Page 53 - Orlicky's Material Requirements Planning

34 PART 1 Perspective

Forecasting assumes that the future will look like the past. Past demand is input into
sophisticated forecasting algorithms to project the future. This can be compared to dri-
ving a car by only using the rear view mirror. If you are driving on a straight road where
the road in front looks like the road behind, then you may be successful. However if you
are driving on a road with many twists and turns, the results can be catastrophic.
Business today has to face more twists and turns than ever before.

Manual Reorder Point Systems
In order to overcome the shortcomings of MRP, some companies and many lean disciples
have abandoned MRP completely. Early demand flow implementations actually had
lapel buttons with the letters “MRP” and the universal “not” sign over them, as demon-
strated in Figure 3-6. In its place, the pull-focused companies have implemented differ-
ent forms of manual reorder point systems.
Manual reorder point systems were a common technique for managing inventory
before MRP. Has industry come full circle? Is industry ready to abandon the promise of tech-
nology just because an antiquated set of rules and tools has not been updated or evolved?
Consider what Joe Orlicky himself said about reorder point systems in the first edi-
tion of this book in 1975:

Systems based on reorder point suffer from false assumptions about the
demand environment, tend to misinterpret observed demand behavior, and
lack the ability to determine the specific timing of future demand. These
shortcomings, inherent in all systems of this type, manifest themselves in a
number of unsatisfactory performance characteristics, chief among them
being an unnecessarily high overall inventory level, inventory imbalance,
and stock-outs or shortages by the system itself. 8

FIGURE 3-6

Lapel button
used by early
demand-flow and
lean advocates.
MRP

8 Joe Orlicky, Material Requirements Planning (New York: McGraw-Hill, 1975), p. 6.