Operations Management and Strategic Management · Production Planning and Control

Material Requirement Planning (MRP) and MRP II Explained

Updated 10 October 2026 · Fact-checked

MRP is a system that works backwards from the master production schedule. Using the bill of materials and inventory status, it calculates what components to order, how many, and when. MRP II extends it to capacity, labour, machine time and finance. To solve numericals, explode demand, subtract stock, offset by lead time.

Understand Material Requirement Planning (MRP) and MRP II

Material Requirement Planning (MRP) answers three questions for every item you need to make or buy: what is needed, how many, and by when. It is mainly used where the demand for parts depends on the demand for a finished product.

That idea is called dependent demand. If you plan to build 100 bicycles, you need exactly 200 wheels. You do not forecast wheels separately. You calculate them from the bicycle plan. Finished goods have independent demand, which comes from the market and is forecast.

MRP has three main inputs. The master production schedule (MPS) says how many end products to make and when. The bill of materials (BOM) is the product structure: every part, sub-assembly and the quantity of each needed per parent unit. The inventory status record shows on-hand stock, scheduled receipts, allocated stock and lead times for each item.

The outputs are planned order releases (what to order and when), order rescheduling notices, cancellation notices and reports on performance and exceptions. Along the way you must choose a lot-sizing rule, such as lot-for-lot, fixed order quantity or periodic order quantity, to decide the size of each order.

MRP II (Manufacturing Resource Planning) widens the scope. It keeps MRP at the core but links it with capacity requirements planning, shop-floor control, purchasing, and financial planning such as budgets and cost. MRP plans materials only. MRP II plans all the resources of the manufacturing business and ties operations to finance and marketing.

Key rules to remember

Gross requirement of a component: Gross requirement = Parent's planned order quantity × Quantity per parent (from BOM); This is the 'explosion' step. For a component used in several parents, add the requirements from each parent.
Net requirement: Net requirement = Gross requirement + Allocated stock + Safety stock − On-hand stock − Scheduled receipts; Allocated stock is already committed to other orders, so it is added to the requirement. If the result is zero or negative, the net requirement is zero.
Projected on-hand at end of period: Ending on-hand = Opening on-hand + Scheduled receipts + Planned order receipts − Gross requirement; Use it to check that stock never drops below the level you need.
Planned order release timing: Release period = Need period − Lead time; This is called lead-time offsetting. Orders are released earlier than the date the item is needed.
Lot-for-lot: Order quantity = Net requirement of the period; No stock is carried over. It suits expensive items or those with low ordering cost.

How to solve Material Requirement Planning (MRP) and MRP II questions

Use the same sequence for any MRP numerical or written question. It keeps your working in the order examiners expect.

1Draw the product structure from the BOM and note the quantity of each item per parent and the level of each item.
2Start at the top with the MPS requirement for the end item, in the period it is due.
3Compute the gross requirement for the item in each period.
4Subtract scheduled receipts and available on-hand stock to get the net requirement. Roll the stock forward period by period.
5Apply the lot-sizing rule given (lot-for-lot, fixed quantity or multiple) to decide the planned order receipt.
6Offset by the lead time to get the planned order release period.
7Treat the planned order releases of the parent as the gross requirement of its components, and repeat for each lower level.
8Write the final planned order release schedule clearly, with item, quantity and week.

Quickest way: Table-and-offset shortcut

When to use it: Use for numericals with one or two levels, a given lead time and lot-for-lot ordering.

Draw a row for Gross requirement, Stock, Net requirement and Order release across the periods.
Calculate net requirement first, since gross is given or a simple multiplication.
Shift each net requirement left by the lead time and write it in the release row.
Multiply that release row by the BOM quantity to get the child item's gross row.
Check the total: total releases plus opening stock and receipts should equal total gross requirement under lot-for-lot.

