Material Requirements Planning Fundamentals Flashcards

The Economic Order Quantity (EOQ) lot-sizing rule minimizes the sum of which two cost categories?

Answer: Ordering costs and carrying costs

EOQ balances ordering (or setup) costs against inventory carrying (holding) costs to find the most cost-effective order quantity.

What is the effect of increasing safety stock levels in an MRP system?

Answer: Increases net requirements and planned order quantities

Higher safety stock increases the projected on-hand target, which raises net requirements and therefore the planned order quantities generated by MRP.

Which MRP output is used by purchasing to create purchase orders?

Answer: Planned order releases for purchased items

Planned order releases for purchased items are the MRP output that triggers the creation of purchase orders to external suppliers.

A 'pegging' report in MRP is used to:

Answer: Trace a component's demand back to its parent requirement

Pegging links a lower-level component requirement back through the BOM to the specific parent orders or customer demands that caused it.

Low-level coding in a BOM ensures that MRP:

Answer: Calculates requirements for a component after all its parents have been planned

Low-level coding assigns each part a code equal to the lowest level it appears, ensuring MRP nets all parent demands before planning that component.

What problem does 'nervousness' describe in an MRP system?

Answer: Frequent and disruptive changes to planned orders caused by small demand fluctuations

MRP nervousness refers to the tendency of the system to generate large, cascading changes to the plan in response to even minor changes in demand or supply.

Which technique is used to stabilize an MRP plan and reduce system nervousness?

Answer: Implementing time fences on the MPS

Time fences restrict automatic changes to the MPS within a defined near-term window, preventing constant replanning and stabilizing downstream MRP schedules.