What is MRP? Use cases, examples, and practical guidance
MRP stands for Material Requirements Planning.
It is a method for planning material demand.
The system calculates how much and when raw materials and semi-finished goods need to be ordered to meet production deadlines. It operates based on bills of materials (BOMs), inventory levels, and forecasts.
Companies adopt MRP to reduce material shortages, shorten order lead times, and make better use of cash tied up in inventory.
Why MRP matters
In real-life manufacturing, customer orders change from week to week. Manual demand calculations quickly become unmanageable. MRP brings everything into a single, coherent picture. Managers can see which components are critical, warehouses receive clear priority lists, and purchasing teams get precise delivery dates. The classic dilemma—whether to place a larger order “just in case”—disappears.
The results are measurable: lead times shortened by several percent and safety stock reduced, often by double-digit values—without the risk of stopping production lines.
How MRP works
MRP starts with the master production schedule. Orders are exploded through the product structure down to raw materials. For each component, the system compares demand with available stock and already placed orders. It then calculates shortages and suggests production orders or purchases, taking lead times and lot sizes into account.
When a customer order changes, the algorithm recalculates the plan and signals what should be postponed, expedited, or canceled. It is a continuous cycle: planning, execution, adjustment.
Example of an MRP process
Imagine a table manufacturer planning to produce 1,000 tables next month. Each table consists of a tabletop, four legs, screws, and packaging. The ERP system (e.g. Odoo) explodes the order into components, subtracts current inventory, and identifies shortages.
Tabletops have a production lead time of three days, screws are delivered within 48 hours, and packaging takes one day. MRP prioritizes tabletops as the bottleneck. Purchasing automatically receives requirements for screws and packaging with delivery dates aligned to tabletop production.
If the customer increases the order to 1,200 units, the plan updates immediately and shows a shortage of tabletop panels. The team can react instantly instead of discovering the issue during packing.
When it makes sense to implement MRP
Typical signals include:
- a growing number of material items,
- frequent order changes,
- difficulty predicting inventory levels.
When schedules are maintained in spreadsheets that require hours of updates, MRP usually pays off quickly. The same applies to seasonal demand—MRP helps synchronize purchasing with production without freezing capital in inventory.
In smaller companies, MRP works effectively with just a few dozen material items; in larger organizations, it becomes the backbone of planning.
What you can do with MRP in practice
First, clean up master data—BOMs, consumption rates, lead times, and routings. Then define ordering policies and safety stock levels for time-critical components.
In daily operations, planners monitor net requirements, release suggested orders, and track deviations. Warehouses receive goods according to the schedule. Purchasing works from a prioritized list instead of scattered requests from production. When a quality module is added, the impact of a component complaint on the entire plan becomes immediately visible.
MRP vs ERP and other systems
MRP is a core planning function focused on materials. It works best within an ERP system, as it relies on inventory data, sales orders, and production information. In logistics, it is often combined with WMS so receipts and issues follow the plan. In sales, it benefits from CRM, where demand forecasts are based on real data.
API integrations streamline data exchange with suppliers and customers. Companies preferring ready-made cloud solutions often choose the SaaS model.
A mini guide to implementing MRP
Successful implementation starts with trusting your data. Without accurate BOMs and lead times, the system will generate false alerts. A phased rollout works best—start with one department or production line, then expand.
Running MRP in parallel with existing planning for a few weeks is a good practice. The team can compare results, fine-tune parameters, and close the feedback loop faster. This leads to a more stable plan. MRP also works in service companies when material kits are used for projects or installations with long lead times.
What you can gain
Typically, inventory levels for fast- and medium-moving items decrease. On-time delivery performance improves because bottlenecks become visible earlier. Planners spend less time on corrections and ad-hoc communication.
Many implementations show lead time reductions of up to 20%, thanks to better order sequencing and synchronized deliveries. Savings come not from a single trick, but from many small, data-driven decisions.
FAQ – questions and answers
What does MRP mean in manufacturing?
Material Requirements Planning. The system determines quantities and dates of components needed to fulfill production orders, using BOMs, inventory, and lead times.
What is the difference between MRP and MRP II?
MRP focuses on materials. MRP II extends planning to capacities, costs, and resource calendars. In modern solutions, MRP II features are often part of ERP systems.
Does MRP work without demand forecasts?
Yes, in make-to-order environments. For make-to-stock production, forecasts improve plan accuracy and stability.
How much does MRP implementation cost?
It depends on the number of users, module scope, and data quality. Small cloud-based companies usually pay a subscription, while larger projects include analysis and migration services.
What data is critical for MRP?
Accurate BOMs, lead times, setup times, and reliable inventory levels. Without them, even the best algorithm will suggest incorrect dates.
Does MRP make sense with short lead times?
Yes. It synchronizes purchasing and production and quickly highlights missing components.
Can MRP work with suppliers?
Yes. It can send schedules and requirements via EDI or API, allowing suppliers to align their deliveries with your timelines.
Best practices for working with MRP
Parameter settings matter. Lot sizes, safety stock levels, and priorities determine results. For components with long lead times, safety stock should reflect the risk of disruption.
For seasonal products, combine MRP with simple rolling forecasts and release orders earlier during peak months. The team learns to interpret system signals, and planning meetings are based on a single source of truth rather than multiple spreadsheet versions.
Let’s take a closer look at your MRP
If you want to discuss configuration and parameters, we can review your material data, lead times, and planning settings, and provide a short action roadmap. Contact us.
Related topics
See also: ERP systems, customer relationship management, WMS, and Odoo. API integrations and the SaaS model make getting started and ongoing maintenance easier.
