Material requirements planning (MRP) is a planning alternative that calculates requirements for parts using information from master scheduling, manufacturing structures, and inventory data. The calculation is based on the existing inventory balance, and all sources of material supply and demand such as shop orders, customer orders, purchase orders, production schedules, and distribution orders. Planning methods controlling the planning data are entered for a part.
The purpose of MRP is to calculate the demand for parts in a phased manner based on information such as shop orders, customer orders, and part structures, to ensure that the demand is met. MRP results in order proposals for the parts that need to be manufactured and purchased. Order recommendations are calculated using the appropriate lead time offset and lot sizing rules, considering both values when the parts need to be available and in specific quantities. MRP also generates suggestions for re-planning existing shop orders and purchase orders as well as recommendations to best meet the demand with new shop orders, production schedules, purchase requisitions, and supplier schedules.
MRP starts by calculating the lowest level on which the parts exist in the structures. A part that is not a component of another structure, but is only a parent part, has the lowest level, zero (0). Zero-level parts are usually sales parts. A part that is a component of a parent part is at level one, a sub component of a component is at level two, and so on. This level coding is necessary for accurate MRP, estimates, and calculations of product families and product codes. Before the MRP calculation takes place, existing unreleased supply orders (such as purchase requisitions, shop proposals, production schedules, supplier schedules) which were created by MRP in a previous run of MRP are deleted. The MRP process generates the necessary supply proposals again after the calculation. Action messages are generated for each part to draw the planners' attention to parts requiring actions such as rescheduling supply orders.
MRP also supports the concept of multi-site planning through the use of planning networks with material transfers executed using distribution orders. Multi-site planning can be used when two or more sites interact in a single supply chain, and parts being distributed to a demand site from a supplying site. Multi-site planned parts are defined as supplied from an internal supplier corresponding to the supplying site. MRP can be run for an entire planning network consisting of two or more sites, with requirements for the multi-site parts organized into distribution requirements, and an order recommending the transfer of materials within the network. When MRP is run for a planning network, multi-site planned parts are considered within the low level calculation, that is the site-to-site transfer representing a level within an overall multi-site structure.