What Is MRP (Material Requirements Planning)?
Also known as: Material Requirements Planning, material planning, MRP run
Definition
MRP (Material Requirements Planning) is the ERP calculation that explodes demand through bills of materials, nets it against on-hand and on-order inventory, and offsets by lead time to produce timed purchase and work order suggestions.
MRP (Material Requirements Planning) Explained
MRP runs three mechanical steps in sequence. First it gathers gross requirements from customer orders, forecasts, and the master production schedule. Second it nets those requirements against projected available balance, which is on-hand inventory plus scheduled receipts minus allocations and safety stock. Third it applies lot sizing to whatever shortfall remains and offsets the order release date backward by the item lead time. The output is a set of planned orders with suggested release and due dates, not commitments.
The explosion walks the bill of materials level by level using low-level codes. An item that appears both as a top-level spare and as a component two levels down is planned only once, at its lowest level, so its requirements are complete before it is netted. This is why a bill of materials structural error, such as a loop or a wrong low-level code after an engineering change, can produce planning results that look random. Most ERPs expose a low-level code recalculation utility for exactly this reason.
MRP assumes infinite capacity. It will happily suggest forty work orders due on the same Tuesday even if the plant has three machines. That assumption is deliberate: MRP answers what materials are needed and when, and leaves the question of whether the plant can do it to rough cut or finite capacity planning. Treating MRP output as a schedule instead of a material plan is the single most common operational misuse.
Regenerative MRP recalculates everything from scratch, while net change MRP only reprocesses items touched since the last run. Regeneration is safer after mass data changes such as a lead time reload or a BOM restructure, and net change is faster for nightly cycles. Many shops run net change nightly and a full regeneration weekly, which catches drift without adding hours to the nightly batch window.
Why It Matters
- MRP output drives every purchase commitment and shop release, so a bad lead time or BOM quantity turns directly into stockouts or excess.
- Action messages from MRP are the earliest warning of schedule slippage, often weeks before a late shipment becomes visible.
- Because MRP assumes infinite capacity, taking its dates as promises without a capacity check causes chronic late delivery.
- MRP quality is the cheapest lever on working capital: correct netting and lot sizing routinely free cash tied up in early receipts.
In Practice
A classic gotcha: an item is set up with a two-day lead time because purchasing once expedited it in two days. MRP then releases the requisition two days before need, and every order for that part is chronically late. Audit planning lead times against actual receipt-to-order elapsed time at least annually, and use realistic values rather than best-case ones.
Frequently Asked Questions
What inputs does MRP need to run correctly?
MRP needs demand (customer orders, forecast, or master production schedule), accurate multi-level bills of materials, current on-hand inventory and open supply orders, and item planning parameters including lead time, lot size rule, safety stock, and order policy. If any one of these is stale, the suggestions will be internally consistent but operationally wrong.
Why does MRP suggest orders I already placed?
Usually because the existing supply order is not linked to the demand in a way MRP recognizes: it may be for a different site, a different revision, past its due date and excluded from the planning horizon, or on hold. Check that scheduled receipts fall inside the planning window and that the order status is one MRP counts as available supply.
Related Terms
BOM (Bill of Materials)
A BOM (bill of materials) is the structured, hierarchical list of components, sub-assemblies, and quantities required to produce one unit of a parent item, and it is the primary input MRP explodes to calculate material requirements.
Lead Time
Lead time is the elapsed time between initiating an order and having the material available for use. In ERP it is the offset MRP applies when back-scheduling a planned order from its due date to its release date.
MPS (Master Production Schedule)
An MPS (master production schedule) is the time-phased statement of which end items a plant will produce, in what quantities, and in which periods. It is the anchor demand input MRP explodes into component requirements.
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