Page 63 - Orlicky's Material Requirements Planning

44 PART 2 Concepts

■ Subassemblies in stock
■ Component parts in process
■ Subassemblies in process
Note that so-called shippable items (inventory items ready, at their stage of com-
pletion, to be delivered to a customer), such as end products and service parts, are
excluded from the preceding list. They are part of a distribution inventory, as discussed
later in this section. Under today’s conditions, it makes more sense to treat most service
parts as strategic inventory positions that consolidate internal and external consumption
and supply generation. More on this can be found in Part 4.
In order to establish the attributes that set apart manufacturing inventories, let us
first consider what the functions of a system of inventory management are, including that
of a grocery, museum, or blood bank. Inventory management, or inventory planning and
control, consists of the following functions and subfunctions:
1. Planning. There is normally no need for a special inventory policy pertaining to
a manufacturing inventory as a whole. The least total inventory consistent with
production requirements and that allows manufacturing cost to be at a mini-
mum is always the management objective. Forecasting, within the manufactur-
ing inventory system proper, plays a secondary role, and the type of forecasting
being performed (such as the proportion of a given optional feature within a
future product lot) differs from the usual forecasting of demand magnitude.
Included in planning are
■ Inventory policy
■ Inventory planning
■ Forecasting
2. Acquisition. The order action function is expanded and exhibits several charac-
teristics unique to manufacturing. Material in the manufacturing process is
from the inventory system’s point of view, being acquired and reacquired at a
different configuration as it progresses through multiple stages of conversion
from raw material to end product. An order for a manufactured item, once
started, cannot be canceled without the penalty of scrap or rework. Neither can
it normally be increased or decreased in quantity. Factors that enter into the
order-quantity determination include allowances for yield or scrap, raw materi-
als cutting considerations, and so on. The ordering function includes order sus-
pension, that is, rescheduling the order to an indefinite future due date. Finally,
the quantity and timing of an order may be affected by capacity considerations.
■ Positive order action (place or increase)
■ Negative order action (decrease or cancel)
3. Stockkeeping. These functions are the execution of the planning and acquisition phase.
■ Receiving
■ Physical inventory control
■ Inventory accounting (recordkeeping)