The material requirements planning (MRP) is essentially an information system consisting of logical procedures for managing inventories of component assemblies, sub-assemblies, parts, and raw materials in a manufacturing environment. The primary objective of an MRP system is to determine how many of each item in the bill of materials must be manufactured or purchased and when.

Materials Requirements Planning (MRP) originated in the 1960s in the USA as a computer-based tool for material purchasing and production. MRP can be considered as a flow control system. It generates reports to procure or produce components that are required to maintain the flow of the product. The starting point for an MRP system is the bills of materials (BOM). A BOM describes the parent-child relationship between an assembly and its components. The MRP system is based on the premise that one can devrive the demand for individual components based on the demand for the parent item. An MRP system is driven by a Master Production Schedule (MPS). The MPS contains the demand (with dates) for each level product. The MPS is derived from sales forcasts, customer orders, and so on. In addition to the information contained in an MPS and BOM, an MRP system uses information on the current inventory status and product lead-times.

Manufacturing lead time is the total time required to manufacture a product and includes the set-up time, processing time, queue time, imspecition time and transport time. Similary, the puchasing lead time is the total time required to obtain a purchased product and includes the procurement time. An MRP system produces a time phased schedule called a materials requirement plan.

Material requirements planning process

In an MRP system, time is considered to be discrete, in terms of days or weeks. The MRP report is generated for the duration of the planning horizon. A 'planning horizon' refers to the span of the MPS (for example six months, six weeks, etc.) A 'time bucket' refers to the units of time into which the planning horizon is divided (for example a day or a week).