Material Requirements Planning (MRP)

Material Requirements Planning (MRP) in ERPNext helps manufacturers determine what materials are required, how much is needed, and when they should be purchased or manufactured to meet production demand. By analyzing demand from multiple sources, MRP ensures that the right materials are available at the right time while minimizing inventory shortages and excess stock.

In ERPNext Version 16, MRP has been redesigned as a dedicated process instead of being limited to the Production Plan. The enhanced approach supports multiple demand sources, making it easier for users to understand and providing more accurate planning for both short-term and long-term manufacturing requirements.

Purpose of Material Requirements Planning

The primary objective of Material Requirements Planning is to ensure that production materials are available exactly when they are needed.

By accurately planning procurement and manufacturing activities, MRP helps businesses:

• Avoid raw material shortages during production.
• Prevent overproduction and excess inventory.
• Reduce procurement delays.
• Improve production scheduling.
• Ensure timely fulfillment of customer orders.

To generate an effective material plan, ERPNext first determines product demand through its Demand Planning process.

Demand Planning

Demand Planning is the process of identifying future product demand before generating procurement and manufacturing requirements.

Earlier versions primarily relied on Sales Orders and Material Requests, which were suitable for short-term planning but provided limited visibility for future production.

To support long-term manufacturing planning, ERPNext now includes additional demand sources, allowing businesses to forecast production requirements more effectively.

Sources of Demand

ERPNext gathers demand information from multiple business documents to generate accurate manufacturing plans.

Sales Orders

Confirmed Sales Orders represent customer demand that has already been committed. These orders are considered during material planning to ensure that products can be manufactured and delivered on time.

Material Requests

Material Requests generated for manufacturing are also treated as demand sources, helping businesses plan production for internal requirements.

Sales Forecast

A Sales Forecast allows organizations to plan manufacturing based on expected future demand instead of waiting for actual customer orders.

Users manually enter forecast quantities after performing demand analysis outside the ERP system.

Forecasts are particularly useful for:

• Seasonal products.
• Products with predictable demand.
• Long-term production planning.
• Capacity planning.

Delivery Schedules

Many customers require products to be delivered in multiple shipments instead of a single delivery.

Delivery Schedules allow users to define multiple delivery dates for individual Sales Order items.

Rather than assuming that all products are required immediately, ERPNext uses these schedules to determine the actual dates on which materials are needed.

This results in more accurate procurement and manufacturing planning.

Delivery Schedules can be added directly from the Sales Order Item table using the Add Schedule option.

Master Production Schedule (MPS)

The Master Production Schedule (MPS) serves as the central planning document for finished goods.

ERPNext automatically collects demand from multiple sources and consolidates it into the Master Production Schedule.

The demand sources include:

• Sales Orders
• Material Requests
• Sales Forecasts
• Delivery Schedules

Based on this combined demand, the MPS determines the production quantities required for finished products over a defined planning period.

This consolidated production plan becomes the basis for Material Requirements Planning.

Material Requirements Planning (MRP) Report

The Material Requirements Planning Report analyzes the Master Production Schedule and calculates the materials required to fulfill production demand.

The report determines:

• The raw materials required.
• The required quantities.
• The components needed for manufacturing.
• The dates on which each material is required.

Using this information, manufacturers can plan procurement activities, schedule production, and ensure materials are available before manufacturing begins.

Bucket View

The MRP Report also provides a Bucket View, which groups material requirements into planning periods.

Instead of reviewing every individual requirement separately, users can analyze demand based on predefined time buckets such as daily, weekly, or monthly periods.

This provides a clearer overview of procurement and production requirements over time.

Item Lead Time

To determine when procurement and manufacturing activities should begin, ERPNext uses the Item Lead Time document.

Item Lead Time stores the time required to obtain or manufacture an item before it becomes available for production.

The system uses this information to calculate:

• When Purchase Orders should be released for raw materials.
• When Work Orders should be created for manufactured components.
• The planned start dates for production activities.

By considering lead times, ERPNext ensures that materials arrive before they are required, helping manufacturers avoid production delays.

MRP Planning Flow

The overall Material Requirements Planning process follows these stages:

1. Collect demand from Sales Orders, Material Requests, Sales Forecasts, and Delivery Schedules.
2. Generate the Master Production Schedule (MPS).
3. Analyze finished goods demand.
4. Calculate raw material and component requirements through the MRP Report.
5. Apply Item Lead Times to determine procurement and manufacturing dates.
6. Plan Purchase Orders and Work Orders accordingly.

Business Benefits

• Supports both short-term and long-term production planning.
• Consolidates demand from multiple business documents.
• Improves procurement planning using accurate material requirements.
• Reduces inventory shortages and excess stock.
• Calculates production schedules based on actual delivery commitments.
• Uses Item Lead Times to determine optimal purchasing and manufacturing dates.
• Provides bucket-based planning for better demand analysis.
• Improves production efficiency and on-time customer deliveries.

Key Summary

Material Requirements Planning (MRP) in ERPNext Version 16 provides a comprehensive planning system that determines material requirements based on demand from Sales Orders, Material Requests, Sales Forecasts, and Delivery Schedules. Using the Master Production Schedule, MRP Report, Bucket View, and Item Lead Time, ERPNext enables manufacturers to accurately plan procurement and production activities, ensuring materials are available when needed while optimizing inventory levels and manufacturing efficiency.