What is MRP?

MRP stands for Material Requirements Planning. It is a computer-based inventory management system that helps organizations plan and manage their production and inventory of materials and components. MRP is commonly used in manufacturing and production industries to ensure that materials are available when needed for the production process while minimizing excess inventory and associated carrying costs.

Here are the key components and functions of MRP:

  1. Bill of Materials (BOM): MRP starts with a BOM, which is a list of all the materials, components, and sub-assemblies required to manufacture a finished product. Each item in the BOM is associated with a part number and quantity.
  2. Master Production Schedule (MPS): The MPS is a plan that specifies the production quantities and schedules for finished products over a certain time horizon. It serves as a key input to MRP.
  3. Inventory Data: MRP relies on information about existing inventory levels, lead times for materials, and order quantities.
  4. Demand Forecast: MRP takes into account the expected demand for finished products based on forecasts or actual customer orders.
  5. Calculations: MRP software uses the BOM, MPS, inventory data, and demand forecast to calculate the required quantities of materials and components needed to meet production schedules. It determines when to place orders for materials to ensure they arrive just in time for production.
  6. Order Generation: MRP generates purchase orders or production orders for the required materials and components based on the calculations.
  7. Tracking and Monitoring: MRP systems continually track the status of orders, monitor inventory levels, and adjust production and procurement plans as needed to account for changes in demand, lead times, or unexpected events.

The primary goals of MRP are to optimize inventory levels, reduce carrying costs, minimize stockouts, and ensure that materials are available to meet production demands efficiently. MRP systems have evolved over time and are often integrated with other enterprise resource planning (ERP) software to provide a comprehensive view of an organization’s supply chain and production processes.

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