Page 89 - Orlicky's Material Requirements Planning

CHAPTER 4 Inventory in a Manufacturing Environment 69

FIGURE 4-9

Part 300 compressed lead time—first iteration.
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

FIGURE 4-10
Part 400 compressed lead time—first iteration.

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

The potential risk for this strategy is that critical resource E is left relatively unpro-
tected. Resource E can be disrupted by two different factors not related to its own opera-
tion. First, it is left susceptible to a long string of internal resource-related dependencies
characterized by the path A → B → C → G. Second, it is also vulnerable to supplier issues
with regard to purchased Part 50. Remember that resource G (the preceding resource to
critical resource E) is a subassembly that requires both a Part 200 and a purchased Part 50.
In carrying this example forward, suppose that customer tolerance time is less than
12 days for Part 300 and less than 11 days for Part 400. This company will have to deter-
mine an inventory strategy that will compress lead times further. A possible choice
would be to stock Part 200 to decouple the front end of the manufacturing processes
from the back end. Figures 4-11 and 4-12 show what stocking at Part 200 will do for both
finished items.
Surprisingly, by placing a stock buffer only at Part 200, there is no compression of
Part 400’s lead time. Part 200 does not lie on Part 400’s CLT path. As mentioned earlier, if
the customer tolerance time for Part 400 is within 11 days, this choice would not yield the