MRP Fundamentals and the Manufacturing Planning Hierarchy
Planning hierarchy
MRP is the third planning level, not the first. The cascade runs: strategic business plan (2–10 years), demand management and S&OP (1–3 years, monthly buckets), production plan (product families and volumes), master production schedule (end items in weeks or days), material requirements planning (components), then capacity requirements planning and shop-floor/purchasing execution. Upper levels plan families and volumes; lower levels plan individual items and dates. The mismatch is deliberate - it keeps each level tractable.
Inputs and outputs
MRP has three inputs: the MPS, the bill of materials, and inventory records (on-hand, scheduled receipts, lead times, lot-sizing rules, safety stock). It produces planned orders and action messages. MRP is a time-phased netting engine: it decides when orders are needed and offsets by lead time, but quantity comes from the item's lot-sizing rule.
Time fences
Inside the demand time fence the MPS follows customer orders; inside the planning time fence the master scheduler authorises changes; beyond it, MRP regenerates freely.
Worked example
A bicycle takes 2 wheels. MPS: 100 bikes in week 4. Wheels on hand 30; scheduled receipt 20 in week 2; lead time 1 week; lot-for-lot. Gross requirement week 4 = 100 × 2 = 200. Projected available after week 2 = 50; after week 4 = 50 − 200 = −150. Net requirement 150; planned receipt week 4; planned release week 3. Netting on the 30 on hand alone gives 170 - the classic error that ignores the scheduled receipt.
Traps
Confusing the production plan (families, rates) with the MPS (end items, dated). Assuming MRP schedules work centres - it plans orders; CRP and the shop floor schedule. Forgetting that the MPS must sit on items that can be exploded, such as a planning bill for a modular product. Mixing up a planned order release with a scheduled receipt.