Page 75 - Orlicky's Material Requirements Planning

56 PART 2 Concepts

TA B L E 4-2

Probabilities of Simultaneous Availability
Service level
Number of component items 90% 95%

1 0.900 0.950
2 0.810 0.902
3 0.729 0.857
4 0.656 0.814
5 0.590 0.774
6 0.531 0.735
7 0.478 0.698
8 0.430 0.663
9 0.387 0.630
10 0.348 0.599
11 0.313 0.569
12 0.282 0.540
13 0.254 0.513
14 0.228 0.488
15 0.206 0.463
20 0.121 0.358
25 0.071 0.260

ments of the replenishment lot size. The underlying assumption of gradual inventory
depletion at a steady rate will render the technique invalid when this basic premise is
grossly unrealistic. In a manufacturing environment, where we deal with components of
products, requirements typically are anything but uniform and depletion anything but
steady.
Inventory depletion tends to occur in discrete “lumps” owing to lot sizing for sub-
sequent stages of manufacture. The example in Figure 4-1 shows this clearly. Here, the
end item, its component, and the raw material are all on order point. These could be a
simple wrench, the rough forging that it is made of, and the forging steel. Or they could
be the transmission (if it were a shippable end product), the gearbox, and the gear from
the preceding example.
Wrenches (or transmissions) are not made in quantities of one. When an order is
placed on the factory to produce a quantity of the end item (perhaps to replenish its
stock), it is necessary to withdraw a corresponding quantity of the component. This will
deplete the inventory of the component in one sudden stroke, sometimes driving it below
the order point. When it does (as at the end of July in the example), the system will imme-
diately reorder, necessitating a large withdrawal of the raw material. If its order point is
thereby “tripped,” this material is also reordered.