Page 81 - Orlicky's Material Requirements Planning

62 PART 2 Concepts

wait for the delivery of a good or a service. Syn: customer tolerance time.”
Determining this lead time often will take the active involvement of sales and/or
customer service.
■ Market potential lead time. The lead time that will allow an increase of price or the
capture of additional business either through existing or new customer channels.
Determining this lead time will take the active involvement of sales and/or cus-
tomer service. Be aware that there could be different stratifications of market
potential lead time. For example, a one-week reduction in lead time may only
result in an increase in orders, whereas a two-week reduction in lead time could
result in both an increase in orders and a potential price increase on some of those
orders. Properly segmenting the market will prevent giving too much away at
any one time.
■ Variable rate of demand. The potential for swings and spikes in demand that could
overwhelm resources (capacity, stock, cash, etc.). This variability can be calculat-
ed by a variety of equations or determined heuristically by intuitive planning
personnel. “Mathematically, demand variability or uncertainty can be calculated
through standard deviation, mean absolute deviation (MAD) or variance of fore-
2
cast errors.” If the data required for mathematical calculation do not exist, com-
panies can use the following criteria:
• High-demand variability products/parts that are subject to frequent spikes
• Medium-demand variability products/parts that are subject to occasional
spikes
• Low-demand variability products/parts that have little to no spike activity
(their demand is stable)
■ Variable rate of supply. The potential for and severity of disruptions in sources of
supply and/or specific suppliers. This can also be referred to as supply continu-
ity variability. This can be calculated by examining the variance of promise dates
versus actual receipt dates. When first considering the variable rate of supply, the
initial variances can be caused by critical flaws in how the MRP system has been
deployed. Additionally, those dates often shift owing to other shortcomings asso-
ciated with the way MRP is employed rather than because of the supplier. Any
critical supplier of a major manufacturer will know which day its customer
regenerates its MRP. These suppliers will see a flurry of additional orders, can-
celed orders, and changes to orders (quantity, specification, and request date). If
the data required for mathematical calculation do not exist, the following heuris-
tics can be used:
• High-supply variability frequent supply disruptions
• Medium-supply variability occasional supply disruptions
• Low-supply variability reliable supply

2 Ibid, p. 144.