Page 87 - Orlicky's Material Requirements Planning

CHAPTER 4 Inventory in a Manufacturing Environment 67

C) to transform it into the component Part 200. This can be accomplished reliably in five
days. This reliability can be affected by finite capacity, quantity, quality, other orders,
machine breakdown, etc. For this simple example, the assumption is made that the
process can be completed reliably in five days.
Part 200 is a point of divergence. A divergent point means that Part 200 can be direct-
ed into different manufacturing paths. A divergent point represents a commitment that
cannot be practically or cost-effectively reversed. An example would be the introduction
of a log into a plywood facility, in which the first step is to peel the log into veneer. This
decision precludes the log from being used or redirected into dimensional lumber. For
this example, Part 200 can be directed to resource D, where it will then pass through
resources E and F to be made into Part 300. This can be accomplished reliably in seven
days. Part 200 can also be combined with purchased Part 50 at resource G. Resource G
processes this work and forwards it to resource E to complete the process of producing
parent Part 400. This can be accomplished reliably in four days.
In this example, resource E is a critical resource that should be carefully protected
owing to its importance in the overall process. In this case, that protection must minimize
disruption that is passed to it from preceding areas. This is a consideration for our stock-
ing strategy. Resource E has been shaded to denote its special status.
Consider Figure 4-7 with no stock held at any level. This would be a complete make-
and-purchase-to-order environment. The CLT paths for both Part 300 and Part 400 are
laid over the routing. As mentioned earlier, in the case of Part 300, the CLT is 22 days. The
22-day lead time is calculated by adding the PLT of Part 100 (10 days) and the total time
it takes to move from resource A through resource F (12 days). In Figure 4-8, the case of
Part 400, the path is also defined by the Part 100 leg of the BOM path because that is the
longer of the two legs.
Given the current competitive position, the customer tolerance time must be con-
sidered. In this example, the company can have zero inventory if the customer tolerance

FIGURE 4-7
Cumulative production lead time for Part 300 with no stock.

5 Days 7 Days

Part 100 A B C Part 200 D E F Part 300
Purchased Component Parent
PLT = 10 days

Part 50 G E Part 400
Purchased Parent
PLT = 7 days
4 Days