Material Requirements Planning (MRP) is the computational engine behind production planning. Given a master production schedule (what needs to be built and when), BOMs (what materials each product requires), and current inventory levels, MRP calculates purchase orders and work orders needed to meet demand.
MRP explodes BOMs level by level, netting out available inventory and scheduled receipts at each level, then offsets by lead times to determine when orders must be placed. The output is a set of planned orders: buy this material on this date, release this work order on this date.
MRP works well for repetitive manufacturing with stable demand. It struggles in high-mix, low-volume environments where demand is unpredictable and lead times are variable. Modern manufacturing systems augment MRP with real-time shop floor data, AI-driven demand sensing, and dynamic lead time calculations.