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Materials requirement planning

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Definition of Materials requirement planning

Materials Requirement Planning Image 1

Materials requirement planning

Computer-based systems that plan backward from the production schedule
to make purchases in order to manage inventory levels.



Related Terms:

materials requirements planning (MRP)

a computerbased information system that simulates the ordering and
scheduling of demand-dependent inventories; a simulation
of the parts fabrication and subassembly activities that are
required, in an appropriate time sequence, to meet a production
master schedule


manufacturing resource planning (MRP II)

a fully integrated materials requirement planning system that involves
top management and provides a basis for both strategic
and tactical planning


Aggregate planning

A budgeting process using summary-level information to
derive various budget models, usually at the product family level.


Assets requirements

A common element of a financial plan that describes projected capital spending and the
proposed uses of net working capital.


Bill of materials

A listing of all the materials and quantities that go to make up a completed product.



bill of materials

a document that contains information about
the product materials components and their specifications
(including quality and quantities needed)


Bill of materials

An itemization of the parts and subassemblies required to create a
product, frequently including assumed scrap rates that will arise as part of the production
process.


Materials Requirement Planning Image 2

Bill of materials (BOM)

A listing of all parts and subassemblies required to produce one
unit of a finished product, including the required number of units of each part
and subassembly.


Breeder bill of materials

A bill of material that accounts for the generation and
cost implications of byproducts as a result of manufacturing the parent item.


Corporate financial planning

Financial planning conducted by a firm that encompasses preparation of both
long- and short-term financial plans.


Direct materials cost

The cost of all materials used in a cost object, such as finished goods.


Direct materials mix variance

The variance between the budgeted and actual mixes of
direct materials costs, both using the actual total quantity used. This variance isolates
the unit cost of each item, excluding all other variables.


enterprise resource planning (ERP) system

a packaged software program that allows a company to
(1) automate and integrate the majority of its business processes,
(2) share common data and practices across the entire enterprise, and
(3) produce and access information in a realtime environment


Enterprise resource planning system

A computer system used to manage all company
resources in the receipt, completion, and delivery of customer orders.


Estate Planning

An insurance program designed to provide funds for insured's dependents upon death of the insured, and to also conserve, as much as possible, the personal assets that the insured wants to bequeath to heirs.


Financial planning

The process of evaluating the investing and financing options available to a firm. It
includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in
the form of a financial plan, and then comparing future performance against that plan.


Materials Requirement Planning Image 3

Floor planning

Arrangement used to finance inventory. A finance company buys the inventory, which is then
held in trust by the user.


Initial margin requirement

When buying securities on margin, the proportion of the total market value of
the securities that the investor must pay for in cash. The Security Exchange Act of 1934 gives the board of
governors of the Federal Reserve the responsibility to set initial margin requirements, but individual
brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by
the exchange.



Legal Reserve Requirement

See reserve requirement.


Maintenance margin requirement

A sum, usually smaller than -but part of the original margin, which must
be maintained on deposit at all times. If a customer's equity in any futures position drops to, or under, the
maintenance margin level, the broker must issue a margin call for the amount at money required to restore the
customer's equity in the account to the original margin level. Related: margin, margin call.


Manufacturing resource planning

An integrated, computerized system for planning
all manufacturing resources.


Manufacturing resource planning (MRP II)

An expansion of the material requirements planning concept, with additional computer-based capabilities in the areas of
direct labor and machine capacity planning.


Margin requirement (Options)

The amount of cash an uncovered (naked) option writer is required to
deposit and maintain to cover his daily position valuation and reasonably foreseeable intra-day price changes.


Material requirements planning

A computerized system used to calculate material
requirements for a manufacturing operation.


Material requirements planning (MRP)

A computer-driven production methodology
that manufactures products based on an initial demand forecast. It tends to result in
more inventory of all types than a just-in-time (JIT) production system.


Materials price variance

The difference between the actual and budgeted cost to
acquire materials, multiplied by the total number of units purchased.


Materials quantity variance

The difference between the actual and budgeted quantities
of material used in the production process, multiplied by the standard cost per
unit.


Materials Requirement Planning Image 4

Materials requisition

A document listing the quantities of specific parts to be withdrawn
from inventory.



planning

the process of creating the goals and objectives for
an organization and developing a strategy for achieving
them in a systematic manner


Planning horizon

The length of time a model projects into the future.


planning horizon

Time horizon for a financial plan.


Planning, programming and budgeting system (PPBS)

A method of budgeting in which budgets are allocated to projects or programmes rather than to responsibility centres.


Raw materials

Unprocessed goods bought for manufacture, part of inventory.


Raw materials inventory

The total cost of all component parts currently in stock that
have not yet been used in work-in-process or finished goods production.


Requirements explosion

The component-level requirements for a production run,
derived by multiplying the number of parent-level requirements by the component
requirements for each parent, as specified in the bill of materials.


Reserve Requirement

Fraction of total deposits that a commercial bank is required by the central bank to hold in the form of reserves.


Reserve requirements

The percentage of different types of deposits that member banks are required to hold
on deposit at the Fed.


Sinking fund requirement

A condition included in some corporate bond indentures that requires the issuer to
retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.


strategic planning

the process of developing a statement of
long-range (5–10 years) goals for the organization and
defining the strategies and policies that will help the organization
achieve those goals


Summarized bill of materials

A bill of materials format showing the grand total
usage requirement for each component of a finished product.


tactical planning

the process of determining the specific
means or objectives by which the strategic plans of the
organization will be achieved; it is short-range in nature
(usually 1–18 months)


MRP

see materials requirements planning



 

 

 

 

 

 

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