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Material Requirements Planning (MRP)

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Lead Time

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The time interval between the initiation and completion of a production process. It's important for planning when to order materials so they arrive just in time for production.

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Safety Stock

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Extra inventory held to guard against uncertainty in demand or supply. It ensures smooth production in case of delays or sudden demand increases.

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Cycle Inventory

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Inventory that a company holds to meet usual demand during a specified period. It helps in managing production and supply chain efficiency.

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Pareto Analysis

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A technique used to prioritize tasks based on their significant cumulative impact. Often applied in inventory to focus on items that represent the majority of the value or turnover (80/20 rule).

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Gross Requirements

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The total demand for an item derived from the MPS. It forms the basis of MRP calculations for what must be available in each period.

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Bill of Materials (BOM)

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A comprehensive list of raw materials, components, and instructions required to construct, manufacture, or repair a product or service. It is crucial for calculating material requirements.

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Planned Order Releases

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Instructions to produce or purchase enough units to meet net requirements. These are the planned orders to be released to the shop floor or suppliers.

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Net Requirements

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The actual amount needed when considering inventory on hand and on order. It's what needs to be produced or ordered after accounting for current inventory.

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Capacity Planning

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The process of determining the production capacity needed to meet changing demands. It plays a vital role in ensuring resources are used effectively.

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Lot Sizing

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Determining the optimal order quantity for production. It balances the costs between ordering, carrying, and setup to minimize total costs.

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Master Production Schedule (MPS)

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A plan for individual commodities to be produced in each time period. It drives the MRP process and is key for aligning production with customer demand.

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Demand Forecasting

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Predicting future customer demand using historical data and market analysis. It's critical for setting accurate inventory levels and MPS.

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Order Point

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The inventory level at which an order should be placed to replenish stock before it runs out. It's crucial for maintaining continuous production without delays.

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Inventory Turnover

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A measure of how often inventory is sold and replaced over a period. High turnover can indicate efficient management and a lack of excess stock.

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Planned Order Receipts

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The quantity of items planned to arrive to fulfill the net requirements. It schedules when products should arrive to maintain optimal inventory.

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