fbpx

What is Material Requirements Planning?

Material Requirements Planning

Share This...

Material Requirements Planning

Material Requirements Planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes. MRP converts a master schedule of production into a detailed schedule for raw materials, components, parts, and other inputs that are needed to fulfill the production plan.

The main functions of an MRP system include:

  • Inventory Control: MRP helps to keep inventory levels in check by indicating when to order materials and how much to order, aiming to prevent overstocking or understocking of materials.
  • Scheduling: MRP schedules the timing of operations based on lead times and due dates of final products to ensure timely production and delivery.
  • Ordering: MRP systems can generate purchase orders for the necessary materials and production orders for the manufacturing process.
  • Planning: MRP aids in the planning of manufacturing activities, delivery schedules, and purchasing activities.

The primary inputs of an MRP system are a Bill of Materials (BOM), which lists the raw materials, parts, and subassemblies needed to produce each unit of finished goods, and a Master Production Schedule (MPS), which outlines the production plan for finished goods.

MRP can lead to more efficient use of resources and better customer service, but it also requires accurate and up-to-date information to function effectively. An incorrect or outdated Bill of Materials, for example, can lead to inaccurate production plans and inventory problems.

Example of Material Requirements Planning

Let’s take the example of a company that manufactures bicycles.

The company uses a Material Requirements Planning (MRP) system to manage the production of its bicycles. For each bicycle it produces, the Bill of Materials (BOM) might look something like this:

  • Frame: 1
  • Tires: 2
  • Pedals: 2
  • Brake system: 1
  • Gears: 1
  • Chain: 1
  • Seat: 1
  • Handlebars: 1

Now, let’s say the company receives an order for 100 bicycles, and they want to ensure the bicycles are completed within a month. The Master Production Schedule (MPS) would indicate this, and the MRP system would use this information to calculate the materials needed based on the BOM.

The MRP system would then determine the following requirements:

  • Frames: 100
  • Tires: 200
  • Pedals: 200
  • Brake systems: 100
  • Gears: 100
  • Chains: 100
  • Seats: 100
  • Handlebars: 100

In addition, the MRP would schedule the timing of ordering and producing each component based on the lead time for each material or part, with the goal of completing all 100 bicycles by the due date. For instance, if the lead time to procure tires is 2 weeks, the system would schedule the order of tires to be placed at least 2 weeks before the bicycle assembly process starts.

The MRP system would also monitor the inventory levels of each component and trigger new orders when the inventory level falls below a certain point.

In this way, the MRP system helps the bicycle manufacturing company plan and control its production process, ensuring it has the materials it needs when it needs them, while also helping to control inventory levels and costs.

Other Posts You'll Like...

Want to Pass as Fast as Possible?

(and avoid failing sections?)

Watch one of our free "Study Hacks" trainings for a free walkthrough of the SuperfastCPA study methods that have helped so many candidates pass their sections faster and avoid failing scores...