Material requirements planning (MRP) answers three questions every manufacturer faces daily: what materials do we need, how much, and when? Done by hand, the answers come from spreadsheets, experience and frequent surprises. Done by MRP, they come from a systematic calculation using orders, BOMs, stock and lead times. This guide explains how MRP works in plain language.
The inputs to MRP
- Demand — customer orders and forecasts for finished products, with due dates.
- Bills of materials — what goes into each product, at each level.
- Inventory — current stock of every item, plus stock reserved or on hold.
- Open orders — purchase orders not yet received and work orders in progress.
- Lead times — how long it takes to buy or make each item.
- Planning rules — minimum order quantities, pack sizes, safety stock.
Step 1: BOM explosion
MRP starts with finished product demand and explodes it through the BOM. If you need 100 assemblies, each needing 2 sub-assemblies and each sub-assembly needing 4 brackets, then you need 200 sub-assemblies and 800 brackets. Multi-level BOMs are exploded level by level.
Step 2: Netting
Gross requirements are reduced by what's already available: stock on hand and open orders arriving in time. If you need 800 brackets, have 300 in stock and 200 on an open purchase order arriving next week, the net requirement is 300.
Step 3: Lead-time offsetting
MRP works backwards from the due date. If the assembly must ship on day 30, assembly takes 3 days, the sub-assembly takes 5 days and brackets take 10 days to buy, then brackets must be ordered by day 12 (30 − 3 − 5 − 10). This timing is what makes MRP far more useful than a simple shortage list.
Step 4: Lot sizing
Net requirements are adjusted to practical order quantities: minimum order quantities, pack sizes, economic batch sizes or fixed periods (order weekly requirements together).
Step 5: Planned orders
The output is a list of planned purchase orders (what to buy, from whom, how much, by when) and planned work orders (what to make, how much, by when). Planners review and release them. MRP also produces exception messages: expedite this order, delay that one, cancel another.
Pegging: why is this needed?
Pegging shows which customer order drives each requirement. When a supplier is late, pegging tells you which customer orders are at risk — essential for prioritising and communicating.
What MRP doesn't do
Classic MRP assumes unlimited capacity: it plans materials but doesn't check whether machines and people can make everything on time. That's the role of capacity planning and scheduling, which use MRP's planned work orders as input. See production scheduling.
Data accuracy: the make-or-break factor
MRP is only as good as its data. Wrong BOMs mean wrong materials; inaccurate stock means wrong quantities; outdated lead times mean wrong dates. Before implementing MRP, invest in BOM accuracy, stock accuracy (cycle counting), and realistic lead times. Many MRP failures are really data failures. See BOM best practices.
Common pitfalls
- Inaccurate BOMs, especially missing scrap factors or alternates.
- Stock records not updated in real time.
- Lead times set once and never reviewed.
- Planners ignoring MRP and ordering by habit.
- Too many exception messages, so important ones are missed.
MRP for small manufacturers
You don't need a large ERP to benefit from MRP. A focused system with accurate BOMs, live stock and supplier lead times can run MRP for a small factory and produce a daily list of what to buy and make. Start with your most important products and materials, check results against your planner's judgement, and expand as confidence grows.
MRP and reorder levels together
Materials with dependent demand (components in a BOM) suit MRP. Consumables, spares and items with independent steady demand suit reorder levels. Most factories use both. See reorder levels.
Getting started
- Clean BOMs for top products.
- Count stock accurately and keep it updated.
- Record supplier lead times and MOQs.
- Run MRP in parallel with current planning for a few weeks.
- Release planned orders from MRP; review exceptions daily.
Corposol builds MRP software for small and mid-sized manufacturers. Talk to us.
A simple worked example
A manufacturer receives an order for 200 pumps due in four weeks. Each pump needs one motor (lead time two weeks), one casing (made in-house in one week from a casting with a three-week lead time) and one impeller (bought, one week). Stock shows 50 motors, 20 casings, no castings and 300 impellers. MRP calculates: motors — need 150 more, order by week two; casings — need 180, start production by week three; castings — need 180, order immediately as the three-week lead time leaves no slack; impellers — enough in stock. The planner instantly sees that castings are the critical path and can expedite the supplier.
Frequently asked questions
Is MRP the same as ERP?
No. MRP is the material-planning function — what to buy and make, and when. ERP is a broader system that usually includes MRP alongside sales, purchase, finance and more.
Do we need accurate BOMs for MRP?
Yes. MRP is only as good as its BOMs, stock records and lead times. Cleaning these is the main preparation work.
How often should MRP run?
Daily or whenever significant orders or changes arrive. With software it takes seconds.
Can MRP handle make-to-order and make-to-stock together?
Yes. Customer orders and stock replenishment both create demand, and MRP plans materials for both.
What if suppliers have minimum order quantities?
MRP can round planned purchases up to MOQs and pack sizes, and show the resulting extra stock.
Can MRP suggest which supplier to order from?
Yes. Each item can have a preferred supplier with lead time and minimum order quantity, so planned purchase orders are created for the right supplier automatically.
