Material Requirement Planning (MRP)
What is a materials requirement planning (MRP) system?
A Material Requirements Planning (MRP) system is a planning and decision-making tool used in the production process. The tool enables you to analyse current inventory levels vs production capacity and the need to manufacture goods, based on forecasts. MRP schedules production as per bills of materials, all whilst minimising inventory. The technique is computerised and looks at requirements within a fixed period.
What are the main features of an MRP system?
An MRP system has several handy features to help you with your planning. Here are just a few listed below:
- A master production schedule: 
A statement of what final products need to be made and when. This drives the entire MRP system. It’s based on forecasts, customer orders, production capacity and prioritisation of work. - Bill of materials (BOM): 
All the raw materials and components required to make the final product.
- Inventory status file:
This keeps a record of what is in stock and allows the gross requirements to be adjusted to net requirements. The idea is to avoid excess stocks, if possible, but if inventories do come into existence, the system will ensure that they are used in the right sequence.
How does an MRP system work?
If you’re thinking of implementing an MRP system into your organisation, it’s key to get to grips with how it works before it’s in place.
- Step 1 - Exploding:
Achieved by using the Bill of Materials (BOM), i.e., how many components are needed to prepare one item of manufacturing. - Step 2 - Netting:
The net quantity of material calculated through the difference between the stock available in the factory from the overall gross requirement. This figure is provided by exploding. - Step 3 - Offsetting:
The lead time is estimated for the entire operation which helps practitioners to compute the expected time for manufacturing. It also advises when the manufacturing process should begin so that items are available on the promised date.
What are the advantages of an MRP system?
A Material Requirements Planning (MRP) system helps organisations to stay on top of their scheduling, planning, and inventory. It’s a useful tool in helping to balance the load across various departments.
What are the disadvantages of an MRP system?
Like all systems, an MRP system does have its challenges.
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