What Is Material Requirements Planning (MRP)?
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Talk to our experts- Material requirements planning (MRP)
- Material requirements planning (MRP) is a computerized planning tool used in production that works out which raw materials and components a manufacturer needs, how many and when they must be sourced. It starts from a master production schedule, explodes it through the bill of materials, subtracts available stock and offsets for lead time.
Also called: MRP
How it works
This page follows the Chartered Institute of Procurement and Supply (CIPS), a professional body, and labels general practice where it goes further.
An MRP run draws on three inputs:
- Master production schedule: a statement of what finished products need to be made and when. It drives the whole system and is based on forecasts, customer orders, production capacity and the priority of work.
- Bill of materials (BOM): all the raw materials and components required to make the finished product.
- Inventory status file: the record of what is in stock, which lets gross requirements be adjusted to net requirements.
The system then works in three steps and schedules and tracks the resulting orders, for production or for suppliers.
How an MRP run turns a schedule into orders
A statement of what finished products need to be made and when, based on forecasts, customer orders and capacity.
The bill of materials gives how many components are needed to make each finished item.
Stock available is subtracted from the gross requirement to give the net quantity of material needed.
Lead time sets when work must begin so items are available on the promised date.
The system generates requisitions for procurement and schedules production orders.
Example
Illustrative numbers only. A manufacturer's master production schedule calls for 200 pump assemblies in week 6. Each pump needs 1 impeller and 8 bolts.
- Explode: 200 x 1 = 200 impellers and 200 x 8 = 1,600 bolts.
- Net: 50 impellers are on hand and 100 more are already on order, due in week 3 (a scheduled receipt). What on-hand stock and scheduled receipts cannot cover is the net requirement: 200 - 50 - 100 = 50 impellers to order. With 400 bolts on hand and none on order: 1,600 - 400 = 1,200 bolts.
- Offset: impellers take 3 weeks to arrive, so the order goes out in week 6 - 3 = week 3. Bolts take 1 week, so they are ordered in week 5.
Common problems
CIPS names the weak points:
- Change means a re-run. There are many variables in production, so even a slight change to the bill of materials means the whole MRP run has to be repeated.
- Bad inputs, bad plan. MRP depends heavily on accurate input data. Any error causes problems with quantities and scheduling.
- Forecast dependence. MRP is demand driven, which can cause problems for a business that does not plan from a demand forecast.
MRP vs. ERP
MRP is a planning tool for production. Manufacturing resource planning (MRP II) is a method for planning all the resources of a manufacturing company, an extension of closed-loop MRP, with MRP as one of its basic modules. Gartner defines enterprise resource planning (ERP) as the ability to deliver an integrated suite of business applications that share a common process and data model across processes like those in finance, HR, distribution, manufacturing, service and the supply chain. The term ERP succeeded MRP and came into use when vendors extended their suites beyond manufacturing.
On Shopify
Shopify records inventory by state at each location. On hand inventory at a location is the sum of committed, unavailable and available units. Incoming inventory is on its way to a location from transfers, purchase orders or apps, and isn't available to sell until it's received.
Purchase orders in the Shopify admin record what you agree with suppliers: products, quantities, costs, payment terms and supplier details. Once a purchase order is marked as Ordered, you create an inventory transfer for it to track the shipment and receive the stock.
As general practice, the MRP run itself happens in the ERP or manufacturing system, and an integration passes the resulting availability to the storefront.
How Uncap helps
Uncap's Epicor Kinetic integration page shows where MRP meets the storefront. A buyer orders three of a part, and between the page load and the checkout, MRP allocated two of them to a job. Under a reasonable design, the checkout revalidates against the same Business Activity Query (BAQ) that produced the browse number, and the buyer is told immediately, with a date rather than a silence.
Sources
Frequently asked questions
What three inputs do you need to maintain the materials requirements plan?
A master production schedule (what finished products to make and when), a bill of materials (the components each one needs) and an inventory status file (what is already in stock).
What is the main difference between MRP and ERP?
MRP plans which materials production needs and when to source them. ERP delivers an integrated suite of business applications that share a common process and data model across finance, HR, distribution, manufacturing, service and the supply chain. The term ERP succeeded MRP as vendors extended their suites beyond manufacturing.
What is the role of MRP in supply chain management?
It tells purchasing what materials are needed and when to source them, and generates requisitions to act on, while keeping inventory low.
