What Is MRP? Material Requirements Planning Explained

What Is MRP?

MRP (Material Requirements Planning) is a manufacturing planning system that helps answer four critical questions:

What materials do we need?
How much do we need?
When do we need them?
What do we need to buy or build to keep production on schedule?

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MRP uses information such as customer demand, forecasts, bills of material (BOMs), current inventory, open purchase orders, production orders, and lead times to calculate future material requirements.

The result is a time-phased plan that helps manufacturers purchase and produce what they need, when they need it, without relying on spreadsheets, guesswork, or last-minute expediting.

What Does MRP Stand For?

MRP stands for Material Requirements Planning.

You may also see the original form referred to as MRP I or "MRP One," particularly when it is being compared with MRP II (Manufacturing Resource Planning). Today, however, the term MRP almost always refers to Material Requirements Planning.

At its core, MRP connects demand with inventory, purchasing, and production.

Instead of asking, "What should we order?" MRP asks a much more useful question:

Based on what we need to produce, what are we actually going to be short of, how much will we need, and when will we need it?

How Does MRP Work?

MRP starts with demand for finished products and works backward through the manufacturing process.

A typical MRP calculation considers:

Demand from customer orders, forecasts, or planned production
Bills of material (BOMs) that define the components and quantities required to build each product
Inventory on hand that is already available
Open purchase orders for material already on the way
Open production orders for items already being manufactured
Lead times for purchasing and production
Safety stock or minimum inventory requirements
Required completion and delivery dates

MRP then calculates the net requirements for components and subassemblies and determines when purchasing or production activity needs to begin.

In practical terms, MRP tells you:

What to buy. What to build. How much. And when.

MRP vs. Inventory Control

Inventory control and MRP solve different problems.

Inventory control tells you what you have.

MRP tells you what you are going to need.

A traditional inventory system can alert you when the quantity of an item falls below a reorder point. MRP goes further by looking at future demand and determining whether the inventory you have, plus material already on order or in production, will be enough to meet that demand.

That allows manufacturers to identify shortages before they interrupt production.

The goal is not necessarily to carry no inventory. The goal is to carry the right inventory at the right time, reducing unnecessary stock while maintaining enough material to meet production requirements and protect against appropriate supply-chain risk.

What Is a Master Production Schedule (MPS)?

A Master Production Schedule (MPS) defines what a manufacturer plans to produce and when.

The MPS and MRP are closely related, but they are not the same thing.

The Master Production Schedule establishes the production plan. MRP uses that plan, along with BOMs, inventory, existing supply, lead times, and other planning data, to calculate the materials and subassemblies required to support it.

A simple way to think about the relationship is:

MPS determines what needs to be produced.
MRP determines what must be purchased or built to make it happen.

Modern manufacturing software often presents these functions together, which is why the terms MPS and MRP are sometimes used interchangeably in everyday conversation.

What Is MRP II?

MRP II (Manufacturing Resource Planning) expanded the original concept of Material Requirements Planning beyond materials.

Where traditional MRP focuses primarily on what materials need to be purchased or produced and when, MRP II incorporates additional manufacturing resources such as:

Production capacity
Work centers
Labor
Machinery
Production scheduling
Shop floor activity
Cost and financial information

MRP II became an important step in the evolution of manufacturing software and eventually helped lead to the development of modern ERP (Enterprise Resource Planning) systems.

Today, many capabilities once associated specifically with MRP II are simply standard features of manufacturing software and manufacturing ERP systems.

MRP vs. MRP II vs. ERP

The terms are related, but they describe different scopes of planning.

MRP: Material Requirements Planning
Focuses on materials and production requirements. It determines what needs to be purchased or manufactured, in what quantity, and when.

MRP II: Manufacturing Resource Planning
Expands MRP to include broader manufacturing resources such as capacity, labor, work centers, scheduling, and financial planning.

ERP: Enterprise Resource Planning
Expands beyond manufacturing to connect functions across the entire business, which may include accounting, finance, sales, CRM, human resources, purchasing, manufacturing, and supply chain management.

For many small and mid-sized manufacturers, the real question is not whether a system fits perfectly into one of these historical categories.

