MRP is a production planning system used to manage manufacturing processes and inventory levels. It determines material requirements based on a product structure tree and lead times. For a product requiring 80 units of the end item by week 6: MRP plans to order 80 units of E at week 4 and 120 units of B at week 2. It also plans orders of 480 units of J at week 1 and 180 units of J at week 4 to meet requirements while considering scheduled deliveries and lead times.