1) What is MRP?
MRP stands for Material Requirements Planning.
It is a system used to decide:
- what materials are needed
- how much material is needed
- when the material is needed
In simple words:
MRP helps a company make sure the right materials are available at the right time for production.
2) Very simple meaning
Suppose a factory wants to make 100 tables.
To make 100 tables, it needs:
- wood
- screws
- glue
- polish
- packing material
Now the factory must know:
- how much wood is required
- how many screws are required
- when to order these items
- whether some stock is already available
The system that answers these questions is MRP.
So MRP is basically a planning system for materials.
3) Why MRP is needed
Production cannot happen unless materials are available.
If material planning is poor:
- production may stop
- machines may remain idle
- workers may wait
- orders may be delayed
- emergency purchasing may increase cost
- too much inventory may pile up
MRP is used to avoid these problems.
It helps in:
- timely availability of materials
- better production planning
- lower inventory levels
- smoother workflow
- fewer shortages
- fewer delays
- better coordination between production, purchase, and stores
4) Main objective of MRP
The main objective of MRP is:
to ensure that materials are available for production when needed, while avoiding unnecessary excess inventory
This is the heart of the topic.
So MRP tries to balance two things:
- no shortage
- no excess stock
5) What kind of questions does MRP answer?
MRP mainly answers three questions:
- What is needed?
- How much is needed?
- When is it needed?
These three questions are enough to understand the full purpose of MRP.
6) Easy real-life example
Imagine a bakery wants to produce 1,000 cake boxes for a festival week.
For that, it needs:
- flour
- sugar
- eggs
- butter
- boxes
Now the bakery must know:
- total quantity of each ingredient needed
- what quantity is already in stock
- what quantity must be purchased
- when the items must arrive
If this is not planned properly:
- ingredients may run out mid-production
- extra stock may be wasted
- deliveries may be delayed
So the bakery needs a material planning system.
That is the role of MRP.
7) Basic idea behind MRP
MRP starts from the finished product requirement and then works backward to calculate the materials and components needed.
This is called dependent demand thinking.
8) What is dependent demand?
This is very important.
Some demand is independent.
Some demand is dependent.
Independent demand
This is demand for the final product.
Example:
Customer demand for 500 bicycles.
Dependent demand
This is demand for parts or materials that depends on the final product.
If 1 bicycle needs:
- 2 wheels
- 1 frame
- 1 handle
Then for 500 bicycles, the company needs:
- 1,000 wheels
- 500 frames
- 500 handles
So the demand for wheels and frames depends on bicycle demand.
MRP mainly deals with dependent demand.
9) Inputs of MRP
MRP works using certain important inputs.
The main inputs are:
- Master Production Schedule
- Bill of Materials
- Inventory Records
These are the core components of MRP I. Product packaging plan is not an input component, while Master Production Schedule, Bill of Materials, and Inventory Records are.
Let us understand each one.
10) Master Production Schedule (MPS)
The Master Production Schedule shows:
- what final products must be produced
- how many must be produced
- when they must be produced
Example:
Week 1: 200 chairs
Week 2: 300 chairs
Week 3: 250 chairs
This schedule gives the starting point for MRP.
Simple understanding:
MPS tells MRP what finished goods the company plans to make.
11) Bill of Materials (BOM)
The Bill of Materials is a complete list of all parts, materials, and components needed to make one finished product.
Example:
To make 1 study table, BOM may include:
- 10 kg wood
- 20 screws
- 1 bottle glue
- 1 polish pack
So if the factory wants to make 100 tables, MRP uses the BOM to calculate the total requirement.
Simple understanding:
BOM tells MRP what goes inside the final product.
12) Inventory Records
Inventory records show:
- how much stock is already available
- how much is on order
- what quantity is reserved
- what quantity is actually free to use
Example:
If the company needs 500 handles but already has 200 in stock, then it only needs to arrange 300 more.
Simple understanding:
Inventory records tell MRP what is already available.
13) How MRP works
Now let us understand the working step by step.
Step 1: Start with the production schedule
The company first decides how many finished products must be produced.
Step 2: Use the BOM
The system checks what materials and components are needed for those finished products.
Step 3: Check current stock
The system sees how much material is already available in inventory.
Step 4: Calculate net requirement
It subtracts available stock from total requirement.
Step 5: Decide when to order or produce components
The system considers lead time and plans purchase orders or work orders.
So MRP basically converts product demand into material plans.
14) Output of MRP
The main outputs of MRP include:
- purchase orders
- work orders
- rescheduling notices
The question bank specifically identifies purchase orders and work orders as output components of MRP I.
Let us understand these.
A) Purchase orders
These are orders for buying materials from suppliers.
Example:
Buy 1,000 screws from supplier by next Monday.
B) Work orders
These are instructions to produce components internally.
Example:
Produce 500 metal brackets in machine shop.
C) Rescheduling notices
These are suggestions to change existing order timing if demand changes.
Example:
- advance order
- delay order
- cancel order
- increase or reduce quantity
15) Easy example of MRP calculation
Suppose a company plans to make 100 bicycles.
Each bicycle needs:
- 2 wheels
- 1 frame
- 1 seat
So total gross requirement is:
- wheels = 200
- frames = 100
- seats = 100
Now suppose current stock is:
- wheels = 40
- frames = 20
- seats = 10
Then net requirement becomes:
- wheels = 160
- frames = 80
- seats = 90
If lead time is:
- wheels = 5 days
- frames = 7 days
- seats = 3 days
Then MRP tells the company when to place the orders so materials arrive before production starts.
