MRP Process

Most finished goods are comprised of multiple ingredients, materials or other components, and must undergo various processes and steps before they are considered complete. Because the finished good is dependent on these items, they are referred to as dependent demand, and they must be carefully managed in order to fulfill planned production orders.

The MRP process starts with the master production schedule, as it determines what quantity of a dependent demand product is needed and when. The MRP system then works backward from the master production schedule to calculate the quantity of each dependent demand item that is needed to produce the required amount of end product.

Next, the MRP process determines how much of each item the company currently has available in inventory, and aggregates it with upcoming scheduled deliveries. If there is a gap between what is needed and what is on-hand, the process will indicate that additional orders need to be placed. Finally, if the future net requirements of materials or components is projected to deplete inventory, planned orders can be created to account for each item’s lead time. In this way, the MRP process prevents future production downtime that might occur due to depleted on-hand inventory. Often, an MRP process must be performed for each dependent demand item.

While the MRP process can be carried out by hand, it is most commonly performed electronically, either by a homegrown or commercial material requirements planning (MRP) software solution.