MRP key terms

A time-phased statement of which end items or product families will be produced, in what quantities, and in which periods. It drives material requirements planning and must stay within the capacity limits confirmed by rough-cut capacity planning.

A calculation that converts the master schedule into time-phased requirements for components and raw materials by exploding the bill of materials, netting against inventory and scheduled receipts, and offsetting by lead time.

The layered sequence from strategic business plan and sales and operations planning, through master scheduling, material requirements planning, and capacity planning, down to shop-floor and purchasing execution. Each level covers a shorter horizon and finer detail than the one above it.

A monthly executive process that balances demand and supply plans at the product-family level over a medium-term horizon, reconciling marketing forecasts with production, inventory, and financial targets before the master schedule is set.

Planning output and resource levels for product families or groups rather than individual items, using coarse units such as hours or tons. It bridges the business plan and the more detailed master schedule.

Demand for finished goods or service parts that comes from outside the company and cannot be calculated from other items. It must be forecast or booked as customer orders and is the input to the master schedule.

Demand for components and materials derived from the planned build of parent items through the bill of materials. It is calculated by MRP rather than forecast, because it depends on the schedule of higher-level assemblies.

The set of processes that gather, filter, and shape all sources of demand, including forecasts, customer orders, interplant transfers, and service parts, so they can be combined into a single plan for master scheduling.

An estimate of future demand built from history, market intelligence, or statistical models. In MRP it is typically consumed by actual customer orders so the same demand is not counted twice.

The logic that offsets customer orders against the forecast for the same period, reducing the forecast remaining so that forecast and actual demand are not both added into gross requirements.

The uncommitted quantity of a master-scheduled item in a period that sales can still promise to customers, calculated from on-hand supply plus scheduled production minus existing orders and prior promises.

A date inside the master schedule horizon beyond which changes to the plan are restricted or require managerial approval. It protects firm orders, released work orders, and purchased material from disruptive schedule changes.

A point in the planning horizon where forecast and actual orders are combined differently. Inside it, customer orders dominate; beyond it, forecast drives planning. It is often set at or inside the planning time fence.

A structured list of every component, its quantity per parent, and the sequence in which a product is assembled. It defines product structure and is the map MRP uses to calculate dependent demand.

The process of multiplying parent requirements down through every level of the bill of materials to derive the total quantity of each component needed, accounting for quantities per assembly and scrap allowances.

The deepest level at which an item appears in any bill of materials. MRP processes items in low-level-code sequence so all parent requirements are known before the item's own requirements are calculated.

A logical grouping of components that is never stocked or built as a separate item. Its components pass straight through to the parent, simplifying engineering structure without creating inventory or orders.

A listing of every parent assembly that contains a given component. Engineers and planners use it to assess the impact of a design change, shortage, or obsolescence decision on affected products.

The date from which a bill-of-materials revision, component, or routing becomes valid. It lets engineering changes be phased in so old and new configurations are planned correctly over time.

The central record for each part or material, holding its number, description, unit of measure, item type, planning policy, lead times, lot-sizing rules, safety stock, and costing data used by MRP.

The elapsed time between releasing an order and receiving the item into stock. MRP offsets planned order releases backward from the required date by this amount to schedule work and purchases.

The longest total lead time through all levels of a product's bill of materials, from purchasing the deepest raw material to shipping the finished item. It sets the minimum planning horizon for the master schedule.

Extra inventory held to absorb forecast error and supply variability. In MRP it appears as a buffer requirement that planned orders must satisfy, protecting service levels at the cost of carrying inventory.

A planning buffer expressed in days that makes MRP release orders earlier than the true need date, rather than holding physical stock. It protects against lead-time variability without adding inventory.

The policy that determines how much to order each time a net requirement occurs, such as lot-for-lot, fixed order quantity, economic order quantity, or period order quantity. It trades ordering cost against holding cost.

A lot-sizing rule that orders exactly the net requirement in each period, producing no leftover inventory. It minimizes holding cost but may generate many small orders and higher setup or ordering cost.

A lot-sizing rule that always orders a predetermined amount, such as a supplier's standard pack or a container size. Requirements are met by releasing one or more of these fixed lots.

The total quantity of an item needed in each period before any inventory or receipts are considered. For components it comes from exploding parent planned orders; for end items it comes from the master schedule.

Open purchase orders and released work orders that are expected to arrive in a specific future period. MRP counts them as supply when calculating net requirements and projected available balance.

The expected on-hand inventory at the end of each period, calculated by adding scheduled receipts and planned order receipts to the prior balance and subtracting gross requirements and safety stock.

The quantity still needed in a period after subtracting available inventory and scheduled receipts from gross requirements. It is the amount that planned orders must cover, adjusted for safety stock.

The MRP step that subtracts on-hand inventory, safety stock, and scheduled receipts from gross requirements to determine the true shortage that planned orders must satisfy in each period.

The quantity MRP calculates must be received in a period to cover net requirements. It becomes a scheduled receipt once the order is actually released to production or purchasing.

The planned order receipt offset backward by the item's lead time, showing the date the order must be released so material arrives on time. It is the primary output planners act on.

A system-generated exception notice telling a planner to do something, such as release an order, expedite, defer, cancel, or reschedule. Action messages turn the MRP calculation into daily work priorities.

An alert about a planning problem rather than a direct instruction, such as a requirement dated before the current date, a shortage that cannot be met, or a date beyond the planning horizon.

The traceability link that shows which parent orders or customer orders created a given requirement. Planners use pegging to decide priorities when material is short and to explain why an order exists.

A medium-term check that compares the master production schedule against key resource capacities such as bottleneck work centers or labor hours, confirming the MPS is feasible before MRP is run in detail.

A detailed capacity check that converts planned and released orders from MRP into work-center load hours using routings, then compares that load with available capacity period by period.

A planning aid that states the resource time, such as machine or labor hours, needed per unit of each product family. It is used in rough-cut capacity planning to convert MPS quantities into load.

The sequence of operations, work centers, and standard times required to make an item. Capacity requirements planning uses routings to translate order quantities into hours of load by work center.

A period-by-period comparison of required work-center hours against available hours. It reveals overloads and underloads so planners can shift, split, or reschedule orders before execution.

The connection of MRP with finance, sales, purchasing, and shop-floor modules so that one set of item, order, and transaction data drives planning and accounting without duplicate entry or reconciliation.

An MRP process that feeds capacity planning results back into the master schedule and execution, so plans are validated and adjusted rather than issued as a one-way calculation.

The accuracy and consistency of item, bill-of-materials, routing, and inventory records. MRP output is only as good as this input, so cycle counting and audits are used to keep it high.

A continuous inventory audit that counts a subset of items on a rotating schedule, often prioritizing high-value or error-prone parts, to verify record accuracy without a full physical inventory shutdown.

A key performance metric measuring the percentage of customer orders shipped on or before the promised date. It shows whether planning, capacity, and execution are actually delivering service to customers.

A performance metric comparing the quantity of orders completed to the quantity scheduled for the same period. It indicates how reliably the master schedule and shop execution are being met.