Material Requirements Planning
Also known as: MRP, MRP I
Material Requirements Planning (MRP) is a computerized system developed by Joseph Orlicky in the 1970s that calculates material requirements based on master production schedules and bill-of-materials data. MRP determines what materials to buy, how much to order, and when to order them to meet production demand while minimizing inventory carrying costs. It became a foundational technology for manufacturing planning and later evolved into manufacturing resource planning (MRP II) and enterprise resource planning (ERP) systems.
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When to use it
MRP is essential for manufacturers producing multi-level products with complex bills-of-materials and multiple sourcing options. Apply MRP when lead times are significant (so advance planning matters), when inventory carrying costs are high, or when coordinating procurement with production is critical. MRP works best in make-to-stock and assemble-to-order environments with relatively stable, predictable demand. Less effective in high-mix, low-volume job shops or truly demand-driven environments (where kanban may be preferable).
Strengths & limitations
- Automatically calculates material requirements for complex, multi-level products, reducing planning errors and manual effort
- Schedules material purchases and production orders to arrive just-in-time, reducing inventory carrying costs
- Provides visibility into capacity constraints and schedule conflicts, enabling better decision-making
- Integrates demand (forecasts, customer orders) with supply planning, creating coordination across sales and operations
- Foundation for advanced planning systems (APS) and enterprise resource planning (ERP) platforms
- Assumes stable, predictable demand; performs poorly with highly seasonal, erratic, or customized demand
- Requires accurate, current bill-of-materials and inventory data; system outputs are only as good as input data
- Does not account for capacity constraints in detail; infinite capacity assumptions can lead to unrealistic schedules
- Can generate nervous schedules (frequent changes to planned orders) if not tuned properly, creating supply chain instability
Frequently asked
How is MRP different from ERP?
MRP is a planning algorithm focused on material requirements and scheduling. ERP is a broader enterprise software system that includes MRP as one module, plus accounting, finance, HR, and CRM functions. Modern ERPs use MRP logic but integrate it with real-time data and other business processes.
Can we use MRP in a make-to-order environment?
Yes, MRP adapts to make-to-order: the master production schedule is driven by customer orders instead of forecasts. The advantage is precision—you calculate exact material needs for exact customer specifications. The challenge is shorter planning horizons and less time to aggregate demand across orders.
What is MRP nervousness, and how do we prevent it?
MRP nervousness occurs when small changes to the master schedule trigger large changes to planned orders throughout the supply chain, destabilizing suppliers and inventory. Prevent it with time fences (planning horizon divisions), frozen schedules for near-term periods, and safety stock policies that absorb minor demand variations.
Do we still need MRP in a lean manufacturing environment?
MRP and lean are complementary. Lean reduces variability and simplifies scheduling (e.g., through kanban), which can make MRP unnecessary for some materials. For long-lead-time or complex materials, MRP remains valuable. Many organizations use a hybrid: kanban for high-volume items, MRP for long-lead or low-frequency components.
Sources
How to cite this page
ScholarGate. (2026, June 3). Material Requirements Planning. ScholarGate. https://scholargate.app/en/operations-management/material-requirements-planning
Which method?
Set this method beside its closest kin and read them side by side — the library lays the books on the table; the choice is yours.
- Aggregate PlanningOperations Management↔ compare
- Inventory RoutingOperations Management↔ compare
- Job Shop SchedulingOperations Management↔ compare
- KanbanOperations Management↔ compare
- SCOR ModelOperations Management↔ compare