Definition of Material requirements planning

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 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)

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

Assets requirements

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

Corporate financial planning

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

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.

Floor planning

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

Materials requirement planning

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

Planning horizon

The length of time a model projects into the future.

Raw material supply agreement

As used in connection with project financing, an agreement to furnish a
specified amount per period of a specified raw material.

Reserve requirements

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

Bill of materials

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

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.

bill of materials

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

direct material

a readily identifiable part of a product; the cost of such a part

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

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

material price variance

total actual cost of material purchased
minus (actual quantity of material  standard
price); it is the amount of money spent below (favorable)
or in excess (unfavorable) of the standard price for the
quantity of materials purchased; it can be calculated based
on the actual quantity of material purchased or the actual
quantity used

material quantity variance

(actual quantity X standard price) - (standard quantity allowed  standard price);
the standard cost saved (favorable) or expended (unfavorable)
due to the difference between the actual quantity
of material used and the standard quantity of material
allowed for the goods produced during the period

material requisition form

a source document that indicates
the types and quantities of material to be placed into production
or used in performing a service; it causes materials
and its cost to be released from the Raw material Inventory
warehouse and sent to Work in Process Inventory

material mix variance

(actual mix X actual quantity X standard price) - (standard mix X actual quantity X standardprice);
it computes the monetary effect of substituting a nonstandard mix of material

material yield variance

(standard mix X actual quantity X standard price) - (standard mix X standard quantity X standard price);
it computes the difference between the
actual total quantity of input and the standard total quantity
allowed based on output and uses standard mix and
standard prices to determine variance

planning

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

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

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)

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.

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.

Materiality

The proportional size of a financial misstatement. It can be construed as
the net impact on reported profits, or the percentage or dollar change in a specific
line item.

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.

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.

planning horizon

Time horizon for a financial plan.

Materiality

A characterization of the magnitude of a financial statement item's effect on a
company's overall financial condition and performance. An item is material when its size is
likely to influence decisions of investors or creditors.

Advance material request

Very early orders for materials before the completion
of a product design, given the long lead times required to supply some items.

Aggregate planning

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

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.

Earmarked material

Inventory that has been physically marked as being for a
specific purpose.

Enterprise resource planning system

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

Indented bill of material

A bill of material reporting format under which successively
lower levels of components are indented farther away from the left
margin.

Manufacturing resource planning

An integrated, computerized system for planning
all manufacturing resources.

Material review board

A company committee typically comprising members representing
multiple departments, which determines the disposition of inventory
items that will not be used in the normal manufacturing or distribution process.

Materials requisition

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

Matrix bill of material

A bill of materials chart listing the bills for similar products,
which is useful for determining common components.

Modular bill of material

A bill of material format in which components and subassemblies
are clustered by product option, so one can more easily plan for the
assembly of finished goods with different configurations.

Multilevel bill of material

An itemization of all bill of material components, including
a nested categorization of all components used for subassemblies.

Nonconforming material

Any inventory item that does not match its original design
specifications within approved tolerance levels.

Offal material

The waste materials resulting from a production process.

Phantom bill of material

A bill of materials for a subassembly that is not normally
kept in stock, because it is used at once as part of a higher-level assembly or
finished product.

Raw material

Base-level items used by the manufacturing process to create either
subassemblies or finished goods.

Repair bill of material

A special bill itemizing changes needed to refurbish an
existing product.

Reprocessed material

material that has been reworked and returned to stock.

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.

Reserved material

material that has been reserved for a specific purpose.

Single-level bill of material

A list of all components used in a parent item.

Summarized bill of materials

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

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.

MRP

see materials requirements planning

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