What Is MRP? A Beginner's Guide to Material Requirements Planning, with a Worked Example
MRP (Material Requirements Planning) calculates which parts a factory must make or buy, how many, and when to start, from the production plan, the bill of materials (BOM) and inventory. This guide starts from zero, with a worked 100-desk example, common pitfalls, an English-Japanese-Thai glossary, and how to get started with TPiCS-X.
Short answer: MRP (Material Requirements Planning) is a planning method that answers three questions for a factory: what parts to make or buy, how many, and when to start. It takes the master production schedule (MPS), the bill of materials (BOM) and current stock plus open orders, then works back from each due date by the item's lead time. The result is a list of planned work orders and purchase orders that keeps parts from running short without piling up stock (Oracle, ASCM). In Japan it is called 資材所要量計画 (or simply 所要量計算), and in TPiCS-X, the Japanese production management system, the function is called f-MRP.
- 3
- Questions MRP answers: what, how many, when
- 1964
- Year the first company (Black & Decker) adopted MRP
- 98%
- Common rule of thumb for inventory accuracy with MRP
- 128
- Maximum BOM levels per product in TPiCS-X
This guide is for people new to MRP. By the end you will know what data MRP needs, how the calculation works, where it goes wrong, and how a factory should start. TPiCS-X facts come from TPiCS Laboratory's official site (tpics.co.jp); MRP principles come from ASCM (APICS), Oracle, Siemens and the other sources listed at the end.
What is MRP, in plain terms?
Picture cooking dinner for 100 guests. The recipe tells you what each dish needs, the fridge tells you what you already have, the dinner time tells you when everything must be ready, and each shop takes a different number of days to deliver. To avoid running out without overbuying, you work backwards from dinner time: what to order, how much, and from which day.
MRP does the same in a factory. The recipe is the BOM, the fridge is inventory, dinner time is the due date in the production plan, and delivery time is lead time. The difference is that a factory has hundreds or thousands of items, parts nested several levels deep, and orders that change every day, so the calculation has to be done by a system.
The core idea of MRP is to separate independent demand from dependent demand. Desk sales are independent: they come from customers or a forecast. Desk legs are dependent: you can calculate exactly how many you need from the number of desks you plan to build. Components should therefore not be reordered on a "reorder when it runs low" basis (reorder point) like finished goods, but ordered against the actual production plan. Joseph Orlicky set out this approach in his book Material Requirements Planning (McGraw-Hill, 1975) (history of MRP).
Why use MRP instead of Excel or experience?
A small factory can plan with Excel or a supervisor's experience. As the product range grows, the same problem keeps coming back: the parts you need are short while the parts you don't need fill the warehouse. The table sums up the difference.
| Topic | Excel / reorder when low | MRP |
|---|---|---|
| Orders are based on | Past usage or falling stock | Future production plan multiplied through the BOM |
| Multi-level products | Calculated level by level by hand, error-prone | Every BOM level exploded automatically |
| Customer order changes | Several files to update, slow and easy to miss | Recalculate and see at once what to add, cut or move |
| Orders already placed | Often forgotten, so items get ordered twice | Open purchase and work orders netted off automatically |
| Knowing a part will be late | Found out when the line stops | Flagged while planning |
ASCM (formerly APICS), the global supply chain association, explains that MRP ties order quantities to actual future requirements rather than stock levels alone, works toward zero excess stock for each item, and gives buyers and planners the information they need to act (ASCM).
What data does MRP need?
1. Master production schedule (MPS)
Which finished products to make, how many, and when they must be ready. It comes from customer orders and forecasts and is the starting point of the whole calculation.
2. Bill of materials (BOM)
Which components make one product, how many of each, and what those components are made of, across as many levels as needed. If the BOM is wrong, everything calculated from it is wrong.
3. Stock and open orders
What is on hand now, plus purchase orders not yet delivered and work orders not yet finished. These are netted off first, so nothing is ordered twice.
