Glossary 359

ventory data, and the master schedule to calculate requirements for materials.
It makes recommendations to release replenishment orders for
material. Further, since it is time phased, it makes recommendations to
reschedule open orders when due dates and need dates are not in phase.
See Closed-Loop MRP, Manufacturing Resource Planning, Enterprise
Resource Planning.
MATERIALS MANAGEMENT An organizational structure which groups
the functions related to the complete cycle of material flow, from the purchase
and internal control of production materials to the warehousing,
shipping, and distribution of the finished product.
MODULAR BILL (OF MATERIAL) A type of planning bill which is
arranged in product modules or options. Often used in companies where
the product has many optional features (e.g., automobiles, computers).
See Planning Bill.
NET CHANGE MRP A method of processing Material Requirements
Planning on the computer whereby the material plan is continually retained
in the computer. Whenever there is a change in requirements, open
order, or inventory status, bills of material, or the like, a partial recalculation
of requirements is made only for those parts affected by the change.
NET REQUIREMENTS In MRP, the net requirements for an item are derived
as a result of netting gross requirements against inventory on hand
and the scheduled receipts. Net requirements, lot sized and offset for lead
time, become planned orders.
ON-HAND BALANCE The quantity shown in the inventory records as being
physically in stock. (APICS)
OPEN ORDER An active manufacturing order or purchase order. See
Scheduled Receipts.
OPTION A choice or feature offered to customers for customizing the end
product. In many companies, the term option means a mandatory choice
(i.e., the customer must select from one of the available choices). For example,
in ordering a new car, the customer must specify an engine (option)
but need not necessarily select an air conditioner.
ORDER ENTRY The process of accepting and translating what a customer
wants into terms used by the provider. This can be as simple as creating
shipping documents for a finished goods product to a far more complicated
series of activities including engineering effort for make-to-order
products. A key element in the order promising process is customer order
promising.
ORDER PROMISING The process of making a delivery commitment (i.e.,
answering the question “When can you ship?”) SeeAvailable-to-Promise.
ORDER QUANTITY The amount of an item to be ordered. Also called lot
size.