MRP (Material Requirements Planning)

What is MRP? Definition of Material Requirements Planning

MRP stands for Material Requirements Planning (in German: Materialbedarfsplanung). It is a software-supported method for planning, controlling and managing inventories to ensure smooth production. At its core, MRP is the link between what is to be sold and what must be purchased or produced to support it.

The central task of MRP is to answer three key questions:

• ✅ What is needed? (Which assemblies and raw materials)
• ✅ How much is needed? (Exact quantity planning)
• ✅ When is it needed? (On-time provision)

Through this planning, a company ensures that materials are available in the right quantity, at the right time and at the right place, without tying up capital in unnecessarily high inventory levels.

Objectives of Material Requirements Planning: Why use MRP?

Materials management constantly operates in the tension between supply reliability and cost efficiency. MRP harmonizes these often conflicting interests through clear objectives:

• Ensuring delivery reliability: Avoiding stockouts (stock-outs) that lead to production stoppages and delivery delays.
• Inventory minimization: Reducing inventories to the necessary minimum to reduce storage costs and capital binding.
• Planning efficiency: Faster response to market changes and automatic adjustment of procurement proposals.

How it works: How MRP determines demand

The demand determination in the MRP process is usually program-driven, i.e., derived from the production plan. The system then runs through logical calculation steps:

1. Input data for MRP

For material requirements planning to work, it draws on three central data sources:

• 🔹 Primary demand (Master Production Schedule): Which end products (e.g., machines) must be finished by when?
• 🔹 Bill of Materials (BOM): Which components and assemblies does the end product consist of?
• 🔹 Inventory data: What is currently in stock and which orders are already in transit?

2. The calculation steps

From gross requirements to net requirements: The system calculates "backwards" from the delivery date.

Example: For 100 bicycles (primary demand) 200 tires are required (gross requirements). If 50 tires are in stock, net requirements are 150 pieces. With a lead time of 2 weeks, the order must be placed 2 weeks before production begins.

MRP I vs. MRP II: The crucial difference

Terms are often confused, but they describe different evolutionary stages of planning:

• MRP I (Material Requirements Planning): The original form (60s/70s). It focuses purely on the material requirements determination. Focus: "Do I have all the parts?"
• MRP II (Manufacturing Resource Planning): The development (80s). It extends planning to all resources, such as machine capacities, personnel, and finances. MRP II is thus a holistic production planning and control.

💡 Modern ERP typically integrates the full scope of MRP II, but in common usage the term "MRP run" is often still used for material planning.

MRP in ERP systems: The interaction

Without modern IT, complex material requirements planning is hardly manageable. ERP systems (Enterprise Resource Planning) revolutionize MRP through real-time data and integration.

An ERP system such as Abas ERP handles central tasks:

• ✅ Automation: Calculation of net requirements overnight or in real time.
• ✅ Order proposals: The system automatically generates proposals for procurement or manufacturing orders for production.
• ✅ Connectivity: Changes in sales (e.g., express order) directly affect material planning.
• ✅ Supplier integration: For framework contracts, calls can be sent fully automatically.

Advantages and disadvantages of material requirements planning

Optimization: ABC/XYZ analysis and best practices

MRP is not a "Set-and-Forget" system. To maximize efficiency, companies should use classification methods to set priorities.

ABC and XYZ analysis

Not every part needs to be planned with equal intensity. The combination of value share (ABC) and consumption variability (XYZ) determines the disposition strategy:

• A-parts (high-value): Require precise, deterministic MRP planning to avoid capital binding.
• C-parts (low-value, e.g., screws): Here, consumption-based planning or Kanban is often suitable to keep administrative effort low.
• X-parts (constant consumption): Ideal for automated procurement.
• Z-parts (irregular): Require higher safety stocks or case-by-case evaluation.

Further optimization tips

• 🔄 Maintain master data: Incorrect lead times in the system lead to incorrect order dates.
• 📉 Check lot sizes: Order economically, not "out of habit".
• 📊 Dynamic safety stock: Adjust buffer stock to the current demand volatility instead of using static values.

Conclusion: MRP is far more than a calculation task. It is the strategic backbone of a functioning supply chain. Those who implement material requirements planning with software support and data-driven approaches create the basis for on-time deliveries and healthy margins.

Table of Contents

• What is MRP? Definition of Material Requirements Planning
• Goals of Material Requirements Planning: Why use MRP?
• How it works: How MRP determines demand
• MRP I vs. MRP II: The key difference
• MRP in ERP systems: The interplay
• Pros and cons of Material Requirements Planning
• Optimization: ABC/XYZ analysis and best practices
• FAQ: Frequently asked questions about MRP