Material Requirements Planning: Plan, Produce & Deliver on Time

Staying on top of all the processes and stages can be tricky when running a business. You must ensure you have what you need for production and avoid overstocking. Material Requirements Planning (MRP) can help with this. It is a crucial component of Enterprise Resource Planning (ERP) systems, integral to modern business operations. The revenue in the Enterprise Resource Planning Software market is estimated to reach USD 55.88 billion in 2025 and USD 65.29 billion by 2029. This shows that more businesses are adopting technologies like MRP and ERP.

Understanding MRP can make a big difference if you want to grow your business and keep things running smoothly. Let’s dive into how it can work for you.

Material Requirements Planning: The Basics Explained

MRP helps you manage inventory, plan production, and schedule deliveries, ensuring that materials are available at the right time to meet customer demand. It enables you to avoid delays, reduce waste, and keep costs under control. Key Components of MRP are: 

• Bill of Materials (BOM): A detailed list of raw materials, components, and subassemblies needed for production, showing parent-child relationships.
• Inventory Records: Tracks stock levels of raw materials, work-in-progress, and finished goods to prevent shortages or overstocking.
• Master Production Schedule (MPS): Defines what to produce, what quantity, and when to match demand.
• Material Requirement Plans: Determines required materials, quantities, and order timing to meet production schedules.
• Inventory Status File (ISF): Monitors stock levels and pending supplier orders to prevent disruptions.
• Lead Time Tracking: Tracks material and production lead times to ensure smooth operations.
• Planning Data: Considers labour, machine capacity, routing, quality, and lot sizing to optimise production.

MRP works by answering three key questions: 

• What materials do you need? 
• How much of it do you need? 
• When do you need them? 

It takes your production plan and breaks it down into specific material requirements, helping you avoid over-ordering or running out of stock.

The process is simple. First, you check the inventory to see what materials you already have. Then, you identify what is missing and determine the quantity required. Finally, you schedule orders for purchasing or production to ensure everything is ready on time.

This system prevents material shortages, reduces waste, and ensures timely deliveries, keeping customers satisfied. It also helps you control storage costs by purchasing only what is necessary. With MRP, you can efficiently manage production and balance supply and demand, making your business more organised and cost-effective.

The Evolution of MRP

Material Requirements Planning (MRP) began in the 1960s when Joseph Orlicky developed it to solve factory inventory issues. Companies like Black & Decker were early adopters, using computers to plan production schedules and ensure materials arrived on time.

In the 1970s, MRP evolved into Manufacturing Resource Planning (MRP II), adding scheduling, cost control, and production management. This made manufacturing more efficient by reducing waste and improving planning.

By the 1990s, MRP II had expanded into Enterprise Resource Planning (ERP), integrating manufacturing, finance, HR, and supply chain management. Software companies like SAP and Oracle developed ERP systems to streamline operations.

Today, ERP systems use real-time data, AI, and cloud technology, allowing businesses to make quick decisions and optimise production. Cloud-based ERP provides remote access and helps adjust inventory based on demand. Many companies now combine ERP with lean manufacturing and Just-In-Time (JIT) to cut costs and improve efficiency.

MRP has evolved from a simple inventory tracker to a complete business management tool, helping companies stay organised, reduce costs, and boost productivity.

How MRP Helps Manage Materials Efficiently

An MRP system helps you manage materials efficiently by ensuring the right materials are available at the right time.

1. Calculates material needs using production schedules, the Bill of Materials (BOM), and inventory data to ensure accurate orders.
2. Maintains optimal stock levels, preventing shortages and excess inventory.
3. Schedules procurement based on lead times, avoiding production delays.
4. Reduces waste by ordering only what’s needed, freeing up capital.
5. Keeps production smooth by preventing bottlenecks and disruptions.
6. Ensures timely deliveries, improving customer satisfaction and trust.
7. Aligns supply with demand, reducing last-minute orders and inefficiencies.
8. Provides clear data for better planning, cost control, and resource management.