The better question is:

Does the software provide the manufacturing planning, inventory, purchasing, production, and capacity tools we actually need?

What Are the Benefits of MRP?

Effective Material Requirements Planning can help manufacturers:

Identify material shortages before they affect production
Reduce excess inventory and unnecessary purchasing
Improve purchasing decisions
Coordinate purchasing with actual production demand
Plan component and subassembly production
Account for supplier and production lead times
Improve production scheduling
Reduce last-minute expediting
Improve on-time delivery
Make better use of working capital
Respond more quickly when demand or production plans change

Instead of purchasing based primarily on historical usage or instinct, manufacturers can make purchasing and production decisions based on actual and anticipated requirements.

How MISys Manufacturing Handles MRP

MISys Manufacturing provides Material Requirements Planning specifically for small and mid-sized manufacturers that need greater control over inventory, purchasing, and production.

MISys brings together the information required to build a realistic production plan, including inventory, purchase orders, manufacturing orders, work orders, sales orders, forecasts, stocking requirements, and lead times.

Using the Master Production Schedule, manufacturers can look ahead weeks, months, or longer to identify potential shortages before they disrupt production.

From the resulting Material Requirements Plan, MISys can help determine:

What materials need to be purchased
What components or assemblies need to be produced
How much is required
When orders need to be released
When shortages are expected to occur

Purchase orders and production orders can then be created directly from the plan, turning production requirements into action.

MISys also supports sales forecasting, planning simulations, forward and backward scheduling, Available to Promise projections, and other tools that help manufacturers understand the impact of future demand.

MRP and Capacity Planning in MISys Manufacturing

Material availability is only part of a realistic production plan.

You may have every component required to build an order, but still lack the machine time, labor, or work-center capacity necessary to complete it on schedule.

MISys Manufacturing extends production planning with work center and capacity management capabilities.

Manufacturers can define work centers and production routings, view work-center loading over time, identify capacity conflicts, and reschedule production to make better use of available resources.

This connects two important sides of manufacturing planning:

Do we have the materials to build it?

Do we have the capacity to build it on time?

Do You Need MRP Software?

If your purchasing and production teams regularly find themselves asking questions like these, MRP may be the missing piece:

Do we have enough material for our upcoming orders?
What are we going to run short of next month?
What should purchasing order today?
When does that material actually need to arrive?
Which subassemblies need to be built first?
Are we buying inventory because we need it or because we think we might need it?
Can we meet a new customer delivery date?
What happens if demand increases?
Where are our upcoming production bottlenecks?

MRP replaces much of that manual calculation with a structured, repeatable planning process.

See MRP in Action

The easiest way to understand Material Requirements Planning is to see it applied to a real manufacturing environment.

Request a private MISys Manufacturing demo and bring your questions. We can walk through Master Production Scheduling, material planning, purchasing, production, and capacity management and show how MISys turns demand into a practical manufacturing plan.

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Frequently Asked Questions About MRP

What does MRP mean in manufacturing?

MRP stands for Material Requirements Planning. It is a method for calculating the materials and components required for production, how many are needed, and when they need to be purchased or produced.

What are the main inputs to MRP?

Traditional MRP relies on the production schedule, bills of material, and inventory records. Modern MRP software can also consider customer orders, forecasts, open purchase orders, production orders, lead times, safety stock, and other planning information.

What is the difference between MRP and ERP?

MRP focuses on manufacturing requirements such as materials, inventory, purchasing, and production planning. ERP has a broader scope and is designed to manage processes across the entire business, often including accounting, finance, sales, HR, manufacturing, and supply chain functions.

What is the difference between MRP and MRP II?

MRP focuses primarily on material requirements. MRP II expands the concept to include other manufacturing resources such as capacity, labor, work centers, scheduling, and financial planning.

Does MRP reduce inventory?

MRP can help reduce excess inventory by connecting purchasing and production decisions to actual future requirements. The objective is not necessarily zero inventory, but having enough material available when production needs it without unnecessarily tying up cash in excess stock.

What is the difference between MRP and a reorder point?

A reorder point typically triggers replenishment when inventory falls below a predetermined quantity. MRP is demand-driven and time-phased, looking ahead at production requirements to determine whether material will be needed and when it needs to be available.