4. Lead times and order rules
How many days each item takes to make or receive, minimum order quantities, ordering in boxes or lots, and any allowance for scrap or buffer stock.
How does MRP calculate? Five basic steps
Gross requirements
Start with finished goods in the MPS, for example 100 desks to ship on day 15.
Netting
Net requirement = gross requirement − stock on hand − open orders that will arrive in time. If the result is zero or less, nothing needs ordering yet.
Lot sizing
Adjust the quantity to the order rules, such as a minimum quantity, multiples of 100 or full boxes. The order can therefore be larger than the net requirement.
Lead-time offsetting
Count back from the date the item is needed by its make or buy time to get the date to start production or send the purchase order.
BOM explosion
Planned orders for a parent item become gross requirements for its components on the next level down. Repeat steps 2 to 4 until the lowest-level raw materials.
Oracle describes the same principle: MRP uses bill-of-material and inventory records to calculate time-phased net requirements for every component and subassembly, then suggests a replenishment plan to produce the quantities in the MPS (Oracle JD Edwards).
Worked example: a customer orders 100 office desks
A furniture factory receives an order for 100 office desks, to ship on day 15. One desk uses 4 legs, 1 desktop and 16 screws.
| Item (lead time) | Gross need | On hand + on order | Net need | Order rule | Order qty | Start |
|---|---|---|---|---|---|---|
| Desk (assembled, 2 days) | 100 | 0 | 100 | Exact | 100 | Day 13 |
| Leg (bought, 5 days) | 400 | 150 + 50 | 200 | Multiples of 100 | 200 | Day 8 |
| Desktop (made, 3 days) | 100 | 30 | 70 | Exact | 70 | Day 10 |
| Screw (bought, 7 days) | 1,600 | 500 | 1,100 | Boxes of 500 | 1,500 | Day 6 |
How to read the result:
- Assembly takes 2 days, so it starts on day 13 and every component must be ready by then.
- Legs: 400 needed, 150 in stock and 50 already on order, so 200 are short. The supplier needs 5 days, so the purchase order must go out by day 8, and the 50 already on order must also arrive before day 13.
- Screws: 1,100 short, but they come in boxes of 500, so 3 boxes (1,500) are ordered and 400 are left over. They have the longest lead time, so they are ordered first, on day 6.
- Desktops: 70 made in-house, starting on day 10.
If today is day 7, the system warns straight away that screws can no longer arrive in time. The planner knows now that they need a faster supplier or a new ship date, rather than finding out when the assembly line stops for lack of screws. Now imagine 300 products, 50 parts each, and orders that change every week: doing this in Excel is close to impossible.
What does MRP produce, and who uses it?
| Output | What it tells you | Main users |
|---|---|---|
| Planned work orders | Parts made in-house: how many, and when to start | Production planners, line leaders |
| Planned purchase orders | Materials bought: how many, and when to send the PO | Purchasing |
| Warnings and reschedule messages | What will be late, and which orders to pull in, push out or cancel | Planners, plant managers |
| Projected stock | Expected stock of each item in each period | Warehouse, accounting, management |
MRP vs MRP II vs ERP: what is the difference?
| System | Covers | Key question |
|---|---|---|
| MRP (Material Requirements Planning) | Materials and components | What to make or buy, how many, and when |
| MRP II (Manufacturing Resource Planning) | MRP plus other production resources such as people, machines, capacity and cost | Can we actually make the plan, and with what resources? |
| ERP (Enterprise Resource Planning) | The whole company: sales, purchasing, production, warehouse, accounting, HR | Do all departments work from one set of data? |
Siemens explains that MRP II covers every MRP function and also optimizes other assets needed for manufacturing, such as people, production equipment and spare parts (Siemens). In practice, a production management system like TPiCS-X sits between MRP II and a factory ERP: it combines production planning, purchasing, production reporting, inventory, costing and purchase and sales ledgers, with the focus on the factory. Physical warehouse work, such as storage locations and picking, is the job of a WMS such as WMS Standard.
