Pegging — Manufacturing Glossary

Pegging is the ability within MRP to trace a component's demand back to the specific parent orders or customer orders that created it. Pegging answers the critical question: "Why do we need this part, and for whom?" It is the reverse of BOM explosion — instead of drilling down from parent to component, pegging drills up from component to parent.

At User Solutions we consider pegging one of the most underused yet powerful features in MRP. Planners who use pegging reports consistently make faster, better-informed decisions when managing shortages and priority conflicts.

---

How Pegging Works

During BOM explosion, MRP calculates gross requirements for each component by multiplying parent order quantities by the quantity-per. Pegging records this linkage so it can be queried later.

Types of Pegging

Single-level pegging — traces demand one level up to the immediate parent order. Example: "These 200 bearings are needed for Work Order WO-5501 (Pump Assembly A)."

Full pegging (end-item pegging) — traces demand through every BOM level up to the finished product and, ideally, to the customer sales order. Example: "These 200 bearings → WO-5501 (Pump Assembly A) → WO-5498 (Pump Unit) → Sales Order SO-1234 (Acme Corp, due April 15)."

Bottom-up pegging — starts from a component and identifies all parent orders creating demand.

Top-down pegging — starts from a customer order or finished goods order and identifies all component requirements.

---

Pegging Example

A manufacturer discovers that only 300 units of component SEAL-100 are available, but MRP shows net requirements of 500 for the current week. There is a 200-unit shortage.

Without pegging, the planner must guess which jobs need the seals and which customers to disappoint.

With pegging, the system shows:

The planner allocates the 300 available seals:

• 150 to WO-6010 — Defense Corp is critical priority and due first
• 150 to WO-6015 — partial allocation; Industrial Inc is notified of 50-unit delay
• 0 to WO-6018 — MidWest Mfg is informed early; expedite order for seals placed with supplier

Pegging turned a chaotic shortage into a structured, priority-based allocation decision.

---

Why Pegging Matters for Scheduling

Enables intelligent shortage management. Shortages are inevitable. Pegging gives planners the data to allocate scarce resources to the highest-value orders instead of using first-come-first-served or guesswork.

Supports priority scheduling. When scheduling software like Resource Manager DB sequences jobs, pegging data helps determine which jobs are truly urgent based on the end customer's priority, not just the work order date.

Improves customer communication. Full pegging links material shortages to specific customer orders. When a supplier delays a delivery, the planner can immediately identify which customers are affected and proactively communicate revised delivery dates.

Reduces bullwhip effects. By understanding which demand is real (pegged to customer orders) versus speculative (forecast-driven), planners can avoid over-reacting to phantom demand.

---

Related Terms

• Gross Requirements — The total demand that pegging traces back to its originating parent orders.
• Bill of Materials (BOM) — The product structure that defines the parent-child relationships pegging navigates.
• Dependent Demand — The type of demand that pegging traces — demand derived from parent items, not external forecasts.

---

FAQ

---

This term is part of the Manufacturing Glossary. For a deep dive into material planning, see our MRP Guide.