- September 26, 2016
- By James Mallory
- In Glossary
MRP is Material Requirements Planning, a module available in every ERP system sold today. By definition, ERP is not ERP without MRP. MRP evaluates on-hand stock quantities, replenishment and stock parameters, purchase orders, transfer orders, sales orders, forecasted demand, manufacturing work orders, and other sources of supply and demand to determine what to make or buy, when, and how much.
MRP planning is typically conducted in phases with long-term plans defined in months or years and near-term plans in weeks or days. The MRP process entails the definition of MRP parameters such as defining which products are part of the plan, the duration of the plan from the start to the end date, and other criteria. A key part of MRP is the creation of planned or suggested orders to meet demand. MRP systems can create actual orders in the ERP system such as purchase orders, manufacturing work orders, and transfer orders.
MRP action or exception messages are typically generated to help planners to understand what changes they need to make to ensure that they have what they need in time ensure on-time delivery of products to the customer. Typical exception messages include cancellation suggestions when orders are no longer required, move-in recommendations when supply is needed sooner than expected, move-out recommendations when orders can be moved to a future date without impacting delivery schedules, and other similar notifications.
MRP planning in a manufacturing environment is paramount to the business operations – especially for companies with complex assemblies where the MRP logic explodes or runs through the assembly bill of materials to provide the planner with a complete list of all purchased and manufactured components that would otherwise be “hidden” from view within the subassemblies in the system.
Most MRP systems today are net change, meaning that MRP logic only runs for items that have changed since the last MRP generation. For example, if an order is adjusted from a quantity of 100 to 150, MRP will recognize this change and will re-generate the material plan for that item and any other items that are impacted by the change. For example, if the increased quantity is for a finished good, the new quantity will impact the quantity required for lower-level assemblies and down through the bill of material to purchased raw materials.
By nature, most MRP systems operate independent of resource constraints such as labor or machine availability but are often connected to advanced planning and scheduling (APS) applications for a time-phased view of material plans against available machine, tooling, and labor resources representing a finite material plan (as opposed to infinite planning).
MRP as a concept has been used by manufacturers since at least the 1940s and 1950s. MRP was first documented and defined by Joseph Orlicky in his 1975 book Material Requirements Planning. MRP systems evolved in the 1970s into Manufacturing Resources Planning (MRP II) as defined by Ollie Wight in the early 1980s. MRP II evolved into ERP in the 1990s.