Material requirements planning

What is material requirements planning (MRP 1)?

Material requirements planning (MRP 1) is a strategy by which a manufacturer optimizes the acquisition, storage and deployment of materials needed in its production runs. MRP 1 keeps track of a manufacturer’s inventory of incoming raw materials and supplied components. The MRP system uses this information along with production orders and bills of materials (BOMs) to calculate the quantity and timing of purchases of additional incoming goods. Material requirements planning is abbreviated “MRP 1” (or “MRP I”) to distinguish it from manufacturing resource planning (MRP 2). MRP 2 encompasses all the capabilities of MRP 1 and also optimizes other assets needed in a manufacturing operation: personnel, production equipment, spare parts and more.

When performed via a software solution, material requirements planning in the past has involved a significant amount of manual entry and communication. In today’s digitalized environments, MRP 1 software is supported by advanced planning and scheduling (APS) solutions, which utilize advanced algorithms to balance demand and capacity.

As product portfolios diversify under stringent customer delivery requirements, APS-enabled material requirements planning may be used to help manufacturers meet demands with existing inventory or increase these resources prudently and with great efficiency. MRP 1, when it is implemented through an effective APS solution, helps manufacturers meet global customer requirements such as lead time reduction, improved resource utilization, and accurate prediction of resource requirements. With APS-enabled MRP systems, manufacturers can compare different scheduling scenarios, improve productivity, and track and control inventory.

Man in a warehouse working on Material Requirements Planning (MRP 1) software on a laptop.

MRP 1 software functionality

Advanced planning software performs material requirements planning functions through numerous features that help manufacturers oversee various aspects of production planning:

  • Bill of materials (BOM) level planning—By enabling an exploded view of the BOM, MRP software allows the production plan for lower level items to be calculated. Proposed material purchase requirements can be exported to an enterprise resource planning (ERP) or other system for action.
  • Interactive schedule visualization—Once an initial master production schedule (MPS) has been created, advanced planning software can display data as stock profile graphs and capacity usage graphs. Clicking and dragging a point on a graph is sufficient to change the MPS.
  • Make-to-order planning—In a make-to-order environment, stock levels of finished and intermediate items will not be part of the key process parameters. An APS-based MRP system enables a manufacturer to evaluate the effects of future demand changes on the manufacturing process. When a change in demand occurs, whether in terms of quantity or delivery dates, the manufacturer can quickly assess if it is possible to meet the new requirements.
  • Make-to-stock planning—Advanced planning software can generate accurate and achievable master production schedules (MPS) considering rough cut capacity, pack forward figures, target days of stock cover, manufacturing preferences, minimum and maximum re-order quantities, re-order multiples, and product shelf life. Production capacity can be specified as a quantity, duration or weight. With an MRP calendar system, production capacity can be varied over time. The capacity available then limits the production volume created in each period.

Benefits of materials requirements planning (MRP 1)

APS-enabled MRP planning generates achievable and optimized production schedules, helps manufacturers respond quickly and intelligently to unanticipated changes, and satisfies customer demands with minimized lead times.

  • Improved on-time delivery
  • Higher productivity
  • Full visibility and control
  • Leaner operations
  • Faster response to change
  • Higher margins