Page 55 - Orlicky's Material Requirements Planning

36 PART 1 Perspective

enterprise, particularly a vertically integrated enterprise, it is left with few viable and sat-
isfactory options.
Some software has been developed as an aid to reduce the complexity of managing
kanbans. This software reduces the management burden and enables the company to
adjust kanban sizing. However, all electronic software products lack the ability to provide
the critical available inventory and netting picture that more complex manufacturing sit-
uations require.

available inventory: The on-hand inventory balance minus allocations, reservations,
backorders, and (usually) quantities held for quality problems. Often called beginning
available balance. 10
These are the necessary traditional MRP functions that have been abandoned in the
lean world. Simply knowing the stock on hand and on order cannot provide the complete
picture of what to order unless those two positions are also considered in relation to rel-
evant demand allocations. An accurate available stock equation is not possible with man-
ual or even electronic reorder point systems such as kanbans. The lack of visibility means
that organizations of size or even moderate complexity are flying blind to the overall
materials and inventory picture. The available stock equation will be discussed in depth
in Part 4.
Furthermore, manual reorder points and kanbans do not consider the bill of mater-
ial in its totality. The kanban is defined only at each discrete connection. This means that
stock positions often must be placed at every position in the bill of material. This strate-
gy, in turn, increases the number of stocked positions to manage and potentially raises
total inventory. Often the implementation of kanbans is not limited to only each connec-
tion in the bill of material. Organizations frequently place them between each step in the
routing. When there is a larger number of part numbers with sporadic demand or rela-
tively long routings for many part numbers, inventory can rise dramatically.
Author’s note: The preceding section on manual reorder points and kanbans is not
intended to alienate the lean advocate. Its intention is to highlight accepted realities about
the planning limitations of manual and even electronic reorder point positions/systems
in environments of size and relative complexity. Many environments do apply kanbans
successfully, especially when those kanbans are placed in the right positions.

Overflattening the Bill of Material (BOM)
Sometimes companies try to simplify the synchronization issue by dramatically reducing
the number of levels in the BOM. In many cases, reducing BOM complexity makes sense.
Taken to extremes, it can close more doors than it opens. Flattening the BOM removes
levels that were identified originally to define the product and the process. These depen-
dencies provide an excellent way to stop variability from gaining momentum and dis-
rupting the entire supply chain like a tsunami. The key to better synchronization is to

10 APICS Dictionary, 12th ed. (New York: Blackstone, 2008), p. 8.