DotOne teamWhat is MRP?
MRP (material requirements planning) takes three inputs and produces a list of what to buy or make:
- What you need to make: confirmed orders and the production plan.
- What goes into it: the bill of materials (BOM) for each product.
- What you already have: stock on hand and material already on order.
The output is net requirements: for each material, the quantity still needed and the date it is needed by, after using up what is already in stock or on its way.
How MRP works, step by step
- Gross requirements. Explode the BOM: multiply each component by the quantity of finished goods planned.
- Subtract what you have. Deduct stock on hand and open purchase orders due in time.
- Net requirements. What is left is what you must buy or make.
- Offset by lead time. Work back from the date the material is needed to the date the order must be placed.
- Raise orders. Purchase indents for bought items and work orders for items you make yourself.
Worked example: exploding a BOM
A furniture maker plans 200 office chairs. The BOM for one chair needs 1 seat shell, 5 castors and 0.8 kg of foam.
| Material | Per chair | Gross need | In stock | On order | Net need |
|---|---|---|---|---|---|
| Seat shell | 1 | 200 | 60 | 50 | 90 |
| Castor | 5 | 1,000 | 1,400 | 0 | 0 |
| Foam (kg) | 0.8 | 160 | 35 | 0 | 125 |
Castors need nothing: stock covers the plan. Seat shells and foam need orders. If foam takes 7 days to arrive and production starts on the 20th, the order must go out by the 13th.
MRP vs MRP II vs ERP
- MRP plans materials: what to buy or make, how much and when.
- MRP II (manufacturing resource planning) adds capacity: machines, labour and shifts, so the plan is one the plant can actually run.
- ERP grew out of MRP II and extends it to the whole business: sales, purchase, finance, HR and more, all on one set of data.
Why MRP results go wrong
MRP is simple arithmetic. When it gives wrong answers, the data is almost always the cause:
- Wrong BOMs. A missing component or an old quantity means every plan is wrong. See our BOM setup guide.
- Wrong stock. If the system shows 1,400 castors and the shelf has 400, MRP will not ask for any.
- Wrong lead times. Use the lead times vendors actually achieve, not the ones they quote.
- Unrecorded scrap. If 5 percent of foam is wasted, the BOM must allow for it.
- Duplicate items. The same material under two codes splits stock. See master data management.
Material planning in DotOne
In DotOne Production Management, multi-level BOMs drive the raw-material requirement for every work order, with a reservation summary of what is set aside for each job and a material issue queue ordered by how urgent each job is. When stock of an item falls below its reorder level, inventory raises a purchase indent automatically.