What is the primary purpose of pegging in the context of materials requirement planning (MRP)?

The primary purpose of pegging in the context of materials requirement planning (MRP) is to identify sources of gross requirements for an item. This process helps organizations trace the demand for materials back through the hierarchy of bills of material and production schedules. By doing so, it enables supply chain professionals to recognize which customer orders or requirements are driving the need for specific components or materials.

This visibility into the sources of demand allows planners to more accurately assess the impact of changes in customer orders or production schedules on inventory levels and material requirements. It facilitates better decision-making regarding sourcing, production, and inventory management, helping to mitigate risks associated with shortages or overstocking.

While effective scheduling, reducing holding costs, and improving on-time delivery are important supply chain objectives, those outcomes are more of a result of effective MRP practices, rather than the primary purpose of pegging itself. Pegging specifically focuses on the traceability of demand, establishing a clear link between end-item requirements and their respective components.