Production

Material Requirements Planning

Material requirements planning calculates the sub-material needs of each product in the production plan by opening the bill of materials, comparing them with existing stock and open orders, and generating production or purchasing recommendations for shortages. It is the most classic, yet still the most critical, calculation in corporate systems.

Calculation logic

1. GROSS NEEDS Plan × Product Tree2. NET NEED Stock and open orders are low.3. PARTY FORMATION Lot size rule 4. TIMING Get it back within the supply period.5. RECOMMENDATION Planned order/request 6. REPEATING THE SAME ACCOUNT FOR A LOWER LEVEL. The planned order at the upper level becomes the gross requirement at the lower level — and this continues until raw materials are available. The accuracy of the account depends on three data points: product tree accuracy, inventory accuracy, and lead time realism. If one of the three is faulty, the output becomes unreliable; planners abandon the system and switch to spreadsheets.

Scope

  • Planning parameters: Planning type for each material, batch size rule, safety stock, lead time, minimum and maximum order quantity, rounding value.
  • Lot size rules: As needed, fixed quantity, periodic collection, economic lot, or based on minimum coverage period.
  • Multi-level breakdown: Calculating all levels sequentially, from the final product to the raw materials.
  • Multi-site planning: Taking into account inter-site supply and alternative production locations.
  • Exception messages: Providing the planner with action suggestions such as "prioritize this order," "cancel this order," "this order is overdue," or "this material is out of capacity." The actual output of MRP is not the numbers, but this list of exceptions.
  • Change tracking: Seeing what has changed compared to the previous study; avoiding having to review the entire list from scratch each time.
  • Simulation run: Testing changes before they are reflected in the real data.
  • Demand-driven planning: As an alternative to classic needs planning, managing the flow with dynamically adjusted buffer stocks strategically located. It is effective in environments with high uncertainty and long lead times.
  • Predictive planning: Simulating medium-term material and capacity scenarios to identify bottlenecks in advance and explore alternatives.


Why is MRP "not working"?

In a significant number of organizations, needs planning is established, used for a few months, and then abandoned. The reason is almost always one of these three:

1. Stock accuracy is low. If the stock in the system does not match reality, the recommendations are meaningless.
2. The product tree does not reflect reality. If consumption in the field is different, the calculation is wrong from the start.
3. The delivery times are optimistic. If materials that actually arrive in 6 weeks are listed as 3 weeks, the plan will always be behind schedule.

No planning investment will yield results without correcting these three data points. The order is clear: data accuracy first, then planning.

The planner's role changes.

In a well-functioning planning system, the planner's job isn't to place orders; the system generates the suggestion itself. The planner's job is to manage exceptions : conflicts the system can't resolve, capacity overruns, supplier issues, and priority decisions.

Once this transformation occurs, the same planner will be able to manage a much wider range of products and dedicate their time to decision-making rather than data entry.
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