What is MRP (material requirements planning)?

MRP stands for material requirements planning. It answers one question: if you have to deliver a given quantity of finished goods on a given date, how much of each raw material and semi-finished item do you need, and when should you order or start making them? MRP works this out by reading demand, the bill of materials (BOM), stock records, and lead times together.

Its output is a list of suggestions: items to buy, make, or move between warehouses, each with a quantity and a date.

How does MRP calculate requirements?

You can think of the calculation in four steps.

1. Gross requirements. Sales orders, forecasts, and the materials for open production orders are collected as demand. Demand for each finished product is broken down into its components through the BOM, which is called a BOM explosion. A material can appear at more than one level of the BOM, and the calculation accounts for this so that no part of the requirement is missed.
2. Net requirements. Available stock on hand and planned receipts (open purchase orders, production orders, and warehouse transfers) are subtracted from the gross requirement. If safety stock is defined, the calculation keeps stock from falling below that level.
3. Lot sizing. The net requirement is rounded according to rules such as a minimum order quantity and an order multiple.
4. Lead-time offsetting. The purchasing or production lead time is counted back from the need date to find the date the order has to be placed. If that date is already in the past, the suggestion is late.

The calculation runs over periods such as days, weeks, or months. For each period, you see opening stock, demand, planned receipts, and closing stock side by side.

What doesn’t MRP do?

Classic MRP plans materials, not capacity. It doesn’t check whether your machines have room for the production orders it suggests. Capacity planning and scheduling are a separate step.

An approach called MRP II adds capacity and cost planning. ERP systems combine this planning with sales, purchasing, inventory, and accounting on the same records.

MRP suggestions are only as good as the data behind them. A wrong quantity in a BOM, an outdated lead time, or an incorrect stock record skews the suggestion directly. That’s why businesses that use MRP treat maintaining their planning data as a job in its own right.

MRP in IWB

In IWB, MRP runs in Requirements Planning, which works alongside Manufacturing. Demand comes from sales orders, the material requirements of production orders, and project budgets. If you choose, sales opportunities in CRM are added as forecasts, along with their probabilities.

The calculation keeps stock from falling below the safety level. When you select a suggestion, IWB shows the records behind it under “Where does this requirement come from?” Goods in quarantine, blocked, or at a subcontractor don’t count as available stock.

When a suggestion looks right, you approve it and it becomes a purchase requisition, a draft production order, or a warehouse transfer, marked as “Converted.” Each run is a snapshot of that moment, so the quantity you approve is the quantity you saw on screen.

If you plan warehouse by warehouse, IWB first tries to cover a requirement from free stock in another warehouse and suggests buying or making the rest. An item that can be neither made nor bought doesn’t quietly drop off the list; it shows as “Not plannable.”

MRP doesn’t plan capacity. You handle machine load and day-by-day scheduling in the capacity and planning views in Manufacturing.

IWB runs 17 checks to list gaps that could throw off the plan, such as a finished product with no BOM or a material with no lead time, and you fix them with bulk editing. If you want, you can turn on the master production schedule (MPS) in settings and add your production commitments to the plan period by period.