This is the essence of MRP.
16) Gross requirement and net requirement
These two terms are very important.
Gross requirement
Total material needed for planned production.
Net requirement
Actual material needed after adjusting current stock and scheduled receipts.
Formula in simple words:
Net requirement = Gross requirement – Available stock – Already ordered stock (if applicable)
So MRP is not just about total need.
It is about actual additional need.
17) Lead time in MRP
Lead time means the time gap between:
- ordering a material or starting a component
and - receiving it or completing it
Lead time is very important in MRP because materials must arrive before production requires them.
If lead time is ignored:
- the order may arrive late
- production may stop
- schedule may fail
So MRP uses lead time to decide when to release orders.
18) MRP I and MRP II
Students often confuse these.
MRP I
MRP I mainly focuses on material planning.
It asks:
- what materials are needed
- how much is needed
- when it is needed
MRP II
MRP II means Manufacturing Resource Planning.
It is wider than MRP I.
It integrates production planning with other business information systems for better decision-making.
So:
- MRP I = materials
- MRP II = materials + broader manufacturing resources and planning integration
19) Advantages of MRP
MRP provides many benefits.
A) Better material availability
Materials are planned in advance, so shortages reduce.
B) Lower inventory
The company avoids keeping too much stock.
C) Better production planning
Production becomes smoother because material timing is coordinated.
D) Better purchase planning
The purchase department gets clear guidance on what to buy and when.
E) Better coordination
MRP connects production, purchase, stores, and inventory.
F) Lower cost
It reduces:
- stock carrying cost
- emergency purchase cost
- idle machine cost
- delay cost
20) Limitations of MRP
MRP is useful, but not perfect.
A) Depends on accurate data
If the BOM is wrong or stock records are wrong, MRP gives wrong results.
B) Depends on correct schedule
If the Master Production Schedule changes often, MRP becomes unstable.
C) Lead time assumptions may fail
If suppliers delay unexpectedly, the plan may collapse.
D) Needs proper coordination
MRP works only if departments share accurate and timely information.
E) Not enough by itself
MRP focuses on materials, but production success also depends on labor, machines, maintenance, and quality.
So MRP is powerful, but it needs discipline and accurate data.
21) Conditions required for successful MRP
For MRP to work properly, the company needs:
- accurate Master Production Schedule
- correct Bill of Materials
- updated inventory records
- proper lead time data
- disciplined record keeping
- coordination between departments
- stable planning system
If these are missing, MRP results become weak.
22) MRP and purchasing
MRP helps purchasing by clearly telling:
- what to buy
- how much to buy
- when to buy
So the purchase department does not depend only on guesswork.
Instead, it receives planned purchase signals from MRP.
This improves:
- supplier coordination
- order timing
- stock control
23) MRP and inventory control
MRP is closely related to inventory control.
It helps avoid:
- overstocking
- understocking
- random buying
- unnecessary storage cost
So MRP supports better inventory management by planning based on actual production needs.
24) MRP and production control
MRP also supports production control because it ensures materials are ready according to the production plan.
Without proper material planning:
- schedules fail
- machines remain idle
- delivery dates are missed
So MRP is an important support system for smooth production.
25) Difference between MRP and ordinary purchasing
Ordinary purchasing may sometimes be reactive.
That means materials are bought only when shortage is noticed.
MRP is more systematic.
It plans material requirement in advance based on production schedule.
So:
- ordinary buying = reactive
- MRP = planned and proactive
26) Common terms used in MRP
Here are some quick terms to remember:
- MPS = Master Production Schedule
- BOM = Bill of Materials
- Inventory Records = current stock information
- Gross Requirement = total need
- Net Requirement = actual additional need
- Lead Time = time needed to obtain material
- Work Order = internal production instruction
- Purchase Order = external buying instruction
27) Practical example with furniture factory
Suppose a furniture factory receives an order for 200 desks.
Each desk requires:
- 15 kg wood
- 30 screws
- 1 polish pack
MRP will:
- calculate total material needed
- subtract available stock
- check when the desks must be produced
- consider supplier lead times
- generate purchase orders for missing materials
- generate internal work orders if needed
That is why MRP is so useful in manufacturing.
28) Why MRP is especially useful in manufacturing
MRP is especially helpful where:
- products have many components
- production is planned in advance
- inventory must be controlled carefully
- demand for parts depends on final product demand
Examples:
- automobile manufacturing
- furniture manufacturing
- electronics assembly
- machinery production
In such businesses, material planning is too complex to do casually.
29) Simple exam-style answer
Material Requirements Planning (MRP) is a system used to determine what materials are needed, how much is needed, and when they are needed for production. It mainly deals with dependent demand and helps ensure timely material availability while reducing excess inventory. The main inputs of MRP are the Master Production Schedule, Bill of Materials, and Inventory Records. The main outputs include purchase orders, work orders, and rescheduling notices. MRP helps improve production planning, inventory control, and purchasing efficiency, but it depends on accurate data and proper coordination.
30) Very easy memory version
Remember this line:
MRP means planning materials in advance so production gets the right material at the right time.
Remember these three core inputs:
- MPS
- BOM
- Inventory Records
Remember the two main outputs:
- Purchase Orders
- Work Orders
31) Final easy example
Suppose a company wants to make 500 chairs next month.
MRP will help it decide:
- how much wood is needed
- how many nails are needed
- how much stock is already available
- what must be purchased
- when purchase orders should be placed
That full planning system is Material Requirements Planning.
