What is MRP?
In short
MRP (material requirements planning) is a calculation method that derives from orders, expected sales and bills of materials which materials and parts you need to buy or make, and when. The system takes stock, open orders and lead times into account.
How does MRP work?
MRP starts with what you have to deliver: customer orders and expected sales. Using each product's bill of materials, the system calculates how many parts and raw materials are needed. It subtracts the stock and orders already placed. What remains becomes a proposal to buy or make, scheduled using the supplier's lead time or your production lead time.
An example: in four weeks you must deliver 100 tables, each table has four legs, you have 150 legs in stock and the supplier delivers in two weeks. MRP then proposes ordering 250 legs within two weeks at the latest.
MRP, MRP II and ERP
- MRP calculates with materials only and assumes there are enough machines and people.
- MRP II (manufacturing resource planning) also takes the capacity of machines and staff into account.
- ERP grew out of this and connects planning with finance, purchasing, sales and inventory in one system.
What should you look out for?
MRP is only as good as the data you put into it. If the bills of materials, lead times and stock are wrong, the proposals are wrong too. So start with reliable stock records and bills of materials. If you work with limited capacity or many rush orders, choose software that also plans for capacity.
Which software helps with this?
MRP is part of most ERP systems for manufacturers and of specialist production planning software. Check how the package handles capacity: classic MRP assumes unlimited capacity.