What Is MRP (Material Requirements Planning)?
Material requirements planning (MRP) is a planning method that uses demand, the bill of materials, and inventory records to calculate which materials to purchase or produce, in what quantities, and when they are needed. Manufacturers use it to avoid shortages without overstocking.
What Are the Inputs to MRP?
MRP combines three core inputs with a few planning settings for each item:
| Input | What It Provides |
|---|---|
| Demand | Sales orders, forecasts, or a master production schedule showing what finished goods are needed and when. |
| Bill of Materials | The components and quantities needed for one unit of each product. See what is a bill of materials. |
| Inventory On Hand | Current stock of every component, by location, from inventory management. |
| Scheduled Receipts | Open purchase orders and work orders that will add stock before the due date. |
| Lead Time | How long it takes to buy or make each item. |
| Safety Stock | A minimum quantity kept on hand to cover demand or supply variation. |
| Lot Size | The order quantity rule, such as exact quantity, fixed quantity, or supplier minimum. |
How MRP Works
An MRP run repeats the same sequence for every item, starting with finished goods and working down through each level of the BOM.
- 1Collect demand. Pull sales orders and forecasts for each finished product and its due date.
- 2Explode the BOM. Multiply demand by each component quantity to get gross requirements at every level.
- 3Net against inventory. Subtract stock on hand and scheduled receipts, and add back safety stock, to get net requirements.
- 4Apply lot sizing. Round each net requirement to the order quantity rule, such as a supplier minimum or pack size.
- 5Offset by lead time. Work back from the due date by each item's lead time to set the order release date.
- 6Release planned orders. Convert planned orders into purchase orders for bought items and work orders for made items.
MRP Example
A furniture maker has an order for 200 oak dining chairs due in Week 6. Using the chair bill of materials, MRP calculates what to order for each component.
| Item | Gross | Available | Net | Lead Time | Planned Order |
|---|---|---|---|---|---|
L0Dining Chair, Oak | 200 | 0 | 200 | 1 week | Work order · Wk 5 |
└L1Chair Leg, Oak | 800 | 250 | 550 | 2 weeks | Purchase · Wk 3 |
└L1Seat Assembly | 200 | 20 | 180 | 1 week | Work order · Wk 4 |
└L2Upholstery Fabric | 90 YD | 30 YD | 60 YD | 2 weeks | Purchase · Wk 2 |
└L1Wood Screw, #8 × 1.5" | 3,200 | 5,000 | 0 | 1 week | No order |
Fabric is ordered first because it goes into the seat assembly, which must be finished before final assembly. Screws need no order because stock already covers the requirement.
MRP vs. MRP II vs. ERP
The three terms describe systems of increasing scope, each building on the one before it.
| MRP | MRP II | ERP | |
|---|---|---|---|
| Plans | Materials | Materials, machine capacity, and labor | Every business function |
| Main Question | What to buy or make, and when | Can we build it with our resources? | How is the whole business performing? |
| Covers | Purchasing and production | Manufacturing operations and cost | Finance, sales, inventory, manufacturing, CRM |
| Used By | Planners and buyers | Operations and plant management | Every department |
Benefits of MRP
Fewer Shortages
Materials are ordered in time for each production run, so work orders don't stall waiting for parts.
Lower Inventory
Buying only the net requirement reduces excess stock and the cash tied up in it.
On-Time Delivery
Production dates are based on real lead times, so promised ship dates are easier to meet.
Better Purchasing
Buyers see future requirements early and can consolidate orders with procurement.
Common MRP Mistakes to Avoid
MRP is only as accurate as the data it runs on. Most planning problems trace back to one of these:
Inaccurate BOMs
Missing components or wrong quantities produce the wrong order for every run.
Wrong Inventory Counts
If recorded stock doesn't match the shelf, MRP either over-orders or misses a shortage.
Outdated Lead Times
Supplier lead times change. Old values release orders too late or too early.
Ignoring Capacity
MRP assumes the plant can build whatever is planned. Check the shop floor schedule before releasing orders.
Which Industries Use MRP?
Any business that builds, blends, or assembles products from purchased materials benefits from MRP. The most common are:
Manufacturing
Discrete products with multi-level BOMs and many purchased components.
Food Services
Ingredient planning for recipes and batches, often with lot tracking.
Health & Beauty
Formulation ingredients and packaging with long supplier lead times.
Apparel
Fabric and trim requirements by style, size, and color.
Furniture & Home Decor
Wood, hardware, and finishes planned for each production run.
Distribution
Kit components and replenishment planned from customer demand.
MRP in Kechie ERP
,Kechie Manufacturing runs MRP from live sales orders, multi-level bills of materials, and inventory in one system. Planned orders convert directly into purchase orders and work orders, and material costs flow into accounting. Because every module shares the same data, requirements update as orders, receipts, and production change.
Frequently Asked Questions
What does MRP stand for?
MRP stands for material requirements planning. In some contexts it also refers to manufacturing resource planning (MRP II), a broader system that adds capacity, labor, and financial planning.
What is MRP in simple terms?
MRP works out which materials you need to buy or make, how many, and when, so production can start on time without carrying extra stock.
What are the three main inputs to MRP?
Demand (from sales orders, forecasts, or a master production schedule), the bill of materials, and current inventory records, including open purchase and work orders.
What is the difference between gross and net requirements?
Gross requirements are the total quantity of a material needed to meet demand. Net requirements are what remains after subtracting inventory on hand and scheduled receipts.
What is the difference between MRP and MRP II?
MRP plans materials only. MRP II adds machine and labor capacity, shop floor control, and financial planning to the same process.
What is the difference between MRP and ERP?
MRP is one planning function inside manufacturing. ERP connects MRP with accounting, sales, purchasing, inventory, and CRM in a single system.
How often should MRP run?
Most businesses run MRP daily or weekly. It should also run whenever demand, inventory, or lead times change significantly.
Can small manufacturers do MRP in spreadsheets?
For a handful of products, yes, but spreadsheets become hard to keep accurate as BOMs, suppliers, and orders grow. ERP software recalculates requirements automatically from live data.
Related Guides
See MRP in Kechie ERP
Plan materials from live orders, release purchase and work orders, and track production in one cloud platform.