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Table of Contents
What is Material Requirements Planning (MRP)?
Material Requirements Planning (MRP) is a production planning and inventory control system used to ensure that the right materials are available at the right time for manufacturing. It synchronizes demand forecasts, production schedules, and inventory levels to optimise the flow of materials.
Definition
Material Requirements Planning (MRP) is a system that calculates the materials, components, and scheduling requirements needed for manufacturing based on the bill of materials, inventory data, and the master production schedule.
Table of Contents
Key Takeaways
- Ensures materials are available for production when needed.
- Reduces excess inventory and improves operational efficiency.
- Uses structured inputs: Bill of Materials (BOM), inventory records, and production schedules.
Understanding Material Requirements Planning (MRP)
MRP helps manufacturers prevent delays due to missing materials and avoid costs associated with overstocking. It evaluates what materials are needed, in what quantities, and at what time. Using demand forecasting and lead-time data, MRP systems plan procurement, production, and delivery activities.
Modern MRP systems are typically integrated into broader ERP (Enterprise Resource Planning) platforms, allowing real‑time data sharing across inventory, procurement, finance, and production units.
MRP supports just‑in‑time (JIT) manufacturing, reduces waste, and enhances production efficiency, especially in industries with complex assemblies such as automotive, electronics, and machinery.
Formula (If Applicable)
MRP calculations often follow:
Net Requirements = Gross Requirements − (On‑Hand Inventory + Scheduled Receipts)
Other MRP concepts include:
- Lead Time
- Lot Sizing
- Safety Stock
Real-World Example
An electronics manufacturer uses MRP to determine the exact number of chips, screens, and connectors needed for the next 10,000 smartphones. The system schedules orders based on supplier lead times to ensure materials arrive before assembly begins.
Importance in Business or Economics
MRP improves production efficiency, reduces carrying costs, minimizes stock‑outs, and enhances customer satisfaction. It enables more accurate forecasting, better supplier coordination, and streamlined operations.
Types or Variations
- MRP I: Basic materials planning.
- MRP II: Adds capacity planning and shop‑floor control.
- ERP Systems: Integrate MRP with company‑wide processes.
Related Terms
- Bill of Materials (BOM)
- Inventory Management
- Production Planning
Sources and Further Reading
- APICS Supply Chain Council: https://www.apics.org
- Investopedia – MRP: https://www.investopedia.com/terms/m/mrp.asp
- Oracle Manufacturing Cloud: https://www.oracle.com/manufacturing
Quick Reference
- Plans material needs based on demand and schedules.
- Reduces inventory waste and delays.
- Forms the backbone of modern manufacturing planning.
Frequently Asked Questions (FAQs)
Why is MRP important in manufacturing?
It ensures materials arrive on time, reducing downtime and improving efficiency.
Is MRP the same as ERP?
No—MRP focuses on materials planning; ERP integrates all business processes.
Does MRP work for small businesses?
Yes, especially for those managing multiple raw materials or complex products.
