Material Requirements Planning (MRP)

TL;DR: Material Requirements Planning (MRP) helps manufacturers calculate what raw materials are needed, in what quantity, and when, so production runs smoothly without excess inventory or stockouts.

Material Requirements Planning (MRP) is a system used in manufacturing to manage the purchasing and scheduling of raw materials and components. It ensures materials are available when needed while keeping inventory costs under control.

What Is Material Requirements Planning (MRP)?

Material Requirements Planning (MRP) is a production planning and inventory control system used to manage manufacturing processes. It determines demand for raw materials and components, then schedules their production or procurement based on lead times, inventory levels, and production capacity.

Why Is MRP Important?

MRP improves productivity, cost control, and delivery reliability. It provides visibility into material movement across departments, ensuring customer orders are fulfilled on time while reducing waste and inefficiencies.

How Does MRP Work?

MRP relies on the Bill of Materials (BOM) to map all components needed for a finished product. It identifies dependencies between components and calculates total requirements so production can only begin when all materials are available.

MRP Steps and Processes

Inventory Tracking

Tracks existing stock and compares it with planned production needs to identify shortages.

Identifying Raw Material Demand

Calculates total material requirements based on confirmed orders, forecasts, and historical data.

Procurement Planning

Determines when to place purchase orders and optimal timelines based on supplier lead times.

MRP Inputs

• Master Production Schedule (MPS)

• Inventory Status Records

• Bill of Materials (BOM)

MRP Outputs

• Planned purchase orders

• Production schedules

• Rescheduling notices

• Inventory status reports

MRP in Manufacturing

MRP enables manufacturers to plan materials accurately, reduce uncertainty, and improve predictability across production stages, leading to better profitability and scalability.

Benefits of MRP

• Improved purchase planning

• Accurate production planning

• Reduced inventory risks

• Lower operational costs

History of MRP

MRP originated in the 1950s to replace manual reorder-based systems. Over time, it evolved into the foundation of modern production and inventory planning systems.

MRP vs ERP

MRP focuses on material planning, while ERP covers end-to-end business operations including finance, HR, and supply chain management.

FAQs

What does MRP stand for?

MRP stands for Material Requirements Planning, a system for calculating material needs for production.

What are the main inputs of MRP?

The main inputs are BOM, MPS, and inventory status records.

What problems does MRP solve?

MRP reduces stockouts, excess inventory, and production delays.

Is MRP suitable for small manufacturers?

Yes, MRP is especially useful for SME manufacturers to control costs and improve planning.

What is the difference between MRP and ERP?

MRP handles material planning, while ERP manages the entire business process.