Common mistakes in Material Requirement Planning (MRP) and MRP II

Treating the bill of materials quantity as the order quantity for the whole plan.
Students forget that the BOM gives the quantity per one parent unit, not the total.
Fix: Always multiply the BOM quantity by the parent's planned order quantity to find the gross requirement.
Not offsetting for lead time.
The net requirement is calculated correctly, so students stop and write the order in the same period.
Fix: The order must be released lead-time periods before the need. Write the release row separately.
Using the opening stock again in every period.
Students subtract the same on-hand figure from each period's gross requirement.
Fix: Roll the stock forward. What you use in week 1 is not available in week 2.
Confusing MRP with MRP II.
The names are close and both are planning systems.
Fix: MRP plans materials and component orders. MRP II adds capacity, labour, machine time, shop floor control and finance. Say it in one line when asked.
Applying MRP logic to independent demand items.
Students assume MRP suits every item in the store.
Fix: MRP suits dependent demand. Finished goods demand is forecast and spares sold directly to customers are independent.
Ignoring scheduled receipts or allocated stock.
Only the on-hand figure is noticed in the table.
Fix: Net requirement subtracts scheduled receipts. Stock already allocated to other orders is not free to use, so add it to the requirement.

Worked examples

Example 1

A firm plans to assemble 120 units of product P in week 5. Each P needs 2 units of component Q. On-hand stock of Q is 60 units, there are no scheduled receipts, and Q's lead time is 2 weeks. Using lot-for-lot, find when and how many units of Q should be ordered.

Show the solution

Gross requirement of Q in week 5 = 120 × 2 = 240 units.
Net requirement = 240 − 60 (on-hand) − 0 (receipts) = 180 units.
Lot-for-lot: planned order receipt in week 5 = 180 units.
Lead time offset: release week = 5 − 2 = week 3.

Answer: Release an order for 180 units of Q in week 3, to be received in week 5.

Example 2

Product A needs 1 unit of B and 3 units of C. The MPS requires 50 units of A in week 4. Stock on hand: A nil, B 10, C 40. There are no scheduled receipts or allocated stock. A has a lead time of 1 week, B has a lead time of 1 week and C has a lead time of 2 weeks. Using lot-for-lot, find the planned order releases for A, B and C.

Show the solution

A: gross 50 in week 4, stock nil, so net 50. With a lead time of 1 week, the order for A is released in week 3 and received in week 4.
The release of A in week 3 creates the gross requirement for B and C in week 3. They must be available in week 3.
B: gross = 50 × 1 = 50. Net = 50 − 10 = 40 units needed in week 3. Release in week 3 − 1 = week 2.
C: gross = 50 × 3 = 150. Net = 150 − 40 = 110 units needed in week 3. Release in week 3 − 2 = week 1.

Answer: Release 50 units of A in week 3, 40 units of B in week 2, and 110 units of C in week 1.

Exam tips

In numericals, show the table with rows labelled. Step marks are given for gross requirement, net requirement and release timing, not only the final figure.
State the lot-sizing rule you assume if the question is silent, and say lot-for-lot is assumed.
For a theory question on MRP II, structure the answer as MRP plus capacity planning, shop floor control and financial integration.
In MCQs, remember that MRP is for dependent demand, the MPS is an input, and the BOM gives quantity per parent.
When asked for the inputs, name all three: MPS, BOM and inventory status records, and say one line about each.

Practice questions from Production Planning and Control

Material Requirement Planning (MRP) and MRP II: frequently asked questions

What is the difference between MRP and MRP II?

MRP plans material requirements: what to order, how much and when. MRP II is an extension that also plans capacity, labour, machine hours, shop floor control and finance. MRP is one module inside MRP II.

What are the inputs to an MRP system?

The three main inputs are the master production schedule, the bill of materials and the inventory status records. Lead times and lot-sizing rules are held in these records. Together they let the system calculate what to order and when.

What is a bill of materials in MRP?

It is a structured list of every component, sub-assembly and raw material needed to make one unit of a product. It also shows the quantity of each per parent and the levels of the product structure. MRP uses it to explode the end-product demand into component demand.

What is lot sizing in MRP?

Lot sizing is the rule used to decide the size of each order once the net requirement is known. Common rules are lot-for-lot, fixed order quantity and periodic order quantity. The choice affects ordering cost and the stock you carry.