MRP — Material Requirements Planning

MRP (Material Requirements Planning) is the calculation that turns a production or sales plan into concrete purchase and production orders. It answers three questions for every part: what is needed, how much, and by when. MRP is the oldest building block of modern ERP systems and still drives day-to-day procurement and shop-floor scheduling in most manufacturing companies.

How MRP works

MRP runs a deterministic calculation in a fixed sequence. It starts from gross demand — sales orders, forecasts and the master production schedule — and explodes each finished product down through its bill of materials, level by level. For every component it nets the gross requirement against current stock, reserved quantities and open purchase or production orders. What remains is the net requirement. MRP then applies the part’s lead time to schedule the order backwards so the material arrives exactly when the next production step needs it.

The three classic inputs are often summarised as the MRP triad: the master production schedule (what to build and when), the bill of materials (what each product consists of) and the inventory record (what is on hand and on order). If any of these is wrong, the output is wrong — which is why master-data quality matters more for MRP than the algorithm itself.

Lot sizing and lead time

MRP does not simply order the exact net quantity. A lot-sizing rule decides how requirements are grouped into orders: lot-for-lot, fixed order quantity, period order quantity or economic order quantity. The choice trades ordering cost against holding cost. Lead time then shifts each planned order earlier in time; classic MRP treats lead time as a fixed parameter regardless of workload, which is one of its best-known weaknesses.

Strengths and limits

MRP is transparent, repeatable and cheap to run, which is why it remains the default in ERP. Its limits are equally well understood. It assumes infinite capacity, so it can generate plans that no machine or team can actually deliver. It is sensitive to nervous demand: small changes high in the BOM ripple into many rescheduling messages lower down. And fixed lead times ignore real queue times on the shop floor. These gaps are exactly what MRP II and later APS were built to close.

MRP in the ERP context

In a modern ERP, MRP is one planning run among several. Procurement teams use its order proposals as a worklist; planners review exception messages rather than every line. Many companies schedule MRP as an overnight batch, while high-volume or make-to-order businesses run it more frequently or move to demand-driven approaches. Understanding what MRP can and cannot promise — quantities and dates, but not feasibility against capacity — is essential to using ERP planning well.

Related Topics

• ERP
• APS
• SCM
• MRP II
• MES
• Cloud ERP