Production Planning, Inventory Control, and MRP Vocabulary

Comprehensive vocabulary flashcards covering Inventory Control (EOQ, EPQ, Discounts), PPC Fundamentals, Aggregate Planning, and Material Requirement Planning (MRP).

Raw Material

Resources required for production or processing before any manufacturing operations are performed.

Components

Parts or subassemblies that will later be assembled into a final finished product.

Work in Process (WIP)

Inventory currently waiting in the system to be processed or actively being processed across workstations.

Finished Goods

Final products that have completed all manufacturing and processing steps and are ready for distribution.

Lead Time

The total time elapsed between the initiation or placement of an order and its final completion or arrival.

Holding Cost

The cost of carrying inventory over time, including physical storage space, taxes, insurance, breakage, spoilage, deterioration, obsolescence, and opportunity cost.

Order Cost

The fixed cost associated with placing an inventory order or setup, incurred regardless of the order size.

Penalty Cost

The cost associated with inventory shortages or stockouts when customer demand cannot be satisfied on time.

ABC Inventory Classification

An inventory management method based on the Pareto principle that categorizes items into Class A (top $20\%$ of items accounting for ~$80\%$ of value), Class B (next $30\%$ of items accounting for ~$15\%$ of value), and Class C (remaining $50\%$ of items accounting for ~$5\%$ of value).

Economic Order Quantity (EOQ)

A fundamental inventory model that calculates the optimal order lot size $Q^* = \sqrt{\frac{2K\lambda}{h}}$ to minimize the sum of annual fixed ordering costs and inventory holding costs under continuous, constant demand.

Reorder Point ($R$)

The predetermined inventory level at which a replenishment order must be placed, calculated as $R = \lambda \tau$, where $\lambda$ is the demand rate and $\tau$ is the order lead time.

Economic Production Quantity (EPQ)

An inventory lot-sizing model where items are produced internally at a constant production rate $P > \lambda$, yielding an optimal batch size $EPQ = \sqrt{\frac{2K\lambda}{h(1 - \lambda/P)}}$.

All-Units Discount

A quantity discount model in which a reduced per-unit price $c_j$ applies to every unit in an order once the total order quantity reaches or exceeds a specified price breakpoint $q_j$.

Incremental Quantity Discount

A quantity discount model in which a reduced unit purchase price $c_j$ applies exclusively to the additional units ordered within a specific quantity bracket $[q_j, q_{j+1}]$.

Production Planning and Control (PPC)

A system concerned with planning, directing, and controlling all manufacturing aspects, including materials, machine and human scheduling, and coordination with suppliers and customers.

Factory Planning

The highest level of production planning, involving decisions on facility location, number of departments, department responsibilities, and inter-departmental relationships.

Process Planning

A production planning stage focused on determining the necessary processes to transform raw inputs into finished outputs, allocating processes to departments, and sequencing operations.

Operations Planning

Detailed operational planning that specifies work centers, tool designs, transfer specifications, and standard time allowances required to execute each production step.

Production Control

The operational mechanism that monitors plan execution, records progress, compares actual performance to planned targets, and initiates corrective actions to manage deviations.

Open-Loop Control System

A production control configuration where transformation processes yield products and services without feedback mechanisms to adjust inputs or processes automatically.

Closed-Loop Control System

A production control configuration where system outputs are continuously measured and compared against objectives to generate feedback-driven corrective actions.

Production System

A transformation framework in which saleable products or services are produced by applying labor, machinery, capital, and materials to raw inputs.

Fixed Position Layout

A facility layout where the main product remains stationary, while workers, materials, and heavy equipment are brought directly to the product location.

Process Layout

A functional layout grouping similar machinery or operations together to accommodate low-volume, high-variety manufacturing with customized routing.

Cellular Layout

A layout based on group technology that arranges dissimilar machines into dedicated cells to process part families with similar manufacturing requirements.

Product Layout

A line layout where workstations are arranged sequentially along the exact operational flow required to manufacture high-volume, low-variety standardized goods.

Aggregate Planning

Macro-level planning aimed at setting overall workforce levels and firm-wide production rates in aggregated units to meet forecasted demand across a planning horizon.

Aggregate Unit

A composite standard unit of measurement (such as total weight, volume, worker-hours, or weighted average) used to unify multi-product demand into a single planning metric.

Smoothing Costs

Costs incurred when making period-to-period changes in production rates or labor force size, such as hiring, firing, retraining, and setup costs.

Planning Horizon

The number of future time periods covered by demand forecasts for which production and capacity decisions are evaluated.

Chase Strategy

An aggregate planning strategy that matches production capacity directly to period demand by adjusting workforce size or production rates, minimizing inventory holding costs.

Constant Workforce Strategy

An aggregate planning strategy that maintains a constant workforce size across the planning horizon, using inventory build-ups or backorders to absorb demand fluctuations.

Mixed Strategy

An aggregate planning approach that combines workforce variations, inventory changes, overtime, and subcontracting to achieve lower overall costs than pure strategies.

Independent Demand

External demand for finished products or end items that originates directly from customers and is independent of the production of other items.

Dependent Demand

Internal demand for component parts, subassemblies, and raw materials derived directly from the production schedule of parent items.

Material Requirement Planning (MRP)

A computer-based system that translates Master Production Schedule (MPS) requirements for end items into time-phased component schedules using BOMs and inventory records.

Master Production Schedule (MPS)

A high-level schedule specifying the precise quantities and completion dates for individual finished goods or end items to be manufactured.

Bill of Materials (BOM)

A structured hierarchical listing of all assemblies, subcomponents, raw materials, quantities, and lead times required to manufacture one unit of a finished product.

Netting

The MRP step of calculating net component requirements by subtracting on-hand inventory and scheduled receipts from gross requirements.

Time Phasing

The MRP process of offsetting component required completion dates backward by their respective lead times to determine planned order release dates.

BOM Explosion

The MRP process of multiplying parent item order releases by lower-level usage quantities to calculate gross requirements for component parts at the next level.

Lot-for-Lot (L4L)

An MRP lot-sizing rule where the planned order quantity exactly equals the net requirements of a single period, eliminating holding costs at the expense of frequent setups.

Silver-Meal Heuristic

A dynamic lot-sizing heuristic that selects an order quantity spanning $T$ future periods to minimize the average combined holding and ordering cost per period $C(T)$.

Least Unit Cost

A dynamic lot-sizing heuristic that selects an order quantity covering $T$ periods to minimize the total holding and setup cost per unit of product demanded.

Part Period Balancing

A lot-sizing technique that sets order quantities by choosing an order horizon where total cumulative inventory holding costs equal fixed ordering costs as closely as possible.

Regenerative MRP

An MRP update mode where all material requirements across the entire product structure are completely erased and recalculated periodically from scratch.

Net Change MRP

A transaction-driven MRP update mode that continuously recalculates requirements only for parts and assemblies affected by recent system changes.

System Nervousness

Instability in an MRP system occurring when minor schedule changes at higher levels cause major, disruptive revisions to lower-level component schedules.

Manufacturing Resource Planning (MRP II)

An expanded production planning system that integrates basic MRP with marketing, finance, engineering, and capacity requirements planning to coordinate all company resources.

Enterprise Resource Planning (ERP)

An integrated software system that unifies core business processes across accounting, HR, marketing, manufacturing, and supply chains using a central shared database.

Push System

A production control system (such as traditional MRP) where production is scheduled based on demand forecasts and completed items are moved forward to the next stage.

Pull System

A production control system (such as JIT or Kanban) where work is initiated at a station only upon receiving an explicit request signal from a downstream process.