Material Requirements Planning (MRP)

What is Material Requirements Planning (MRP)?

Material Requirements Planning (MRP) is a systematic approach to planning materials and components required for production based on actual demand. The goal of MRP is to ensure that the right materials are available at the right time and in the right quantity.
Too much material leads to excessive inventory costs, while a shortage of materials can cause production delays or shutdowns. MRP answers the fundamental question: What is needed, in what quantity, and when?

MRP relies on three key sources of information:

• Bills of Materials (BOM): Lists of all components required to manufacture a finished product.

• Master Production Schedule (MPS): Defines what products are needed, in what quantity, and by when.

• Inventory data and open orders: Indicates what materials are in stock or already on order.

Based on this data, the MRP system calculates the dependent (secondary) requirements – i.e., all materials needed to fulfill the primary demand. In doing so, it considers lead times and lot sizes.
The result is a set of automatically generated purchase and production proposals.

MRP systems are commonly used in manufacturing industries (e.g., mechanical engineering, automotive, electronics), especially in companies with complex products and multi-level bills of materials.
They are an integral part of many ERP systems, such as SAP or Microsoft Dynamics, which almost always include an MRP module.

Benefits of MRP systems include:

• Optimized inventory levels

• Improved production planning

• Early detection of bottlenecks

• Reduced shortages and stockouts