Material Requirements Planning

Material Requirements Planning (MRP) is a ‘time-phasing’ production software program that determines the gross and net requirements of purchased materials and shop floor orders.

The program can be manual or computerized. However, today, it is the latter method that is used more often since the number of finished goods, raw materials and production processes has become more complex.

Prerequisites of MRP

There are some fundamental conditions that must be in place to successfully operate an MRP system. Some of these conditions include,

  • A Master Production Schedule exists (this could simply be a sales order backlog)
  • Bill of Materials created for all finished goods
  • Inventory items are uniquely identified
  • Current and accurate inventory records exist for all parts
  • Purchase and production part lead times are known and input for each item

Benefits of MRP

An MRP system provides a method for determining what raw materials and production processes are needed and when they need to be available to produce the company’s finished goods.

This allows the company to determine when finished product will be available so that customer sales orders can be confirmed with realistic ship dates.

The Bottom Line. Material Requirements Planning is a method to determine the need of purchased materials and production / shop floor orders over discrete periods of time. MRP systems can be manual or computerized. One of the most important benefits, derived from using an MRP, is the ability to provide customers with realistic ship dates for sales orders.

Related Topics

Business Analytics. Today, more than ever, successful companies are using many pieces of information to make decisions that affect their businesses. This information can help a company with growth, cost and profitability. For more on this topic, please follow this link. Enterprise Analytics

Organizational Structure and Performance. Top performing organizations require structure, culture and resources to produce high performance. Departments designed around four areas achieve high performance levels. For more on this topic, please follow this link, Organizational Structure and Peformance.

Inventory Management.  “Can You Avoid the ‘Deadly Sins’ of Inventory Management?” The purchase and storage of raw materials typically represents the single largest investment for a manufacturing company. To learn more, please follow this link.

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