MRP limitations every beginner should know
MRP is not magic. It is fast and precise, but only as good as the data you feed it. Factories that buy a system and see no benefit usually get stuck on one of these:
System stock doesn't match reality
A common rule of thumb is 98% inventory accuracy. Below that MRP still runs, but planners start adding buffer stock to protect themselves, and total inventory rises.
BOM doesn't match the shop floor
If production changes a part but nobody updates the BOM, the system orders the wrong part or the wrong quantity every time.
Lead times are wishful
MRP uses the lead times you set. If a supplier is routinely later than that, the plan looks fine on screen but cannot be met.
Capacity is not checked
Classic MRP plans materials without checking whether machines or people can handle the load, so it needs to work alongside load checks or production scheduling.
The plan changes too often
Re-planning on every small change makes orders jump around and confuses the shop floor. Many factories freeze the near-term plan.
Actual results aren't recorded
If finished production or received goods aren't recorded, the system still thinks they are open, and the next run is wrong.
The old rule of thumb says that material requirements planning (MRP) requires an inventory accuracy of 98%. ... the higher the accuracy, the better the results.
The same article notes that BOM accuracy, stable schedules and avoiding late changes matter just as much (TechTarget). TPiCS Laboratory likewise says the purpose of recording actual results is to make the next plan more precise.
How does TPiCS-X do MRP? f-MRP and manufacturing-number control (製番)
TPiCS-X from TPiCS Laboratory in Japan calls its MRP function f-MRP. According to the developer, it "allocates stock and open orders (発注残・指示残) and automatically creates a plan with neither shortage nor excess", and schedules by date using manufacturing lead times and lot grouping. The developer stresses that it is "strong against changes in demand and delivers stable production" (TPiCS-X 5.2).
BOMs up to 128 levels
One product can have a structure up to 128 levels deep with unlimited items, suited to products with many nested subassemblies.
Flexible planning buckets
Plan by day, week, month or shift, up to 365 buckets.
Automatic scrap allowance
Set a defect rate on each BOM line and the system grosses up order quantities so you don't run short.
Buffer stock (基準在庫)
Hold buffer stock for short-lead-time products or long-lead-time purchased items to absorb swings in demand.
Instant warnings when parts will be late
If the calculation finds an order can't be met in time, the system flags it immediately as a journal warning (ジャーナル), before the line stops.
Built for make-to-order too
Orders with different specs use manufacturing-number control (製番管理), tying parts and work orders to each order, while common parts use f-MRP in the same system.
The developer reports 2,140 user companies and 17,240 client installations as of 30 September 2026 (tpics.co.jp). See the full product overview on the TPiCS-X product page.
MRP glossary (English, Japanese, Thai)
Japanese factories in Thailand often mix all three languages. This table helps Japanese and Thai teams talk about the same thing.
| English | Japanese | Thai | Meaning |
|---|---|---|---|
| MRP | 資材所要量計画 / 所要量計算 | การวางแผนความต้องการวัตถุดิบ | Calculating what to make or buy, how many, and when |
| Bill of Materials (BOM) | 部品表 / 部品構成 | โครงสร้างสินค้า | Which parts, and how many, make one product |
| Master Production Schedule (MPS) | 基準生産計画 | แผนการผลิตหลัก | Which finished goods to make, how many, and when |
| Gross requirement | 総所要量 | ความต้องการรวม | Quantity needed before netting stock |
| Net requirement | 正味所要量 | ความต้องการสุทธิ | Quantity still short after stock and open orders |
| Open order / scheduled receipt | 発注残・指示残 | ของค้างรับ | Purchase or work orders not yet received |
| Lead time | リードタイム | ระยะเวลานำ | Time from ordering until the item is ready to use |
| Lot size | ロット | ขนาดล็อต | Minimum or multiple quantity per order |
| Manufacturing number | 製番 | เลขที่สั่งผลิต | Number tying parts and work to one specific order |
How to start using MRP: six steps for beginners
Pick a pilot scope
Start with one product family or one line where shortages or excess stock are most visible. You see results quickly and learn before scaling up.
