Material Requirements Planning (MRP

Supply Chain & Manufacturing: Material Requirements Planning (MRP)

Developed by Joseph Orlicky in 1964, Material Requirements Planning (MRP) is the computational logic that translates independent master schedule demand into time-phased dependent component requirements:

• The Three Core MRP Inputs:

• Master Production Schedule (MPS): What finished products are needed and by what exact dates.

• Bill of Materials (BOM): The hierarchical engineering recipe listing the exact quantities of raw materials and subassemblies required per finished unit.

• Inventory Status Records: On-hand physical inventory, open purchase orders (scheduled receipts), and safety stock targets.

• Lead-Time Offsetting (Backward Scheduling): MRP works backward from due dates by subtracting procurement or manufacturing lead times, determining the exact calendar week that purchase orders must be released to suppliers to prevent assembly line stoppages.

• Lot-Sizing Rules: Net requirements can be ordered using Lot-for-Lot (L4L) (exact quantity needed), Economic Order Quantity (EOQ), or Periodic Order Quantity (POQ).

How to Use This Calculator

Enter your Master Production Schedule (MPS) Finished Good Demand (e.g. 800 (Finished parent units needed)), Bill of Materials (BOM) Component Multiplier (Qty/Parent) (e.g. 3 (Number of child parts per finished unit)), Current Component On-Hand Inventory (Units) (e.g. 450), Scheduled Receipts (Open Purchase Orders in Pipeline) (e.g. 200 (Units already ordered)), Safety Stock Buffer Requirement (Units) (e.g. 100), Component Scrap / Yield Loss Rate (%) (e.g. 4 (4% assembly fallout)), Component Procurement / Manufacturing Lead Time (Weeks) (e.g. 3), and Finished Good Target Due Week (Week Number) (e.g. 8 (Week assembly must complete)). Results update instantly as you type — adjust any value to compare scenarios.

The Formula

Material Requirements Planning (MRP) \& BOM Explosion equations:

Gross Requirements = (MPS Parent Demand × BOM Multiplier) × (1 + Scrap Rate)

Total Available Stock = On-Hand Inventory + Scheduled Receipts

Net Requirements = (0, Gross Requirements + Safety Stock - Total Available Stock)

Planned Order Receipt (PORec) = Net Requirements (Lot-for-Lot policy)

Planned Order Release Week (PORel) = Target Due Week - Lead Time Weeks

Projected Available Balance (PAB) = Total Available Stock + PORec - Gross Requirements

Worked Example

For example, producing 800 finished widgets due in Week 8, where each widget requires 3 subcomponents, 4\% scrap rate, 450 units on hand, 200 units scheduled for delivery, 100 units safety stock, and a 3-week lead time: Gross requirements are (800 × 3) × 1.04 = 2,496 units. Total available is \ units. Net requirements are . Offsetting by 3 weeks lead time establishes the Planned Order Release in Week 5) for 1,946 units.

Understanding Your Result

Evaluate your result in the context of your specific use case and relevant industry standards or reference values. A single calculated result is a starting point — test two to three scenarios to understand how sensitive the outcome is to your key input assumptions. For high-stakes decisions, verify your result against a secondary source or subject-matter expert before acting.