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MRP Dictionary

The table below gives definitions of some of the main MRP concepts and terms that you may hear being used:

ABC analysis Classifies inventory items into different categories depending on their annual usage.
Actual cost The sum of the actual labour, material and associated overhead costs that are charged against a job as it moves through the production process.
Available capacity The current availability of resources under normal operating conditions.
Backlog All the customer orders received but not yet built and shipped.
Backward scheduling Starts with the date the order is required and calculates the schedule back through the routing to determine the proper release date of the order
Bill of materials Listing of all the subassemblies, component parts, raw materials (including quantities) etc. that go into a parent item.
Bottleneck The manufacturing process for which the available capacity is less than the required capacity.
Buffer stock A quantity of stock planned to be in inventory to protect against fluctuations in demand or supply (synonym for Safety stock).
Business plan Statement of income projections, costs and profits (financially orientated)
Capacity Aggregated volume of work load (required-, demonstrated-, maximum-, etc.)
Capacity planning The process of determining the capacity required to produce in the future.
Capacity requirements planning The process of determining how much labour / machine resources are required to accomplish production
Completion date The planned / estimated date by which an order will be finished.
Critical resources Those resources that usually become overloaded when the schedule is increased (or run out of work when the schedule is reduced).
Cumulative lead time The total planned length of time to carry out all the operations.
Customer service level The percentage of occasions on which the order is delivered as promised.
Cycle time The amount of time it takes to carry out one complete manufacturing cycle.
Data accuracy The percentage of records which are completely error free.
Database Data stored in a mass storage device under the control of a software package called a database manager.
Delivery performance A measure of a supplier's ability to meet orders in full and on time.
Due date The date by which an operation should be completed.
Economic order quantity EOQ is calculated to balance expected cost of acquisition for stock against the expected costs to hold the stock.
Effectivity date The date on which a component or an operation is to be added or removed from a bill of material or assembly process.
Exception reports A flag which is raised when actual value differs from the expected value by more than some threshold
Expediting The activity of rushing or chasing production or purchase orders that are needed in less than the normal lead time, or because of an increase in relative priority or because they have fallen behind.
Feedback The relaying back of performance related information such that corrections / improvements can be made to the process.
Finish date The date by which an order / operation should be completed.
Finite capacity planning The planning of capacity requirements taking into consideration the various capacity restrictions that (will) exist (See Capacity planning).
First in, first out (FIFO) A dispatching / stock issuing rule under which the jobs / stock items are sequenced by their arrival times. For example, stock with a shelf life will need to be issued in this way.
First in, last out (FILO) A dispatching / stock issuing rule under which the jobs / stock items are sequenced by their arrival times. For example, this will be the case if parts received are put on the shelf in front of those that are already in.
Flexible labour Enable redeployment of workers so that minor changes in demand can be coped with
Forward scheduling A scheduling technique where the scheduler proceeds from a known start date and computes the completion date for an order, usually proceeding from the first operation to the last.
Frozen zone The scheduling time horizon during which no alterations to the master production schedule are allowed.
Gantt charts A type of planning and control chart, designed to show graphically the relationship between planned performance and actual performance over time. It is used for loading.
Gross requirements The total of independent and dependent demand for a component before the netting of on-hand inventory and scheduled receipts.
Infinite capacity planning The planning of capacity requirements assuming there are no restrictions on capacity level (See Capacity planning).
Inventory Raw material, WIP, stock, finished goods and all items required for manufacture
Lead-time (Purchasing or manufacturing) Span of time required to perform an activity (manufacturing lead-time consists of move, queue, setup and run time)
Multiskilled workers Able to handle a number of different machines and operations.
Need date The date when an item is required for its intended use. In an MRP system, this date is calculated by a BOM explosion of a schedule and the netting of available inventory against that requirement.
Obsolescence The loss of usefulness or worth of a product or facility as a result of the appearance of better or more economical products, methods or facilities.
On-hand inventory The amount of a part / sub assembly that is expected to be available (i.e. on hand) not allocated to another job.
Overdue work Work which has not been completed by the required date.
Overloaded capacity A condition when the total hours of work allocated to a work centre exceed the work centre's capacity.
Pareto analysis Synonym for ABC analysis. Classifies items into different categories depending on their annual usage.
Part master record Record for an item containing descriptive data, control values (lead times, order quantities etc.) and other information. Synonym: Item master record.
Pegged requirements A requirement which shows the next level parent item (or customer order) as the source of the demand, (i.e. by using the where-used capability from the BOM).
Pegging In MRP this is the capability to identify for a given item the sources of its gross requirements and / or allocations. Pegging can be thought of as active where-used information.
Performance evaluation Process of measuring performance for the purposes of feedback and reporting.
Planned orders A suggested order quantity, release date, and due date created by the planning system's logic when it encounters net requirements in processing MRP.
Planning horizon The amount of time the master schedule extends into the future.
Product costing The activity of determining the cost associated with a particular product.
Productivity Ratio of output to input.
Progress reporting Reporting of the actual current state of an activity.
Projected available balance An inventory balance projected into the future. It is the running sum of on-hand inventory minus requirements plus scheduled receipts and planned orders.
Queue A waiting line (the jobs at a given work centre waiting to be processed)
Queue time The amount of time a job waits at a work centre before being set-up or operated on
Reprioritising A revision of existing priorities in the light of new information.
Routing Document detailing the manufacture of a particular item (includes operations to be performed, their sequence, work centres used etc.).
Safety time Material is planned to arrive ahead of its requirement date
Scheduled receipt Items due to be received in a particular time period. (An open order that has an assigned due date).
Scheduling Activity of assigning dates to the important steps in the process of manufacturing products (part of planning and control not execution).
Standard cost A cost estimate based on standard labour hours, material and overhead costs.
Standard time The length of time that should be required to: setup a given machine or operation and run one part, assembly, batch, or end product through that operation. Synonym: standard hours.
Start date The date on which an operation should be started or was actually started.
Stockout costs The costs associated with a stockout. Those costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs.
Storage costs A subset of inventory carrying costs, including the cost of warehouse utilities, material handling personnel, equipment maintenance, building maintenance, and security personnel.
Subcontracting Sending production work outside to another manufacturer.
Supplier performance Evaluation of suppliers usually with respect to delivery, quality and price.
Time fences Point in time where various restrictions or changes in operating procedures take place
Time horizon The period of time being considered.
Traceability The registering and tracking of parts, processes, and materials used in production, by lot or serial number.
Two-bin system A type of fixed-order system in which inventory is carried in two bins. A replenishment quantity, equivalent to two bins, is ordered when the first bin is empty.
Where-used list A listing of every parent item that calls for a given component, and the respective quantity required, from a BOM file.
Work in progress Products in various stages of completion throughout the plant

If there are other MRP terms that are not listed that you want defining or if you want any of the above explaining in more detail then please ask.

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