Material Requirements Planning (MRP) is a system for calculating what materials and components a manufacturer needs to purchase or produce, and when, based on production schedules, current inventory, and the bill of materials for each product being made. It answers a specific question at scale: given what we plan to build and what we already have on hand, what do we need to order, and by when.
MRP combines these three to calculate net requirements, gross material need minus what is already available or incoming, and works backward from need dates using supplier lead times to determine exactly when each purchase order should be placed.
EXAMPLE
500 units of a finished product require 1,000 units of Component A. Current inventory shows 200 on hand and 300 already on order.
Net requirement = 1,000 − 200 − 300 = 500 units to be newly ordered.
With a 14-day supplier lead time and a production need date of March 30, MRP calculates the order must be placed by March 16.
MRP is a calculation engine, not a source of truth. It is only as accurate as the three inputs feeding it: an outdated bill of materials produces wrong component quantities, inaccurate inventory counts produce wrong net requirements, and stale supplier lead times produce purchase orders timed to arrive too early or too late.
This is the same accuracy dependency that runs through inventory shrinkage and the goods receipt note: MRP's output is a reflection of whatever data is behind it, and an MRP system running on a bill of materials with outdated component costs, described in bill of materials, will generate technically correct quantities priced against numbers that no longer reflect actual supplier pricing.
MRP-generated purchase orders flow into the same procurement and AP process as any manually created purchase order: they authorize a purchase, get sent to the supplier, and become the reference point for matching the resulting invoice. The difference is volume and timing, MRP can generate large batches of purchase orders on a recurring schedule tied to the production plan, rather than one at a time as a human identifies a need.
This volume is exactly why consistent, automated invoice matching matters most for MRP-driven purchasing: a manufacturer running MRP weekly can generate dozens or hundreds of purchase orders in a single cycle, and the resulting invoices need the same validation rigor as any other purchase, just at a scale that manual review struggles to keep pace with.
MRP is one function within a broader enterprise resource planning (ERP) system, focused specifically on material and production planning. A modern ERP typically includes MRP as one module alongside accounting, sales, and inventory management, all sharing the same underlying data. Standalone MRP systems still exist, particularly in older or smaller manufacturing environments, but the trend has been toward MRP as an integrated part of a larger ERP platform rather than a separate system requiring its own data reconciliation.
