Page 62 - Orlicky's Material Requirements Planning

C HAP TE R 4

Inventory in a

Manufacturing Environment

In the first edition of this book, Joe Orlicky made an extensive effort to draw a distinc-
tion between manufacturing inventories and those related to distribution. Under the new
manufacturing and global supply landscape, the need to treat the two separately has
diminished. This chapter represents current practice. Part 4 addresses the future of inven-
tory in a manufacturing environment.
Manufacturing inventory management is a subject in its own right. It only partly
overlaps general inventory management as we know it from the literature because it rep-
resents a special problem and is governed by unique laws. This means that many of the
traditional approaches to inventory management are not properly applicable to manu-
facturing inventories. When applied, they prove relatively ineffective. The classic inven-
tory control theory does not adequately reflect the realities of a manufacturing environ-
ment and makes incorrect assumptions as to the function of and the demand for the indi-
vidual items of which a manufacturing inventory consists.
Failure to distinguish between manufacturing and nonmanufacturing inventories
accounts for a measure of the confusion or controversy observed frequently in connection
with the question of applicability of a given approach or inventory control technique to
a manufacturing environment. To avoid such difficulties arising from a failure of defini-
tion, this chapter is devoted to examining the attributes of manufacturing inventories and
the demands to which these inventories are subject.

MANUFACTURING INVENTORIES

A manufacturing inventory is defined as consisting of the following:
■ Raw materials in stock
■ Semifinished component parts in stock
■ Finished component parts in stock

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