Definitions of terms used in MRP system


Master Production Schedule (MPS)

This is the schedule of the quantity and timing of all end products to be produced over a specific planning horizon.MPS is developed from customer’s firm orders or from forecasts of demand or both. It is an input to the MRP system.

Product structure

Indicates the level of components required to produce an end product.

Bills of Material

A list indicating the quantities of all raw materials ,parts, components sub assemblies and major assemblies that go into an end product. It gives details of the buildup of a product. It may also be called as indented parts list.

Bills of Material file

A bills of material file, also known as product-structure file ,is a computerized file listing all finished products ,the quantity of raw materials, parts, subassemblies and assemblies in each product. The bills of material file must be kept up-to-date as and when the products are redesigned or modified with addition/deletion of some parts, components and sub-assemblies.

Inventory status file

It is a computerized file with a comprehensive record of each and every material held in inventory. The information included in this file are ,materials on hand or on order ,planned orders ,planned order releases, allocated materials, lot sizes, lead times, safety stock levels ,costs and suppliers for each material. The inventory file must be kept up-to-date taking into consideration the daily inventory transactions such as receipts ,issues, scrapped materials, planned orders and order releases.

Available inventory

Materials that are held in inventory or which are on order, but are not either safety stock or allocated to other uses.


On-hand inventory

The quantity of a material, physically held in inventory at a point of time. It may include safety and allocated inventory except materials on order.

Planning horizon

The number of time periods (days ,weeks or months) included in the MPS,CRP,MRP and departmental schedules.

Gross requirements

The total quantity of an item needed at the end of a period to meet the planned output levels ,not considering any availability of the item in inventory or scheduled receipts.

Planned order receipts

The quantity of an item that is planned to be ordered so that, it will received at the beginning of the time period to meet the net requirements for that time period. The order is yet to be placed.

Net requirements

The quantity of an item that must be procured to meet the scheduled output for the period

Lot-sizing coding

Whenever there is a need for the net requirements of a material, a decision must be taken regarding the quantity of material to be ordered (either purchase order or production order).Lot-sizing decisions include both the batch or lot-size (quantity) as well as the timing of these lots.

Lumpy demand

If the demand for the materials varies greatly from time period to time period (say week to week), the demand is said to be lumpy demand.

Capacity requirements planning

The process of reconciling the Master Production Schedule to the available capacities of production departments(viz., machine and labor capacities) over the planning horizon.

Load Schedules

A load schedule is a device for comparing the actual labor-hours and machine-hours required to produce the MPS against the available labor-hours and machine –hours in each week

Product Explosion

The process of determining from the product structure and planned order releases and the gross requirements for components.

Time fence

A designated length of time that must pass without changing the MPS, to stabilize the MRP system.

Lot-for-lot ordering

A lot-sizing policy in which, order quantity equals net requirements for the period.

Frozen MPS

The early time periods of the MPS that can be assumed to not to be subject to change. Frozen periods of MPS enable managers to commit funds, order materials as such plans, will not need to be subsequently changed.

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