# Course 12 – Deterministic Materials Management

### Intended learning outcomes: Produce an overview on demand and available inventory along the time axis. Describe deterministic determination of independent demand. Explain in detail the deterministic determination of dependent demand (Material Requirements Planning, MRP). Differentiate various lot sizing techniques. Disclose how to analyze the results of the MRP.

Deterministic techniques are used in materials management whenever portions of the cumulative lead time remain within the customer tolerance time. This is the case, for example, with the assembly stage during the manufacture of capital goods. During this time, production, procurement, or services are dependent on customer demand. Figure 12.0.0.1 shows the relevant planning & control tasks and processes on a dark background. They refer back to the reference model in Figure 5.1.4.2.

Fig. 12.0.0.1       The parts of the system discussed in this chapter are shown against a darker background.

Sections 5.3.1 and 5.3.2, in particular Figures 5.3.2.1 and 5.3.2.2, provide an introduction to the material in this chapter. We recommend that you read Sections 5.3.1 and 5.3.2 again before continuing to study this chapter.

So-called quasi-deterministic techniques are used in the stochastic case, that is, up­stream from or on the order penetration point. Purely stochastic techniques outlined in Chapter 11 carry the risk that procured goods may not be used in time or that excessi­ve­ly large safety stock levels will have to be maintained. For high-cost dis­continu­ous items both effects are not acceptable. The quasi-determi­ni­s­tic materials management is also used for long-term planning, particularly for budgeting personnel and other resources and for determining blanket contracts.

Section 5.2 presented deterministic techniques for long-term materials management. The present chapter sets out the techniques for medium and short-term planning. What distingui­shes these techniques is that the demand for an item cannot simply be regarded as an average demand that is approximately constant over time, as is the case in long-term planning or stochastic materials management as described in Chapter 11. Instead, you know the exact point or limited period along the time axis at which each requirement will arise and then make use of this knowledge. This enables you to manage even lumpy demand efficiently.

Deterministic techniques are easy to understand. A long customer tolerance time favors their use. This is often given in producer dominated markets, but also holds for production or procurement orders that are customer specific, e.g., in special mechanical engineering and plant construction or in services. Also, deterministic techniques can be implemented more often if — through carefully thought-out methods — the lead time can be reduced.

## Course 12: Sections and their intended learning outcomes

• ##### Course 12 – Deterministic Materials Management

Intended learning outcomes: Produce an overview on demand and available inventory along the time axis. Describe deterministic determination of independent demand. Explain in detail the deterministic determination of dependent demand (Material Requirements Planning, MRP). Differentiate various lot sizing techniques. Disclose how to analyze the results of the MRP.

• ##### 12.1 Demand and Available Inventory along the Time Axis

Intended learning outcomes: Explain the projected available inventory and its calculation. Describe scheduling and cumulative projected available inventory calculation. Produce an overview on operating curves for stock on hand.

• ##### 12.2 Deterministic Determination of Independent Demand

Intended learning outcomes: Present the customer order and distribution requirements planning (DRP). Disclose the consumption of the forecast by actual demand.

• ##### 12.3 Deterministic Determination of Dependent Demand

Intended learning outcomes: Describe characteristics of discontinuous dependent demand. Explain material requirements planning (MRP) and planned orders. Disclose the determination of the timing of dependent demand and the load of a planned order.

• ##### 12.4 Batch Sizing, or Lot Sizing

Intended learning outcomes: Explain combining net requirements into batches. Differentiate between different batch-sizing policies.

• ##### 12.5 Analyzing the Results of Material Requirements Planning (MRP)

Intended learning outcomes: Present projected available inventory and pegging. Produce an overview on action messages.

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• ##### 12.8 Scenarios and Exercises

Intended learning outcomes: Calculate projected available inventory. Determine net requirements and planned release using the MRP technique. Differentiate between order point technique and MRP technique.

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