Clean up item codes
Every material, part and product needs one unique code, with no duplicates and no alternative names.
Make the BOM match the floor
Check each model with production, including scrap rates and interchangeable parts.
Set real lead times and order rules
Use actual supplier delivery history and actual production times, not hoped-for numbers.
Get stock accurate before go-live
Do one full physical count, then set up cycle counting to keep accuracy high.
Run, review and record every day
Planners review warnings each run, and the floor records production and receipts straight away, so every plan is more accurate than the last.
C.NET (Thailand) is a TPiCS distributor in Thailand. We can help assess how ready your factory is, set up item codes and BOMs, configure TPiCS-X, train users, support you after go-live, and develop add-ons or integrations beyond the standard package (development is quoted by scope).
Signs your factory is ready for MRP
- The line often stops waiting for materials while the warehouse is full of other stock
- Purchasing orders by gut feel or by last month's usage
- Production and purchasing plans live in several Excel files that only one person fully understands
- When a customer order changes, it takes days to work out what else to order
- You have many models, shared components and multi-level products
- You can't give customers a firm delivery date
Frequently asked questions about MRP
What is MRP?
MRP (Material Requirements Planning) uses the master production schedule, the bill of materials (BOM) and inventory records to calculate which parts to make or buy, how many, and when to start, so production is on time without holding more stock than needed.
What is MRP called in Japanese?
It is called 資材所要量計画 (shizai shoyōryō keikaku), and factories often call the calculation simply 所要量計算. In TPiCS-X the function is named f-MRP.
What data does MRP need?
Four groups of data: the master production schedule (MPS), the bill of materials (BOM), inventory plus open purchase and work orders, and lead times with order rules such as minimum quantities and lot sizes.
What is the difference between MRP and ERP?
MRP plans materials and components for production. ERP connects data across the whole company, including sales, purchasing, production, warehouse and accounting. Most ERP systems for manufacturers include MRP as one part.
Does a small factory need MRP?
With only a few products and simple BOMs, Excel may still be enough. With many models, shared parts, frequently changing orders, or shortages and excess stock at the same time, an MRP system removes a lot of manual calculation and error.
Why do we still have shortages or excess stock after implementing MRP?
Usually because the data doesn't match reality: system stock differs from physical stock, the BOM isn't updated, lead times are shorter than suppliers actually deliver, or the floor doesn't record production and receipts. Fix the data first and the results improve.
What is f-MRP in TPiCS-X?
f-MRP is the requirements calculation in TPiCS-X. It nets off stock and open orders, then builds date-based production and purchase plans using lead times and lot grouping. It supports BOMs up to 128 levels, adds scrap allowances, warns immediately when orders can't be met in time, and works alongside manufacturing-number control (製番) for make-to-order work.
Who supports TPiCS-X in Thailand?
C.NET (Thailand) is a TPiCS distributor in Thailand, providing sales, implementation, training, support, add-on development and direct coordination of issues with TPiCS Laboratory in Japan. Initial consultation is free through the website's contact page.
Sources
- TPiCS Laboratory: TPiCS-X 5.2 (f-MRP, 製番管理)
- TPiCS Laboratory: home page and user count
- ASCM: Why is Material Requirements Planning (MRP) Important?
- Oracle: Master Production Scheduling and Material Requirements Planning
- Siemens: Material Requirements Planning (MRP I)
- TechTarget: Can MRP be successful without 98 percent inventory accuracy?
- Wikipedia: Material requirements planning (history)
Updated October 2026 by the C.NET (Thailand) team · Product facts from tpics.co.jp as of October 2026 · The desk example uses illustrative numbers.
