Definition
Material Requirements Planning (MRP) is a production planning and inventory control system that calculates the quantity and timing of materials needed to produce finished goods. MRP works backward from a master production schedule (MPS): given what finished goods must be produced and when, MRP explodes the bill of materials (BOM) to determine what raw materials and sub-assemblies are needed, in what quantities, and when they must be ordered based on lead times. Original MRP (MRP I) focused on material quantities. MRP II (Manufacturing Resource Planning) expanded to include capacity planning, labor, and machinery. Modern ERP systems integrate MRP with financial, sales, and distribution functions.
Why It Matters
MRP eliminates the guesswork in material procurement for manufacturers. Without MRP, manufacturers over-order to avoid shortages (which creates excess inventory) or under-order and create production stoppages. MRP's value is proportional to BOM accuracy and lead time data quality — garbage inputs produce garbage output, leading to the frustrating experience of stockouts on planned runs. Demand Forecaster →
Frequently Asked Questions
What is MRP in supply chain management?
MRP (Material Requirements Planning) is a system that calculates what materials to buy and when, based on production schedules and bills of materials. It takes the master production schedule as input, explodes BOMs to determine component requirements, and factors in lead times to generate purchase and production orders.
What is the difference between MRP and ERP?
MRP is the calculation engine for material requirements — it focuses on what to buy and when. ERP (Enterprise Resource Planning) is a broader system that integrates MRP with financials, sales, HR, and operations. ERP systems contain MRP as one module among many.
What are the inputs to MRP?
MRP requires three primary inputs: (1) Master Production Schedule (MPS) — what finished goods to produce and when, (2) Bill of Materials (BOM) — the components and quantities needed for each finished product, and (3) Inventory records — current on-hand, on-order, and lead times by item. Data quality in all three determines MRP output quality.