Operations Management and Strategic Management · Operations Planning

Material Requirements Planning (MRP) and MRP II Explained

Updated 10 October 2026 · Fact-checked

Material Requirements Planning (MRP) is a system that works out what materials and components to order, how many, and when, to meet the master production schedule. It uses the bill of materials and inventory records. MRP II extends it to capacity, finance and shop-floor planning. To solve: explode, net, offset.

Understand Material Requirements Planning and MRP II

Start with a simple idea. A company plans to make 100 cycles. Each cycle needs a frame, two wheels and one chain set. Someone must decide how many wheels to buy, and when, so that nothing is short and nothing sits idle in stores. Material Requirements Planning (MRP) does this job.

MRP suits items with dependent demand. The demand for wheels depends on how many cycles you plan to make, so you calculate it rather than forecast it. Finished goods have independent demand, which comes from customers and is forecast. MRP works best in assembly or batch production with many components.

MRP needs three main inputs:
- Master Production Schedule (MPS): what finished products to make, how many, and when.
- Bill of Materials (BOM): the product structure. It lists every component, sub-assembly and raw material, with the quantity of each needed to make one unit, arranged in levels.
- Inventory records: on-hand stock, items already on order (scheduled receipts), and lead times for each item.

The process has four moves. First, explode the BOM: convert the MPS into gross requirements for every component. Second, net the requirements: subtract stock on hand and scheduled receipts. Third, lot-size the net requirement as the policy demands, for example order in batches. Fourth, offset for lead time: work backwards to find when the order must be released. The main outputs are planned order releases, order rescheduling notices and cancellations, and reports on performance and exceptions.

MRP II (Manufacturing Resource Planning) extends MRP beyond materials. It adds capacity requirements planning, shop-floor control, purchasing, and links to finance, so that the plan is checked against machine and labour capacity and costed in money terms. It is a closed-loop system: feedback from the shop floor corrects the plan. ERP (Enterprise Resource Planning) goes further. It puts all functions of the business, such as finance, HR, sales and supply chain, on one integrated database and software system. So the growth is MRP, then MRP II, then ERP.

Key rules to remember

Gross requirement of a component: Gross requirement = Parent quantity planned × Quantity of component per parent unit; Use this for each BOM level. At lower levels, the parent quantity is the planned order of the item above, not the finished-goods quantity.
Net requirement: Net requirement = Gross requirement − On-hand stock − Scheduled receipts; If the result is zero or negative, no order is needed. Add safety stock to the requirement if the question gives it.
Planned order release date: Order release period = Period the item is needed − Lead time; Offsetting for lead time is done period by period, working backwards from the due date.
MRP flow: MPS + BOM + Inventory records → MRP → Planned orders, reschedule notices, reports; The three inputs and the outputs are common short-answer points.

How to solve Material Requirements Planning and MRP II questions

Use this order for any MRP numerical or theory question. It follows the logic of the system itself.

1Read the question and list the MPS: which finished product, how many units, and in which period.
2Draw the BOM as a tree. Mark the quantity per parent on each branch and the lead time of each item.
3Work level by level from the top. For each item, compute the gross requirement from its parent's planned order, net it against stock and receipts, then pass its planned order down to the next level.
4Deduct on-hand stock and scheduled receipts to get the net requirement. Do not go below zero.
5Apply the lot-sizing rule given, such as order exactly the net requirement or order in fixed batches.
6Subtract the lead time from the due period to find the order release period.
7Use the planned order quantity as the parent quantity for the next level, then repeat steps 3 to 6.
8Write the final answer as a small table or list of item, quantity and release period. For theory, state inputs, process, outputs, then limits.

Quickest way: Top-down explode, net, offset

When to use it: Use this for numericals with one product, a two or three level BOM and simple stock data, when time is short.

Sketch the BOM tree in three lines and write quantity per parent beside each item.
For each item, do one line: need = parent order × per-unit quantity, then minus stock, equals net.
Subtract the lead time from the due period straight away and write the release period next to the net figure.
Carry the net figure down to the next level and repeat.
For theory, keep a memory hook: three inputs (MPS, BOM, inventory), four steps (explode, net, size, offset), three outputs (orders, changes, reports).

