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MRP: from what you sell to what you must buy

MRP turns the forecast into purchase orders, week by week: it subtracts what you already have and what is on the way, and releases each order one lead time early.

The full plan

Blue boxes on the last line are the orders to place, and when. Change any variable and the plan updates at once — press Replay to walk through it again.

Excavator service kit — MRP record · lead time 2 wk

Past dueW1W2W3W4W5W6W7W8W9W10Gross requirements30303030303030303030Scheduled receipts··40·······Projected on hand4010200000000Net requirements···10303030303030Planned receipts···10303030303030Planned releases··10303030303030··today2 wk earlier

Bill of materials

×1Housing×2Filter×4SealService kit

Click a part to see its MRP record.

Filter — 2 per kit · lead time 1 wk · 60 on hand

Past dueW1W2W3W4W5W6W7W8W9W10Gross requirements·20606060606060··Projected on hand604000000000Net requirements··206060606060··Planned receipts··206060606060··Planned releases··206060606060···today
DemandAlready on the wayProjected stockShortage to coverPlanned orderPast due
Plan complete
Planned kit orders
7
First PO to place
Week 2
Past-due releases
0
Stock at week 10
0 units
Average stock
7 units
Filter orders
6

A kit order that is placed late cannot be saved by working harder: the parts are simply not there. MRP (Material Requirements Planning) exists to place every order on time, and not a week earlier than needed.

The stage plays the MRP record of a service kit the central warehouse assembles for excavators. Watch it fill in line by line: first what customers need, then what we already have, and finally the purchase orders to place and when.

Then the kit is broken down into its parts. The week you plan to build kits is the week you need the parts — so the kit's plan becomes the parts' demand. That is how one forecast drives purchases for every component.

The MRP record, line by line

  1. 1Gross requirements. Total demand for the week: the forecast plus confirmed extra orders. For a part, it is what its parent products need.
  2. 2Scheduled receipts. Purchase orders already placed that arrive that week. MRP does not touch them.
  3. 3Projected on hand. Stock at the end of each week if the plan is followed.
  4. 4Net requirements. What is missing: demand − (stock at the start of the week + scheduled receipts), plus safety stock.
  5. 5Planned receipts. The order that must arrive that week, after applying the lot-sizing rule.
  6. 6Planned releases. The same order, placed one lead time earlier. This is the line a buyer acts on.
Net requirement = Gross − (Stock + Scheduled receipts) + Safety stock
Only when the result is positive; otherwise the week is covered.
Release week = Receipt week − Lead time
If the release week is before today, the order is past due: expedite it or move the need.

Three ways to size an order

Why parts follow the kit

A bill of materials (BOM) lists what goes into a product: here 1 filter housing, 2 filters and 4 seals per kit. MRP multiplies the kit releases by these quantities and uses the result as the parts' demand.

This is why the parts' demand comes in lumps even when kit sales are smooth: it follows the kit orders, not the customers. Forecasting the parts separately would miss those lumps — MRP calculates them.

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What to remember

  • MRP answers what to order, how much and when — for every item, every week.
  • Net requirement = what you need − what you have − what is already coming.
  • Each order is placed one lead time before it must arrive. Longer lead times mean deciding earlier.
  • Past-due releases are a warning: the plan cannot be met unless you expedite or change the date.
  • For kits and assembled products, the parent's releases become the parts' demand, multiplied by the bill of materials.