MRP (material requirements planning)
What is MRP? Material requirements planning: working out what to buy or make, and when, from customer demand, the stock you hold and the BOM (the parts list).
In plain words
MRP answers three questions. What do we need, what do we already have, and what must we make or buy to close the gap?
It starts from what customers have ordered, subtracts the stock you hold, and uses the parts list (BOM) to turn a shortfall in a finished product into a need for each part.
A worked example
| Item | Needed | In stock | Shortfall | Action |
|---|---|---|---|---|
| Pump P-100 (finished, has a BOM) | 200 | 60 | 140 | Make 140 |
| Motor M-5 (1 per pump) | 140 | 50 | 90 | Buy 90 |
| Casting C-2 (2 per pump) | 280 | 100 | 180 | Buy 180 |
Customers have ordered 200 pumps due in 30 days and you hold 60, so you must make 140. Each pump needs one motor and two castings, so the plan asks for 140 motors and 280 castings, less what is in stock. This example has no purchase orders already open. Sample numbers.
Why it matters
- Cost. Too much stock ties up cash, and too little stops production or a dispatch.
- Deadlines. A part ordered late makes the customer's delivery late.
- Risk. A plan is only as good as the parts lists and stock counts behind it. A wrong BOM gives a wrong plan.
How Kinnow handles it
In Kinnow, MRP suggests; a person decides.
- The Planning screen. On the Planning screen in the Make area, you press Run MRP and choose how many days ahead to plan, from 1 to 365 (90 by default). Each run is saved as a dated card with a make list and a buy list, each with suggested quantities.
- Make or buy. An item with a BOM is suggested for making; an item without one is suggested for buying.
- Approval. A run starts as a Draft. You review it and approve it. Kinnow never raises purchase orders or work orders from a run by itself.
- Next steps. The Production Planner agent turns the make lines into suggested work orders, and a person releases them. On the buying side, the Reorder Planner suggests reorders, and it never raises a purchase order by itself.
The honest limit. A run nets demand against stock item by item, from the demand and stock figures it is given. Today it does not read your open sales orders by itself, so ask us how those figures would be fed for your plant. Automatic scheduling of machines is not included.
Bring one product with its parts list and we will show the make and buy lists.
Related terms
- BOM (bill of materials): the parts list MRP uses.
- FEFO / FIFO: which stock goes out first.
- Three-way match: checking the bill for what you bought.
Questions
How is MRP different from a reorder level?
A reorder level triggers when the stock of one item falls below a number. MRP plans from actual orders and the parts list, so it also works out the parts needed for a product you have yet to make.
Does MRP place orders by itself?
Not in Kinnow. A run only suggests quantities. A person approves the run, and purchase orders and work orders are raised by people.
What do I need in place before MRP is useful?
Up-to-date parts lists and accurate stock counts. If either is wrong, the plan will be wrong.
Request a demo and we will run a planning pass on your own item list.