What Is MRP?

What Does MRP Stand For?

MRP stands for Material Requirements Planning — a system that calculates what raw materials to order, in what quantities, and when to ensure production runs on schedule without material shortages or unnecessary excess.

Brief History

The MRP concept was first developed in the 1960s by Joseph Orlicky, an American engineer working with IBM. He proposed that material demand (Dependent Demand) could be calculated from the production plan rather than forecast like finished goods.

The evolution of MRP followed this timeline:

• 1960s: MRP I (Material Requirements Planning) — focused solely on calculating material requirements
• 1980s: MRP II (Manufacturing Resource Planning) — expanded scope to cover Capacity Planning, Shop Floor Control, and Financial Planning
• 1990s to present: ERP (Enterprise Resource Planning) — integrates MRP II with management systems across all departments, from accounting and HR to procurement, sales, and warehousing

How MRP Works

The MRP system works by taking 3 inputs and calculating the output — what to order, when, and how much:

Input	Full Name	Description
1. MPS	Master Production Schedule	Master Production Schedule — specifies what products to produce, in what quantities, and by when
2. BOM	Bill of Materials	Bill of Materials — a complete list of raw materials and components needed to produce one unit, including required quantities
3. Inventory Status	Inventory Status	Current on-hand inventory, quantities on-order awaiting receipt, and Lead Time for each item

Real Example: Producing 100 Tables

Suppose a factory receives an order to produce 100 wooden tables for delivery within 3 weeks. Let's see how MRP calculates this:

Step 1: Review the BOM for 1 Table

Material	Qty/Table	Total Required (100 tables)	Lead Time
Wood Panel (Table Top)	1 panel	100 panels	2 weeks
Table Legs	4 legs	400 legs	1 week
Screws	16 pieces	1,600 pieces	1 week
Support Rails	4 pieces	400 pieces	1 week

Step 2: Check Inventory Status and Calculate Net Requirements

Material	Required (Gross)	On-hand	On-order	Need to Order (Net)
Wood Panels	100	30	0	70 panels
Table Legs	400	150	100	150 legs
Screws	1,600	500	0	1,100 pieces
Support Rails	400	400	0	0 (sufficient)

Step 3: Determine Order Dates (Planned Order Release)

MRP "offsets backward" from the need date, subtracting Lead Time:

• 70 Wood Panels: Lead Time 2 weeks, needed by week 3, so order in Week 1 (immediately!)
• 150 Table Legs: Lead Time 1 week, needed by week 3, so order in Week 2
• 1,100 Screws: Lead Time 1 week, needed by week 3, so order in Week 2
• Support Rails: sufficient stock — no order needed

This is what MRP does — calculates everything automatically. No guessing, no memorizing, no spreadsheets.

MRP I vs MRP II — What's the Difference?

Many people confuse MRP I with MRP II because the names are similar, but their scopes are very different:

Aspect	MRP I	MRP II
Full Name	Material Requirements Planning	Manufacturing Resource Planning
Scope	Materials and components only	Materials + production capacity + finances
What It Calculates	What, How many, When (to order)	+ Capacity Planning + Shop Floor Control + Financial Impact
Key Question	"What materials need to be ordered?"	"Can we produce this? What will it cost?"
Capacity Planning	None	Yes (CRP - Capacity Requirements Planning)
Financial Integration	None	Yes (linked to budget and costing)
Feedback Loop	Open-loop	Closed-loop — with feedback reporting

Simply put, MRP I only looks at materials, while MRP II covers the entire factory — materials + people + machines + money.

How Is MRP Different from ERP?

A frequently asked question is "Are MRP and ERP the same?" The answer is no, but they are related:

Aspect	MRP	ERP
Scope	Manufacturing and materials	Every department in the organization
Primary Users	Production, procurement, warehouse	All departments, all levels
Data Used	BOM, MPS, Inventory	All organizational data
Output	Purchase plans, production plans	Complete business overview + executive reports

Problems That Arise Without an MRP System

Factories without MRP typically rely on "manual ordering" — depending on the experience of production supervisors, warehouse staff, or procurement who "remember" what to order and when. Common problems include:

• Sudden material shortages — Lead Time wasn't factored in, ordering too late, production falls behind
• Over-ordering and bloated stock — fear of shortages leads to over-ordering, tying up capital in the warehouse while materials expire or become obsolete
• Missing delivery deadlines — realizing materials are insufficient only when production is about to start
• Using Excel for calculations — with multiple products and complex BOMs, errors multiply, version confusion arises, and when the Excel person leaves, everything stops
• No visibility — sales doesn't know if production can deliver on time, production doesn't know if procurement has ordered yet, and everyone keeps asking each other
• Dependent on one "veteran" employee — all knowledge lives in the warehouse manager's head with no system record. If that person calls in sick or resigns, everything grinds to a halt

Benefits of an MRP System

When properly implemented, an MRP system delivers multiple benefits:

Benefit	Details
Reduce Excess Inventory	Order based on actual demand — no guessing, no over-ordering, less capital tied up in the warehouse
On-time Production	Materials arrive exactly when needed — no waiting for raw materials, no production interruptions
Lower Storage Costs	Less stock = less warehouse space, lower insurance costs, less material deterioration
Advance Procurement Planning	Know in advance what needs to be ordered, enabling better price negotiations with suppliers
Reduced Dependency on Individuals	The system handles calculations — no reliance on a single employee's experience
Full Visibility	Sales, procurement, warehouse, and production all see the same data — better coordination

Saeree ERP and the MRP Module

Saeree ERP includes a built-in MRP module that supports complete material requirements planning:

Feature	Details
Multi-level BOM	Supports multi-level BOM — finished goods > semi-finished parts > raw materials with unlimited nesting
MPS Management	Manages the master production schedule linked to Sales Orders and sales forecasts
Net Requirement Calculation	Automatically calculates net requirements after deducting on-hand stock and pending orders
Lead Time & Safety Stock	Define Lead Time and Safety Stock per material — the system calculates order dates automatically
Planned Order Release	Automatically generates Purchase Orders and Work Orders
Connected to All Modules	Saeree ERP's MRP connects directly to procurement, warehouse, accounting, and sales modules — data flows automatically with no duplicate entry

MRP is not just a "purchasing system" — it's a system that tells the factory "what to do, how much, and when" based on real data, not guesswork or personal experience. When MRP works together with a good ERP, every department sees the same picture, errors are reduced, and production meets deadlines every time.

- Saeree ERP Team

Summary — Key Takeaways

1. MRP (Material Requirements Planning) is a material requirements planning system that calculates what to order, how much, and when — from MPS + BOM + Inventory Status
2. MRP I covers only materials, while MRP II covers the entire factory — including Capacity Planning and Financial Planning
3. MRP is part of ERP — ERP covers all departments, while MRP is the module that handles production and materials
4. No MRP = manual ordering — risking material shortages, bloated stock, late production, and dependence on one veteran employee
5. Key benefits: Reduce excess inventory, meet production deadlines, lower storage costs, plan procurement in advance
6. Saeree ERP includes a built-in MRP module supporting multi-level BOM, Lead Time, Safety Stock, and automatic integration with all modules

If your organization is struggling with material planning, late orders, bloated inventory, or needs a practical MRP system, you can schedule a demo or contact our advisory team to assess your organization's readiness.