Material Requirements Planning (MRP) — Manufacturing Glossary

Material Requirements Planning (MRP) is a systematic method for calculating the materials and components needed to manufacture a product, the quantities required, and the dates they must be available. MRP is the core planning engine inside virtually every ERP system and the foundation upon which production scheduling is built.

At User Solutions we have worked with MRP systems for over 35 years. We consistently find that manufacturers who understand how MRP works — not just how to press buttons — make dramatically better planning decisions.

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How MRP Works

MRP answers three fundamental questions for every component in the product structure:

1. What is needed? (from the Bill of Materials)
2. How much is needed? (from net requirements calculations)
3. When is it needed? (from time-phasing and lead time offsets)

The MRP Process

1. Start with the Master Production Schedule (MPS) — the plan for finished goods production by date and quantity.
2. Explode the BOM — multiply finished goods quantities by component quantities-per to calculate gross requirements.
3. Net against inventory — subtract on-hand stock and scheduled receipts to determine net requirements.
4. Apply lot sizing — group net requirements into order quantities using rules like lot-for-lot or EOQ.
5. Offset for lead time — shift planned orders backward by the item's lead time to determine when to release orders.
6. Repeat for lower BOM levels — planned orders at one level become gross requirements for the next level down.

This process cascades through every level of the BOM until raw material purchase requirements are calculated.

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MRP Example

A manufacturer schedules 100 units of Assembly X for completion in Week 10. Assembly X requires:

• 2 units of Sub-Assembly Y (lead time: 2 weeks)
• 4 units of Component Z (lead time: 1 week, purchased)

Level 0 — Assembly X: MPS demand: 100 in Week 10.

Level 1 — Sub-Assembly Y: Gross requirements: 100 × 2 = 200 units in Week 10 (needed at parent start). On-hand: 50. Scheduled receipts: 0. Net requirements: 200 - 50 = 150 units. Lot sizing (lot-for-lot): planned order for 150. Lead time offset: 2 weeks → planned order release in Week 8.

Level 2 — Component Z: Gross requirements from Sub-Assembly Y: 150 × 4 = 600 units in Week 8. On-hand: 200. Scheduled receipt of 100 arriving Week 7. Net requirements: 600 - 200 - 100 = 300 units. Lead time offset: 1 week → purchase order release in Week 7.

MRP has calculated that a PO for 300 units of Component Z must be placed by Week 7 to support the final assembly of 100 units of Assembly X in Week 10.

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Why MRP Matters for Scheduling

Ensures material availability. No scheduling tool can execute a production plan if materials are not available. MRP synchronizes material arrivals with production start dates, preventing the most common cause of schedule disruption.

Provides the order foundation. Every work order and purchase order in a manufacturing operation traces back to MRP calculations. Scheduling software like Resource Manager DB sequences these orders against finite capacity — but the orders themselves originate from MRP.

Reduces inventory while preventing shortages. By calculating exact quantities and timing, MRP eliminates the need to over-order "just in case." Manufacturers running MRP effectively carry 20-30% less raw material inventory than those using reorder-point systems.

Enables forward visibility. MRP's time-phased output shows planners what will be needed weeks or months ahead. This visibility allows proactive supplier management, capacity planning, and delivery date commitments.

Connects to capacity planning. MRP output feeds directly into CRP to validate whether the production plan is feasible. Together, they form the basis of closed-loop MRP.

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Related Terms

• Bill of Materials (BOM) — The structured product definition that MRP explodes to calculate component requirements.
• Manufacturing Resource Planning (MRP II) — The evolution of MRP that adds capacity planning and financial integration.
• Net Requirements — The output of MRP's netting calculation that drives planned order generation.

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FAQ

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This term is part of the Manufacturing Glossary. For a deep dive into material planning, see our MRP Guide.