Glossary Term: Material requirements planning (MRP)

Material requirements planning (MRP) is the computer-based process of preparing, scheduling and controlling inventory and raw materials to be purchased and used in the manufacturing process. MRP is a part of push manufacturing as raw materials are purchased based on forecasted demands.

MRP works backward from production utilizing forecasted sales to determine raw materials and components needed to meet anticipated sales. Using this method it is important to understand the manufacturing cycle so raw materials arrive on time and to the right place of production.

Proper MPR is a crucial aspect in manufacturing as an abundance of unused inventory can negatively affect profitability and a short supply of inventory slows production.

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