Common mistakes in Material Requirements Planning and MRP II

Ignoring stock on hand at the parent level before exploding to components
Students multiply the finished-goods quantity directly into the components.
Fix: Net each level first. Components are needed only for the parent units you actually have to make, which is the parent's planned order.
Multiplying quantities per unit only once across levels
Students forget that a sub-assembly used twice, which itself uses three parts, needs six parts per final unit.
Fix: Multiply the per-parent quantities down each branch of the BOM tree, using the planned order of the parent.
Adding lead time instead of subtracting it
Students think forward from today rather than back from the due date.
Fix: Order release = due period − lead time. Check that the release date is not earlier than the present period, and flag it if it is.
Using forecasting for component demand
Students confuse independent and dependent demand.
Fix: Finished goods are forecast. Components are calculated from the BOM. State this difference in theory answers.
Writing MRP II as just a bigger MRP
Students memorise the name and skip the added features.
Fix: Mention capacity planning, shop-floor control, financial links and closed-loop feedback. Then add that ERP integrates the whole enterprise on one database.

Worked examples

Example 1

Ashoka Cycles plans to assemble 200 cycles for delivery in week 6. There is no stock of finished cycles. Each cycle needs 1 frame and 2 wheels. Stock on hand: 30 frames and 60 wheels. No scheduled receipts. Lead time: frames 2 weeks, wheels 1 week. Order exactly the net requirement. Find the planned order quantity and release week for each item.

Show the solution

Parent level: there is no finished-cycle stock, so the net requirement of cycles is 200 and the planned order of cycles is 200 in week 6.
Gross requirement of frames = 200 × 1 = 200. Gross requirement of wheels = 200 × 2 = 400.
Net requirement of frames = 200 − 30 = 170.
Net requirement of wheels = 400 − 60 = 340.
Frames are needed in week 6 (assembly week). Release week = 6 − 2 = week 4.
Wheels are needed in week 6. Release week = 6 − 1 = week 5.

Answer: Order 170 frames in week 4 and 340 wheels in week 5.

Example 2

Explain the inputs and outputs of MRP, and state how MRP II differs from MRP.

Show the solution

Define MRP: a computer-based system that plans dependent-demand materials, quantities and timing from the production schedule.
Inputs: master production schedule (what, how many, when); bill of materials (product structure and quantity per unit at each level); inventory records (on-hand stock, scheduled receipts, lead times).
Process in brief: explode the BOM, net against stock, apply lot sizing, offset for lead time.
Outputs: planned order releases, rescheduling or cancellation notices, and performance and exception reports.
Difference: MRP plans materials only. MRP II is a closed-loop system that adds capacity planning, shop-floor control, purchasing and financial planning, so the plan is checked against resources and costed.
Add a line: ERP extends this further by integrating all business functions on a common database.

Answer: MRP takes MPS, BOM and inventory records as inputs and gives planned orders, change notices and reports as outputs. MRP II widens it to capacity, shop-floor and financial planning with feedback, and ERP integrates the entire enterprise.

Exam tips

For MCQs, remember the pairing: MRP is for dependent demand, and its three inputs are MPS, BOM and inventory records. MRP II adds capacity and finance.
In numericals, always show gross, stock, net and release week as separate lines. Step marks are awarded even if the final figure slips.
Draw the BOM tree even if the question gives a table. It helps you catch multi-level multiplication.
In compare questions, write at least three points of difference in a two-column style list: scope, inputs or functions covered, and feedback.
Close theory answers with one limitation: results depend on accurate BOMs, stock records and lead times.

Practice questions from Operations Planning

Material Requirements Planning and MRP II: frequently asked questions

What is the difference between MRP and MRP II?

MRP plans only the materials and components needed, and when to order them. MRP II adds capacity planning, shop-floor control and financial planning in a closed loop. So MRP II plans all manufacturing resources, not just materials.

What is a bill of materials in MRP?

It is the structured list of all parts, sub-assemblies and raw materials needed to make one unit of a product, with the quantity of each. It is arranged in levels, from the finished product down to purchased items.

What are the inputs and outputs of MRP?

The inputs are the master production schedule, the bill of materials and inventory records. The outputs are planned order releases, notices to reschedule or cancel orders, and performance and exception reports.

How does ERP differ from MRP II?

MRP II focuses on manufacturing resources. ERP covers the whole organisation, including finance, HR, sales and supply chain, on one integrated database and software system.