What is the MRP Process?

Manufacturing companies, whether large or small, often face the same recurring challenge—how to ensure that the right materials are available at the right time without overstocking or missing deadlines. In an ideal world, production would flow smoothly, customer demand would be predictable, and materials would arrive just in time. But in reality, production planners are often juggling a hundred moving parts, and even a small delay or shortage can bring the entire system to a halt.

What is the MRP Process?

The MRP process is a structured, time-phased approach used by manufacturers to ensure that materials—whether purchased or produced—are available when needed to fulfill production and delivery commitments. It helps convert demand signals, such as sales orders or forecasts, into detailed plans for procuring and producing materials across every level of the production hierarchy.

The MRP process starts by checking the demand in the system—driven by new sales orders and sales forecasts—and then evaluating the current inventory of finished goods. It proceeds by referring to the Bills of Materials (BOMs), which break each finished product down into its components and sub-components. For every required item, the system determines whether it should be purchased externally or produced in-house.

One of the most powerful aspects of the MRP process is its ability to compute the required-by dates for every item in the production chain. Starting from the estimated delivery date of the sales order, MRP works backward to determine when each component or sub-component must be available to avoid any bottlenecks or production delays. This includes accounting for procurement lead times, production times, and even inventory availability at each stage.

By creating a clear, calendar based view of material needs—both for procurement and internal production—the MRP process enables production planners to schedule activities precisely and meet customer delivery expectations without overstocking or missing deadlines.

Objectives of the MRP Process

The MRP process is designed to maintain supply with demand while optimizing resources to ensure smooth and efficient production. The main objectives of the MRP process include:

1. Ensure Material Availability
Helps guarantee that all required materials and components are available when needed for production. This prevents interruptions on the shop floor caused by missing parts, allowing manufacturing to proceed without delays.

2. Maintain Minimum Inventory Levels
Aims to maintain stock at optimum level while meeting production needs. By calculating the exact quantities required, it reduces unnecessary stock, freeing up working capital and minimizing storage costs.

3. Optimize Production Schedules
Helps streamline material availability in consonance with production plans to create efficient schedules. MRP Process also helps determining the date by which each component must be made available to ensure smooth production workflow, full utilization of production capacity, and timely order fulfillment.

4. Improve Overall Efficiency
Facilitates decision-making across procurement and manufacturing departments by factoring in demand, forecasts, inventory data, and production needs. This leads to better resource allocation, reduced waste, and smoother operations.

Inputs of MRP

The MRP process relies on three critical inputs to accurately plan material requirements and ensure efficient production scheduling. These inputs provide the foundation for calculating what materials are needed, in what quantities, and when. Understanding these key components is essential to grasp how the MRP process functions:

1. Master Production Schedule (MPS)
The Master Production Schedule defines the quantities of finished products that need to be produced within specific time frames. It acts as a detailed production plan, reflecting customer orders, forecasts, and inventory targets. The MPS provides the MRP process with the timeline and volume of products to be manufactured, guiding material procurement and production activities accordingly.

2. Bill of Materials (BOM)
The Bill of Materials is a comprehensive list that details all raw materials, components, and sub-assemblies required to produce a finished product. It outlines the quantity of each item needed and the relationship between assemblies and their parts. The MRP process uses the BOM to break down finished product demands into specific material requirements, ensuring every necessary component is accounted for.

3. Inventory Snapshot
Inventory snapshots provide real-time data on the current stock levels of raw materials, components, and finished goods. This includes information about quantities on hand, quantities allocated, and quantities on order, helping avoid both shortages and excess inventory.

Together, all these inputs enable the MRP process to create an accurate and actionable requirement plan that balances the gap between production demands and available supply and resources, leading to optimized manufacturing operations.

Let’s understand the MRP process using an example of a skateboard built using a multi-level BOM, having components with varying inventory levels, quantity ratio and lead times.

MRP Example

To demonstrate how an MRP software handles Material Requirements Planning, here’s a real-world scenario from a company that produces skateboards. The example includes multi-level BOM having both purchased and in-house manufactured components, along with a well-defined production schedule.

In this scenario, a sales order is received on June 10 for 100 skateboards, with a delivery date on June 22. 

Bill of Materials for a Skateboard

Inventory Status (as of June 10)

Net Requirements

Lead Times

• All the purchased items: 5 working days
• Deck Assembly: 2 working days
• Final Skateboard Assembly: 2 working days
  

Production & Procurement Timeline

Final Material Requirements Plan with Dates

This example shows how the MRP process works across different levels of a BOM—breaking down finished product demand into component requirements, checking inventory, and calculating exact quantities with “required-by” dates. It ensures every material—whether purchased or produced—is available when needed, so production can proceed smoothly and deliveries are made on time.

Common Challenges in the MRP Process

While the MRP process is a powerful tool for planning and production, it relies heavily on accurate inputs and timely updates. Even a well-structured MRP system can face roadblocks if the following challenges aren’t addressed effectively:

1. Maintaining Accuracy in BOM Setup
   An incomplete or outdated Bill of Materials can lead to material shortages or procurement of incorrect parts. MRP systems must have accurate multi-level BOMs to calculate component needs correctly.
   
   
2. Maintaining Accurate and Updated Data
   MRP calculations are only as good as the data they’re based on. If inventory records, BOMs, or demand forecasts are not kept updated, the entire planning process can lead to overproduction, stockouts, or unnecessary procurement.
   
   
3. Dealing with Changing Lead Times
   MRP assumes fixed lead times for purchasing and production. However, delays from suppliers, transportation issues, or unexpected shop floor bottlenecks can disrupt the actual timelines, causing missed delivery dates or shortages in fulfillment.
   
   
4. Aligning Material Planning with Production Capacity
   Traditional MRP doesn’t always account for actual machine or labor capacity. Without factoring in available capacity, material availability may not align with actual production capabilities.

Overcoming these challenges requires more than just awareness—it demands the right tools. A capable MRP software helps determine accurate material requirements—ensuring neither understocking nor overstocking, and keeping production on track.

Conclusion

The MRP process is the backbone of efficient, demand-driven manufacturing. It enables manufacturers to translate demand originating from sales orders, inventory targets and production schedules into precise material and component requirements—ensuring everything needed for production is available at the right time and in the right quantity.

The MRP process is executed through various Manufacturing Execution and Planning Solutions (MEPS), and one of such solutions is available on the Apache OFBiz platform—developed under the umbrella of Apache Software Foundation. Apache OFBiz is a unified enterprise solution with supply chain management and planning at its core. Its manufacturing module includes an intelligent MRP I engine that analyzes inventory levels, production dependencies, and lead times to generate accurate procurement and in-house production requirement plans. We’ve also created a detailed guide that explains how the MRP process works within Apache OFBiz.

If you're looking to build a custom Manufacturing Execution and Planning Solution (MEPS) with a powerful MRP engine using Apache OFBiz—connect with our team of experts at HotWax Systems to unlock the full potential of open-source Apache OFBiz.