The Role of MRP in Manufacturing

MRP can help smoothen the process of manufacturing. Here’s how:

• Prepares for Production: Tells you what materials you need and when to order them.
• Prevents Shortages: Ensures you don’t run out of stock.
• Stops Overstocking: Helps you buy just enough to avoid waste.
• Keeps Production on Schedule: Ensures materials arrive on time so there are no delays.
• Saves Money: Reduces extra costs by avoiding waste and storing too much.
• Predicts Demand: Helps you plan materials based on sales trends.
• Improves Customer Service: Ensures products are made and delivered on time.
• Uses Resources Wisely: Helps you manage workers, machines, and materials efficiently.
• Works for All Businesses: Useful whether you make things in batches or large quantities.

MRP helps you manage your business better by keeping production smooth and avoiding mistakes. It saves you time, money, and effort while keeping your customers happy.

The Good and the Bad of MRP

MRP helps you manage production smoothly, but it also has some challenges. Here’s what works well and what to watch out for.

The Good:

• Better Production Planning: Ensures materials are available when needed.
• Lower Costs: Reduces waste, storage costs, and unnecessary purchases.
• Less Overstocking: Helps avoid buying in excess, saving space and money.
• Faster Delivery: Ensures products are ready on time, keeping customers happy.
• Better Use of Resources: Helps efficiently manage workers, machines, and stock.
• Prevents Shortages: Tracks materials so you don’t run out unexpectedly.

The Bad:

• Needs Accurate Data: Wrong data can lead to missing materials or delays.
• Expensive to Set Up: MRP systems need money for software and training.
• Rigid Schedule: Hard to adjust if demand changes suddenly.
• Not Always Flexible: May struggle with last-minute changes.
• Mismatch Risks: If demand changes, you may have too much or too little stock.

Choosing Between MRP and ERP

Choosing between MRP (Material Requirements Planning) and ERP (Enterprise Resource Planning) depends on business needs. First, let us take a look at the key differences between MRP and ERP: 

Feature	MRP (Material Requirements Planning)	ERP (Enterprise Resource Planning)
Primary Focus	Manufacturing and inventory management	Full business integration across departments
Scope	Limited to production planning	Covers finance, HR, sales, supply chain, and manufacturing
Complexity	Easier to implement and use	More complex due to multiple integrated functions
Cost	More affordable	Higher cost due to extensive features
Modules Included	Inventory, production planning, procurement	Finance, HR, CRM, supply chain, inventory, and manufacturing
Implementation Time	Faster setup, as it focuses only on manufacturing needs	Longer setup time due to multiple department integrations
Ideal For	Manufacturing companies that need better inventory and production control	Businesses looking for complete operational management
Key Benefits	Reduces waste, optimises inventory, and improves production efficiency	Enhances decision-making, automates processes, and improves overall efficiency
Integration Capabilities	Can integrate with ERP or other systems	Fully integrated system with cross-department functionality

Which One to Choose?

• Choose MRP if you mainly need to manage production and inventory. It’s cheaper and great for smaller businesses.
• Choose ERP if you need a system that handles more areas, such as finance, HR, and sales. It’s more expensive but better for larger businesses.
• Best of Both: An ERP with MRP gives you production and other business functions in one system.

It’s a good idea to consult a business advisor or accountant before choosing.

How Shiprocket Supports Businesses Using MRP

Shiprocket helps your business manage production, shipping, and inventory easily. You can ship products across India and globally without hassle with its services. The platform offers automated domestic shipping, starting at just INR 20/500g, making sending packages to customers quick, simple, and affordable. Shiprocket also provides packing and storage in warehouses across India, reducing shipping costs and speeding up deliveries.

Innovative technology is also one of Shiprocket’s tools to boost sales. For example, the Checkout tool speeds up customers’ buying process, and Engage360 helps keep customers connected through WhatsApp, making your business more efficient and improving customer satisfaction.

If you’re using MRP to manage production, Shiprocket works well. It tracks inventory automatically as products are shipped, so you never run out of stock. You’ll save money on shipping, reduce returns, and ensure quick customer delivery. Plus, Shiprocket’s cross-border shipping services let you send products to over 220 countries.

Shiprocket makes it easier to run your business by handling the tough parts of shipping and communication. This lets you focus on growing your business.

Conclusion

Managing materials for production becomes much easier with Material Requirements Planning (MRP). By tracking what you need and when to order it, MRP helps you avoid waste, prevent stock shortages, and meet your production goals on time. It may require some initial setup, but once it’s in place, it streamlines your processes, saving you time and money. Using MRP, you can plan, stay organised, and keep your business running smoothly while keeping your customers satisfied with timely deliveries.