Material Requirements Planning Flashcards, test questions and answers

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What is Material Requirements Planning?

Material Requirements Planning (MRP) is a system used by organizations to manage production and inventory levels. It is used to plan, forecast and organize the purchasing, manufacturing, and distribution of material and components that are necessary to produce products. MRP helps organizations reduce costs associated with inventory management, managing supply chains, and scheduling production activities. It also helps companies ensure they have enough material on hand when they need it without overstocking or understocking. MRP works by analyzing current levels of inventory on hand versus what is needed for production. The system then generates reports that identify when items need to be purchased or manufactured in order to meet customer demand. MRP also helps organizations track their suppliers’ performance in terms of delivery times and quality assurance standards as well as tracking their own internal processes such as raw material use efficiency. The main benefits of using an MRP system include improved visibility into supply chain operations, better planning for purchasing materials in order to meet customer demands, improved accuracy in forecasting needs for production, reduced inventory costs due to better management of stock levels, improved process efficiency due to the ability to plan ahead for activities such as assembly line layout or machine maintenance scheduling; and increased customer satisfaction because orders can be filled faster due to better organized warehouse operations. Overall using an MRP system can help an organization streamline its operations while improving profitability through increased efficiency and cost savings associated with procurement of materials and components needed for production tasks. With this tool at their disposal companies have the potential gain a competitive edge over those who don’t use it by ensuring that they have enough resources available when needed while reducing their overall costs associated with ordering materials or managing supply chains.