An MRP system is a planning tool that analyzes current inventory levels and production capacity to determine what goods need to be manufactured based on forecasts. It schedules production according to bills of materials to minimize inventory while meeting requirements within a fixed period. MRP works by exploding bills of materials to determine component requirements, netting requirements against stock levels, and offsetting to schedule production based on estimated lead times so items are available when needed. The system requires accurate input of master schedules, bills of materials, and inventory records to generate order releases and exception reports.

1. Material Requirements
and Resource Planning
Prepared by:
IRELYN I. JASMIN

2. A Material Requirements Planning (MRP) system is a planning and decision-
making tool used in the production process which analyses current inventory
levels vs production capacity and the need to manufacture goods, based on
forecasts. MRP schedules production as per bills of materials while
minimizing inventory. The technique is computerized and looks at
requirements within a fixed period.

3. MRP Planning
Develop a tentative
master production
schedule
Use MRP to
simulate material
requirements
Convert material
requirements to
resource requirements
Firm up a portion
of the MPS
Is shop
capacity
adequate?
Can
capacity be
changed to meet
requirements
Revise tentative
master production
schedule
Change
capacity
Yes
No
Yes
No

4. What are the main features of an MRP system?
• A master production schedule: A statement of the planning
including orders, forecasts and capacity.
• Bill of materials (BOM): All the materials and components
required to make the final product.
• Inventory status file: Stock records that allow gross
requirements to be adjusted to net requirements.

5. How does an MRP system work?
• Step 1. Exploding: achieved by using the Bill of Materials (BOM), i.e. how many
components are needed to prepare one item of manufacturing?
• Step 2. Netting: the net quantity of material calculated by computing the difference
between the stock available in the factory from the overall, gross requirement. This
figure is provided by exploding.
• Step 3. Offsetting: lead time is estimated for the entire operation that helps
practitioners to compute the expected time for manufacturing. It also advises when
the manufacturing process should begin so that items are available on the promised
date .

6. MRP Inputs MRP Processing MRP Outputs
Master
schedule
Bill of
materials
Inventory
records
MRP computer
programs
Changes
Order releases
Planned-order
schedules
Exception reports
Planning reports
Performance-
control
reports
Inventory
transaction
Primary
reports
Secondary
reports

7. 7
Planning Horizon and Cumulative Lead Time
1 2 3 4 5 6 7 8 9 10
Procurement
Fabrication
Subassembly
Assembly

8. What are the advantages of an MRP system?
• The MRP system is widely credited for playing a crucial part in
decreasing factory inventory. It also assists in manufacturing
industrial products that are more complex
• MRP focus is on what materials are required and when they need to
be sourced. It is also helpful in product customization
• MRP has historically been seen as giving additional advantage
because it is known to schedule and track every order whether for
production or purchase.

9. The disadvantages when using a material requirement
planning inventory system include:
• Reliance on the precise input information
• There are scheduling delays, wrong order quantities, and inefficient tracking if the
information is inputted inaccurately within the system
• Requires extensive maintenance of robust databases
• In order to use the system, proper training is required
• The system is not cheap and requires a substantial capital investment

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