Material Requirements Planning
Material Requirements Planning
Material Requirements Planning
KEY TAKEAWAYS
1. What is needed?
2. How much is needed?
3. When is it needed?
MRP works backward from a production plan for finished goods, which is
converted into a list of requirements for the subassemblies, component parts,
and raw materials needed to produce the final product within the established
schedule.
In other words, it's basically a system for trying to figure out the materials and
items needed to manufacture a given product. MRP helps manufacturers get a
grasp of inventory requirements while balancing both supply and demand.
By parsing raw data—like bills of lading and shelf life of stored materials—this
technology provides meaningful information to managers about their need for
labor and supplies, which can help companies improve their production
efficiency.
The first MRP systems of inventory management evolved in the 1940s and
1950s. They used mainframe computers to extrapolate information from a bill of
materials for a specific finished product into a production and purchasing plan.
Soon, MRP systems expanded to include information feedback loops so that
production managers could change and update the system inputs as needed.
The next generation of MRP, manufacturing resources planning (MRP II), also
incorporated marketing, finance, accounting, engineering, and human resources
aspects into the planning process. A related concept that expands on MRP
is enterprise resources planning (ERP), which uses computer technology to link
the various functional areas across an entire business enterprise. As data
analysis and technology became more sophisticated, more comprehensive
systems were developed to integrate MRP with other aspects of the
manufacturing process.
MRP FAQs
What Is MRP?
Material requirements planning (MRP) is a system that helps manufacturers plan,
schedule, and manage their inventory during the manufacturing process. It is
primarily a software-based system.
1. Make sure raw materials are available for production when required
2. Maintain the lowest possible material and component levels
3. Plan and schedule manufacturing activities
Ensures that materials and components are available when they're needed
Inventory levels are optimized and associated costs are minimized
Manufacturing efficiency is improved significantly
Customer satisfaction is increased due to reduced lead times
The MPS is simply the quantity and timing of all end goods to be produced over a
specific time period. MPS is estimated through customer orders and demand
forecasts.