Material Requirements Planning

A manufacturer needs parts before assembly can begin, and buying too early ties up cash and warehouse space while buying too late can stop production. MRP turns scheduled finished goods into time-phased material needs.

The master production schedule says what finished goods are planned and when, a bill of materials lists the components and quantities for each item, and stock records and open orders show what is already available or expected. Oracle's MRP guidance describes calculating time-phased net requirements using those inputs and producing replenishment proposals, and it also describes reviewing action and warning messages.

A proposed purchase order is not the same as a supplier commitment. Begin with gross demand for each component, subtract usable stock and relevant scheduled receipts, then consider safety stock and any allocations, which gives a net need for each period subject to ordering rules.

Explode the bill of materials through its levels: a finished table needs legs, and the legs may need raw material. The plan must account for dependencies so a lower-level component arrives before its parent assembly is due.

Lead times move the order date earlier than the use date, so if a component is needed in four weeks and takes three weeks to procure, the order must be released at least three weeks before the use date, and capacity and transport can add further constraints. Batch sizes matter, because suppliers may require minimum order quantities or pack sizes, and the system can round an apparent need up, creating extra inventory that management should understand.

Safety stock protects against variability but also increases carrying cost, so if policy changes, explain why the planned order quantity changes, and note that a single universal buffer is unlikely to suit every part. Accurate data is essential, since an outdated bill, wrong unit of measure or stock count can create a convincing but unusable plan, so review master data before blaming the algorithm.

Scheduled receipts need realistic dates, because a purchase order promised for Monday may slip and a work order may be delayed, so update expected arrivals so the next MRP run reflects the situation. MRP can generate reschedule or expedite messages that prompt a planner to investigate shortages, late supply or changed demand, but blindly accepting every suggestion can create supplier churn and unnecessary cost.

It does not solve every capacity issue, because a plan may show enough parts while a machine or specialist worker is unavailable, so capacity planning and shop-floor execution must complement material planning. Forecast changes can make the schedule unstable, as frequent changes in finished-goods demand ripple down to components, and frozen planning windows or review rules can reduce disruptive last-minute orders.

Check excess as well as shortages, since materials ordered for a cancelled product can remain on hand and a planner should review obsolete or slow-moving stock instead of repeatedly buying more. For a small business a simple spreadsheet may follow the same logic when product structures are manageable, while larger operations use ERP modules to automate calculation and trace messages; software quality still depends on input quality and human decisions, and for a manager the strongest process checks the assumptions, confirms supply and adjusts the plan when reality changes.