
priorities associated with purchase orders (POs), transfer orders (TOs), and manufactur-
ing orders (MOs) throughout the internal manufacturing operation and supply chain.
Without an effective priority approach, conventional tools force supply chains (i.e., sup-
pliers, manufacturing, fulfillment, and customers) to employ a rudimentary and arbitrary
priority system called priority by due date.

CHALLENGING PRIORITY BY DUE DATE

Common practice is that if suppliers are late, it counts against them in their performance
report. If a manufacturer is consistently not able to meet customer due dates, then there
will be negative business implications. These include lost opportunities and increased
expedite related expenses. Companies are acutely aware of the importance of hitting due
dates, especially in the current hypercompetitive market. This ripples throughout an
organization, reinforcing the need to measure and act according to priority by due date.
Thus priority by due date becomes the primary method of attempts to maintain expect-
ed service levels to the customer.
Consider the following question: Would you rather have your suppliers be on time
or never create a shortage? This question usually elicits a very interesting reaction. Most
responders blurt out, “On time, of course!” but then pause with a quizzical look on their
faces. Intuitively, they begin to consider that there may be a misalignment between what
companies use as a metric and what effect that metric might have. Suppliers can be con-
sistently 100 percent on time, and the customer still has shortages. This is especially true
when due dates generated out of conventional MRP systems are based on lead times that

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