MRP Fundamentals

Definition

MRP converts time-phased material demand into planned supply actions using the master production schedule, BOM, inventory position, scheduled receipts, lead times and lot-sizing rules.

Objective

Ensure the right material is available at the required time and quantity while avoiding unnecessary inventory, emergency buying and working-capital exposure.

Required Inputs

Item/material master; UOM; current usable stock; reservations/allocations; open purchase and production orders; demand; BOM where applicable; lead time; lot size/MOQ; safety stock; required dates.

Methodology

MRP converts time-phased material demand into planned supply actions using the master production schedule, BOM, inventory position, scheduled receipts, lead times and lot-sizing rules.

Calculation / Planning Logic

Use the relevant requirement, stock, receipt, lead-time and lot-size values consistently and document the planning basis.

Worked Industrial Example

For a maintenance item, combine historical consumption, equipment criticality, current usable stock, open purchase orders, supplier lead time and required maintenance date to determine the planned supply action.

Industrial Application

Apply the framework across production materials, MRO spares, consumables, packing materials, project requirements and shutdown materials. Connect Planning with Purchase, Stores, Production, Maintenance, Quality, Finance and ERP records.

Decision Rules

• Use current usable inventory rather than blindly using book quantity.
• Consider open supply and confirmed dates before creating duplicate requirements.
• Use criticality and required date when resolving competing shortages.
• Respect MOQ, pack size, batch and supplier constraints.
• Review recurring exceptions and parameter failures for root cause.

Controls

Maintain approved planning parameters; validate master data; distinguish usable from blocked stock; review exceptions; document parameter changes; reconcile planned and actual supply.

KPIs

Useful measures include material availability, shortage rate, plan adherence, forecast error, inventory coverage, expedite count, parameter accuracy and planning-cycle time.

Common Errors

• Using inaccurate lead times or outdated BOMs.
• Planning against blocked or reserved stock as if it were freely available.
• Ignoring open purchase orders and scheduled receipts.
• Using arbitrary safety stock or lot sizes.
• Failing to reschedule obsolete requirements and open supply.

Excel / MIS Method

Suggested columns: item code, description, UOM, demand date, gross requirement, opening stock, scheduled receipt, allocation, projected balance, safety stock, net requirement, MOQ, lot size, planned order, lead time and required release date.

Related References

Inventory Management · Purchase Management · Stores Management · Materials Management · ERP & MIS