What is Material Requirements Planning (MRP) and How Does It Work?

What is Material Requirements Planning?

Material Requirements Planning (MRP) is a production planning system used to calculate what materials are required, how much is needed, and when they should be available to meet the production schedule.

It helps manufacturers coordinate purchasing, inventory, and production activities.

In simple terms

A factory receives an order for 200 electrical relays.

Before starting production, the planning team must know:

• What components are required?
• What quantities are needed?
• What materials are already available?
• What needs to be purchased?
• When should the materials arrive?

MRP helps answer these questions systematically.

Simple Manufacturing Example

A factory manufactures 200 relays.

Each relay requires:

• 1 coil
• 1 armature
• 1 contact set
• 2 terminal pins

Total requirements:

Component| Required Quantity
Coil| 200
Armature| 200
Contact set| 200
Terminal pins| 400

Suppose the factory already has:

• 50 coils
• 100 armatures
• 80 contact sets
• 150 terminal pins

The additional net requirements are:

• Coils: 150
• Armatures: 100
• Contact sets: 120
• Terminal pins: 250

MRP uses this information, along with lead times and production dates, to plan replenishment.

Three Important Inputs of MRP

• Master Production Schedule (MPS) – What products must be manufactured and when?
• Bill of Materials (BOM) – What components are required for each product?
• Inventory Records – What materials are already available or expected to arrive?

How MRP Works

1️⃣ Receive customer demand or production requirements.

2️⃣ Check the Master Production Schedule.

3️⃣ Explode the BOM to calculate component requirements.

4️⃣ Check available inventory and scheduled receipts.

5️⃣ Calculate net material requirements.

6️⃣ Consider supplier and manufacturing lead times.

7️⃣ Generate planned purchase orders and production orders.

Important Insight

MRP does not automatically guarantee that production can be completed on time.

It mainly plans material requirements. Machine capacity, manpower availability, supplier reliability, and actual production constraints must also be considered.

Benefits

• Better material availability
• Reduced unnecessary inventory
• Fewer material shortages
• Improved purchasing coordination
• More organized production planning
• Better delivery performance

Practical Insight

A factory may have a confirmed customer order, available machines, and sufficient manpower but production can still stop because one small component is missing.

MRP helps ensure that every required component is planned in the right quantity and at the right time.