What is material requirements planning?
MRP tells a plant which parts to buy or build, how many are needed, and by what date, so every job starts with the right stock on hand.
Manufacturers often hold the right part at the wrong moment, either sitting idle in a bin or missing when the line calls for it. MRP closes that timing gap by working backward from a master production schedule (MPS), the plan for what to make and when.
From there it reads the bill of materials (BOM) for each product, checks current inventory, and decides what to order and what to build. Reliable bill of materials software keeps that parts list correct, which is where the plan gets its numbers.
Keeping materials available also protects revenue. Siemens’ True Cost of Downtime 2024 reports that the world’s 500 largest companies lose an estimated $1.4 trillion a year to unplanned downtime, equal to 11% of their revenues. Steady material flow is one safeguard against stoppages, though MRP by itself will not prevent every loss.
Key characteristics
- Three core inputs: MRP runs on the master production schedule (MPS), the bill of materials (BOM), and on-hand inventory, plus lead times and demand forecasts.
- Three main outputs: It produces purchase orders (POs), work orders (WOs) or manufacture orders (MOs), and updated schedules, including automatic purchase orders for items running short.
- Time-phased planning: It schedules each order around its lead time, so materials arrive just before they are needed instead of stacking up early.
- Accuracy-dependent: Outputs are only as reliable as the inventory counts and BOM records behind them, so weak data produces weak plans.
- A 1964 origin: MRP’s origins in 1964 trace to Joseph Orlicky, who formalized the principles that year, with Black & Decker the first company to deploy the system.
Example
Picture a craft furniture maker with an order for 50 oak tables. MRP reads the BOM (tabletops, legs, screws, and finish) and checks what is already in stock.
For anything short, it generates purchase orders to the right suppliers. It then creates manufacture orders so the shop can build the tables once parts land.
The stakes show up beyond the shop floor. Per IHL Group inventory research, the global retail industry loses about $1.73 trillion a year to inventory distortion, the combined cost of out-of-stocks and overstocks.
Related terms
- MRP software for manufacturers: systems that run material planning.
- materials management: sourcing, storing, and moving inventory.
- MRP capabilities without an ERP: Fishbowl planning tools for growing shops.
FAQ
Is MRP the same as ERP? No. MRP focuses on materials and production, while enterprise resource planning (ERP) runs the whole business, from finance to human resources.
What is the difference between MRP and MRP II? MRP plans materials, while manufacturing resource planning (MRP II) adds capacity, labor, and financial planning.
Who uses MRP? Mostly product-based manufacturers and their planners, buyers, and production teams.