377. MRP

Material Requirements Planning (MRP): explodes the MPS into time-phased requirements for every part / component / material needed to make the planned products.

Foundation of every ERP system (SAP, Oracle, NetSuite, etc.).

377.1. Inputs

1. MPS — planned production quantities, time-phased
2. Bill of materials (BOM) — what components go into each product (and how many of each)
3. Inventory file — on-hand and scheduled receipts of every part
4. Lead-time data — manufacturing / procurement lead time for each part

377.2. BOM example

Product Bicycle:

• 2 × Wheel

  • 1 × Tire
  • 1 × Rim
  • 30 × Spoke

• 1 × Frame

  • 5 × Steel tube (cut from raw)
  • 4 × Bracket
• 1 × Handlebar

Two-level explosion: Bicycle → Wheel/Frame/Handlebar; then Wheel → Tire/Rim/Spoke; etc.

377.3. Three core steps per item

For each part, working level-by-level from top to bottom of the BOM:

1. Gross requirements — how many needed in each period (driven by parent’s planned orders + parent’s lead time)

2. Net requirements — gross minus available (on-hand + scheduled receipts)

3. Planned orders — when to release an order to cover net requirements, offset by lead time

For each part, time period t:
    Gross[t] = parent_demand[t]
    Net[t] = max(0, Gross[t] - OnHand[t-1] - SchedReceipts[t])
    OnHand[t] = OnHand[t-1] + SchedReceipts[t] - Gross[t] + PlannedReceipt[t]
    Planned release at t - lead_time = Net[t]  (lot-sized; see below)

377.4. Lot sizing

Plan orders in batches, not unit-by-unit:

• Lot-for-lot (LFL): order exactly the net requirement each period — minimal inventory, max setups
• Fixed quantity: always order units (e.g., EOQ)
• Periods of supply (POS): cover periods of demand
• Silver-Meal / Least Unit Cost / Part-Period Balancing — heuristics
• Wagner-Whitin — DP-optimal lot-sizing

377.5. Time-phased record example

Part: Wheel. Lead time: 2 weeks. On-hand: 50. Lot size: 100.

(Numbers illustrative; not perfectly consistent — purpose is to show the structure.)

377.6. MRP I → MRP II → ERP

• MRP I (1970s): material requirements only
• MRP II (1980s): adds capacity requirements, financial integration, scheduling
• ERP (1990s+): fully integrated business systems including HR, accounting, CRM

377.7. Limitations

• Deterministic: ignores demand and lead-time uncertainty (planners add safety stock manually)
• Schedule nervousness: small changes ripple
• Push system: drives production based on plan, not on-the-ground signal — compare with Kanban / pull
• Lot sizing tension: heuristics like EOQ optimize per part, missing cross-part synergies

377.8. See also

• MPS — input
• DRP — same logic, distribution side
• RCCP — capacity check
• Wagner-Whitin — lot-sizing