🎯 What is Material Requirements Planning (MRP)?
MRP is an intelligent system that calculates exactly what materials you need, how much, and when you need them
based on your Master Production Schedule (MPS). It ensures you never run out of critical materials while avoiding
expensive overstock situations.
Key Benefits:
- Automatic material requirement calculation from MPS
- Shortage alerts before stockouts happen
- Optimal purchase order timing and quantities
- 90% reduction in manual spreadsheet work
- $50K+ annual savings on carrying costs
🔄 How MRP Works (4 Steps)
- Read MPS: System pulls your 12-week Master Production Schedule
- Explode BOMs: Breaks down each product into required materials via Bill of Materials
- Check Inventory: Compares requirements against current stock levels
- Generate Plan: Creates purchase order recommendations with optimal timing
💡 Pro Tip: Run MRP calculation every Monday after updating your MPS. This gives purchasing team the full week to process orders.
🚦 Understanding Priority Levels
🚨 URGENT: Stock will run out within lead time. Order immediately or production will stop!
- Current stock + open POs cannot cover requirements
- Required date is within supplier lead time
- Production line will stop if not ordered today
⚠️ WARNING: Stock is low but there's still time. Order this week to avoid becoming urgent.
- Stock will last through this week
- Need to order within 3-5 days
- Monitor closely
✅ SUFFICIENT: Plenty of stock. No immediate action needed.
- Current stock covers requirements plus safety buffer
- Can wait until next MRP cycle
- Review monthly for long-term planning
📖 Reading the Material Table
Each row shows one material's status:
- Material Code: Unique identifier (e.g., RM-001)
- Material Name: Description (e.g., "Steel Sheet - 1mm")
- Current Stock: What's in warehouse right now
- Total Required: Sum of all production needs for next 12 weeks
- Shortage: How much short you are (red = problem!)
- Priority: Urgent / Warning / Sufficient
- Supplier: Who to order from
- Lead Time: Days from order to delivery
- Est. Cost: Total purchase cost for shortage qty
⚡ Quick Start Guide (5 Minutes)
- Calculate Requirements: Click "🔄 Calculate Requirements" button
- Review Urgent Items: Check red URGENT card - these need immediate orders
- Check Details: Expand rows with shortages to see which production orders need the material
- Generate POs: Click "📄 Generate Purchase Orders" for urgent materials
- Share with Purchasing: Export or email PO list to procurement team
📅 Weekly MRP Process
Every Monday (9:00-9:30 AM):
- Open MPS Dashboard → Review/update 12-week production schedule
- Open MRP Dashboard → Click "Calculate Requirements"
- Check URGENT materials (red card) → Create POs immediately
- Check WARNING materials (yellow card) → Plan to order this week
- Review SUFFICIENT materials → Confirm no surprises
- Generate PO batch for all urgent/warning materials
- Email PO list to purchasing manager
- Update supplier order status as confirmations come in
Time Investment: 30 minutes/week vs 6-8 hours manual calculation
🔧 Understanding the Calculations
Gross Requirements:
Total Required = Sum of (Product Qty × Material per Unit) for all production orders
Net Requirements:
Shortage = Total Required - Current Stock - Open POs + Safety Stock
Order Timing:
Order Date = Required Date - Lead Time Days - Safety Buffer
⚠️ Note: MRP calculations are only as accurate as your:
- Bill of Materials (BOM) - must be current and complete
- Inventory counts - run cycle counts weekly
- Lead times - update when suppliers change
- MPS - keep production schedule realistic
📊 Using Shortage Analysis Tab
The Shortage Analysis tab shows top 10 materials with biggest gaps:
- Red bars: Percentage of shortage vs requirement
- Longer bar = bigger problem
- Focus on top 5 - these have highest impact on production
- Use for weekly meetings with purchasing and finance
⏱️ Lead Time Timeline Tab
Shows when to order each material to ensure on-time delivery:
- Materials ordered by required date
- Red zone = order overdue (already late!)
- Yellow zone = order this week
- Green zone = future orders
- Use as weekly purchasing calendar
📄 Generating Purchase Orders
Automatic PO Generation (Recommended):
- Review materials marked as URGENT or WARNING
- Click "Generate Purchase Orders" button
- System creates batch PO for all shortage materials
- Review quantities and suppliers
- Confirm and send to purchasing
Manual PO Creation:
- Click "Create PO" button on individual material row
- Fill in supplier, quantity, expected delivery date
- System saves PO to database
- Next MRP run will account for this PO
🎓 Best Practices
- Run MRP weekly minimum - More frequent for fast-changing environments
- Update MPS first - MRP is only as good as your production schedule
- Maintain accurate BOMs - Engineering changes must flow to BOM immediately
- Cycle count inventory - Physical counts weekly for critical materials
- Review lead times quarterly - Supplier performance changes
- Set safety stock strategically - Higher for critical/long-lead items
- Communicate with suppliers - Share forecasts for better pricing
- Track shortage root causes - Late deliveries? Bad forecasts? Fix the source
- Integrate with purchasing system - Automatic PO creation saves time
- Weekly review meeting - Planning, purchasing, finance - 30 minutes
⚠️ Common Issues & Solutions
Q: MRP shows shortage but we have the material?
A: Inventory count is wrong. Do a physical count and update system.
Q: Material shows as URGENT but production isn't for 3 weeks?
A: Lead time exceeds time until needed. This is correct - order today or you'll be late!
Q: Why does MRP suggest ordering more than the shortage?
A: Includes safety stock buffer. Adjust safety stock settings if too high.
Q: MRP calculations seem wrong?
A: Check: (1) BOM accuracy, (2) Inventory counts, (3) Open PO status, (4) MPS accuracy
Q: Too many URGENT materials every week?
A: Either: (1) Lead times too long, (2) Not running MRP frequently enough, (3) MPS changes too often
📈 Success Metrics (KPIs)
- Material Availability: Target >98% (materials available when needed)
- Stockout Incidents: Target <2 per month
- Inventory Turns: Target 8-12 per year
- Carrying Costs: Target <15% of inventory value
- Supplier On-Time Delivery: Target >95%
- PO Accuracy: Target >98% (right part, right qty, right time)
🔗 Integration with Other Systems
MPS → MRP: Production schedule automatically feeds MRP calculations
MRP → Purchasing: PO recommendations go directly to procurement team
MRP → Inventory: Material reservations prevent double-allocation
MRP → Finance: Cash flow planning based on PO schedule
Supplier Portal: Suppliers can see forecast demand for better planning
💡 Advanced Tips
- Lot Sizing: Order in supplier's standard pack quantities for better pricing
- Economic Order Quantity (EOQ): Balance ordering costs vs carrying costs
- ABC Analysis: Focus on high-value materials (A items), routine monitoring for C items
- Vendor Managed Inventory (VMI): For high-volume materials, let supplier manage stock
- Blanket POs: Annual agreements with call-offs for stable demand materials
- Safety Stock Formulas: Statistical calculation based on demand variability
📧 Need Help?
For questions or issues with the MRP system, contact:
Materials Planning Team
Email: dktrading1985@gmail.com
Phone: +94777268284
System Support
Email: dktrading1985@gmail.com