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What is MRP System – Material requirements planning are always used synonyms with MRP II and ERP software although both have difference with respect to the time frames and their evolvement as a computer based software. MRP system also called as Material requirements planning is a computer based inventory management system which was designed to assist the production manager in placing the orders of items which is dependently demanded.

An example of MRP system is to manage the Bill of material which is necessary require to create a finish product for eg: A mobile phone which consist of raw materials such as plastic, speakers, microphone, screen, battery, internal chips and so on . . . the amount of these bill of materials inventory available in the warehouse will make the number of products which is why we called it as dependably demanded without which manufacturing the finished products may not be possible.

History of Materials Requirements Planning Systems

The initial MRP system for managing inventory of a Manufacturing business was evolved in the year 1940 to 1950. It actually uses mainframe computers to explore all the detailed information from a bill of materials to understand the creation of finished products. Based on that purchasing plan for buying components was decided. Therefore MRP system was very helpful for production workers or personal to update and change the inputs into the system as require.

Although MRP II which came later concentrated on other areas of business also including Marketing, finance, engineering, Human resources and so on and then the concept of ERP – Enterprise resource planning software which linked different functional areas and the entire business enterprise in one single computer technology.

MRP system initiated from production plan for final products towards development of requirements of raw materials. So basically MRP systems was designed to understand the need, the number and the time the needs to be fulfilled.

MRP system breaks inventory requirements into different periods such as planning, managing which helps the production to be completed on time with proper inventory levels. MRP also ensures that cost are kept on the minimum area. The main advantage for production managers with implementing MRP tools was that it helps them  for capacity planning and allocating the production time. Although MRP solutions can be costly when it comes to the development and also takes time which small business may not be able to afford previously.

MRP Components and Working

MRP – Materials requirement planning System includes three main sources, Master schedule, inventory files and Bill of materials. MRP system pulled information from BOM, Master schedule and inventory record files determines how much raw materials, parts, sub assemblies is require for each period during planning. MRP also determines the gross materials requirements, which further reduce from the current inventory and then add it to the buffer stock to make sure the perfect net requirements.

Advantages and Benefits of Material Requirements Planning 

  • MRP System offers many benefits to manufacturing units. Some of them were
  • It helps production manager to reduce the inventory levels and carrying cost.
  • Track material requirements and provides most economical lot size for orders.
  • Provides the quantity requires to meet the buffer or safety level.
  • Allocate production time with different products and offers a proper planning for future needs.
  • Enhances the workflows of other department such as plant foreman, purchase manager, inventory manager, production planner, service representatives, sales managers and so on . .

Disadvantages of MRP system

  • There are few drawbacks of MRP the first is that if accurate input and information is not added properly such as BOM and inventory records it may face issues with the proper output.
  • Estimations plays an important role which in case misses can hurt the other areas such as delivery dates.
  • Another disadvantage is that MRP implementation is time consuming and it is sometime difficult to develop successfully.

How Material Requirements Planning (MRP) Works

MRP works backward from a production plan for finished goods to help businesses and manufacturers determine what is needed, how much is needed, and when it is needed.

Using MRP, a plan is transformed into a list of the components, raw materials, and subassemblies required to complete a project on time. MRP assists producers in understanding inventory needs while balancing supply and demand.

By entering information into the MRP system, managers can determine their need for labor and supplies and increase the efficiency of their production.

  • Item Name: The title of the completed good, also referred to as Level “0” on the bill of materials.
  • Master Production Schedule (MPS): How much be produced to meet the demand and When is it needed?
  • Shelf life of stored materials: The duration of storage materials.
  • Inventory Status File (ISF): Materials that are readily available in stock as well as suppliers are ordering that are in stock and materials on order from suppliers.
  • Bills of materials (BOM): details regarding the components and materials needed to make each product.
  • Planning data: Restrictions and directives such as lot sizing methods, labor and machine standards, and quality and testing standards.

What Are the 3 Main Inputs for MRP?

Bill of Materials, Master Production Schedule (MPS), and Inventory Status File (ISF) are the three fundamental inputs of an MRP system. (BOM).

What Are the Outputs of an MRP System?

The MRP determines what materials are required, how much is required to finish a build, and precisely when materials are required in the build process using the necessary inputs.

This enables companies to schedule production based on the availability of materials and use just-in-time (JIT) production. As a result, businesses can efficiently move materials through the manufacturing process while reducing their inventory levels.

How Does MRP Benefit a Business?

By optimizing inventory levels, manufacturing efficiency, and customer satisfaction, MRP makes sure that materials and components are available when they are required.

The Bottom Line

Companies use material requirements planning (MRP), an integrated inventory and supply management system based on software, to project raw material quantities and plan production. MRP computes the materials required, their quantities, and their timing for use in the manufacturing process based on inputs from the Master Production Schedule, Inventory Status File, and Bill of Materials (BOM).

  Read more articles about Enterprise Resource Planning Software

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