7.1 Material Requirements Planning

Quick Answer: MRP takes independent demand from the MPS, explodes the BOM, subtracts on-hand inventory and scheduled receipts (gross-to-net), applies a lot-sizing rule, then offsets by manufacturing or purchasing lead time to create planned order releases. Planners manage the resulting planned orders through action messages such as release, reschedule-in, reschedule-out, and cancel.

Material Requirements Planning (MRP) is the time-phased planning engine that answers three questions for every dependent-demand item: what is needed, how much, and when. In the CPIM planning hierarchy, MRP sits below the master production schedule (MPS) and above detailed scheduling and execution. Independent demand for end items (and sometimes service parts) enters as gross requirements; dependent demand for components and raw materials is calculated from parent planned orders.

Why MRP Matters on the CPIM Exam

Domain IV expects you to run the logic, not just define it. Exam items commonly give a partial grid and ask for projected available, net requirements, planned order receipt, or planned order release in a specific week. Others contrast lot-sizing rules or ask which action message a planner should act on first. Treat every number as part of a balance equation that must close across the horizon.

Inputs and Outputs

BOM Explosion

BOM explosion multiplies each parent planned order release by the component quantity per (QPA) and posts the result as a gross requirement for the child in the same time bucket as the parent’s release (unless the BOM uses a lead-time offset or phantom logic). A single-level explosion covers immediate children; a full multilevel explosion continues until purchased or raw items are reached.

Example quantity relationship: Assembly X requires 2 of Component Y. If X has a planned order release of 30 in week 1, Y receives a gross requirement of 60 in week 1.

Low-level codes ensure each item is planned only after all parents that use it have been planned, so dependent demand is complete before netting.

Gross-to-Netting and Projected Available

For each period, MRP applies gross-to-netting:

1. Start with projected available from the prior period (or beginning on-hand in period 1).
2. Add scheduled receipts.
3. Subtract gross requirements.
4. If the result falls below the safety-stock floor (often zero when safety stock is zero), create a net requirement.
5. Apply the lot-sizing rule to size the planned order receipt, restoring projected available to at least the floor.

A compact form used on many exam grids:

Projected available (end of period) = prior projected available + scheduled receipts + planned order receipts − gross requirements

Net requirements appear only when projected available would otherwise go below the planning floor before a new planned receipt.

Lead-Time Offsetting

After the receipt quantity and due period are known, MRP offsets by lead time to create the planned order release:

Planned order release period = planned order receipt period − lead time

If lead time is 2 weeks and a receipt is due in week 5, the release is in week 3. Releases that fall before the current period become past due and typically generate expedite or release-overdue action messages.

Lot-Sizing Rules (L4L, EOQ, FOQ, POQ)

On the exam, if the stem does not specify a rule, assume L4L unless inventory policy data imply otherwise.

Worked Multilevel MRP Grid

Product structure: End item X uses 2 of component Y. Planning horizon is six weekly buckets. Safety stock is zero for both items. Lot sizing is L4L.

Item X data: Beginning on-hand = 20, lead time = 2 weeks, scheduled receipts = none. MPS gross requirements: week 3 = 50, week 5 = 40, week 6 = 60.

Item X — MRP grid

Walkthrough for X: Weeks 1–2 carry the opening 20 with no demand. In week 3, 20 − 50 creates a shortage of 30, so L4L plans a receipt of 30 and projected available returns to 0. Lead-time offset of 2 weeks places the matching release in week 1. Week 5 net 40 releases in week 3; week 6 net 60 releases in week 4.

Item Y data: Beginning on-hand = 100, lead time = 1 week, scheduled receipts = none. Gross requirements equal 2 × X planned order releases.

Item Y — MRP grid

Walkthrough for Y: Week 1 gross 60 is covered by on-hand (100 − 60 = 40). Week 3 gross 80 needs a net of 40; with LT = 1 the release is week 2. Week 4 gross 120 needs a net of 120 with release in week 3.

Same Nets, Different Lot Rules (Item X Week 3–6 Nets: 30, 40, 60)

If FOQ = 50 were used for X in week 3, the planned receipt would be 50 (not 30), projected available would become 20 after covering the 50 gross against the prior 20 plus receipt, and downstream Y gross requirements would increase because the parent release quantity grows.

Planned Orders and Action Messages

A planned order is a system proposal. When a planner firms it, quantity and timing are protected from routine regenerative changes. When released, it becomes a scheduled receipt (shop order or purchase order).

Common action messages:

• Order release — release date is here or past; convert planned to open.
• Reschedule-in / expedite — bring the due date earlier; shortage risk.
• Reschedule-out / defer — push the due date later; excess timing.
• Cancel — open or planned supply is no longer needed.
• Quantity change — increase or decrease to match revised nets.

Planners should not blindly accept every message. Validate pegging, scrap factors, yield, and firm orders before changing the floor schedule.

Bottom-Up Replanning

Action messages tell you that a date is infeasible; bottom-up replanning is the disciplined response when the standard reschedule cannot be met. Instead of letting MRP mechanically drive a date the shop cannot hit, the planner works up the bill of material from the constrained component to the parent and, if needed, to the master schedule — using firm planned orders and pegging to decide what actually changes.

The sequence:

1. Peg the shortage upward. Single-level pegging identifies which parent order the constrained component serves; full pegging traces to the end item and customer order.
2. Look for slack at the component level first. Alternate routing, alternate part, partial receipt, or lot splitting may fix it without touching the parent.
3. Firm the order if the plan must hold. A firm planned order (FPO) stops MRP from rescheduling that order automatically, holding the date or quantity the planner has committed to.
4. Escalate only if the parent must move. If no component-level fix exists, change the parent order — and if that breaks a customer commitment, escalate to the master scheduler, not the MRP run.

Bottom-up replanning is why MRP is a decision-support tool rather than an autopilot: the system proposes, the planner disposes. Exam trap: accepting every reschedule-in message without pegging is the classic wrong answer — it destabilizes the schedule and creates nervousness, when the actual fix was an alternate routing one level down.

Exam Pitfalls

• Confusing planned order receipt (due date) with planned order release (start/place date).
• Forgetting to multiply by quantity per during explosion.
• Netting against gross without first adding scheduled receipts.
• Applying lead-time offset to gross requirements instead of to planned receipts.
• Mixing independent spare-part demand into component grids incorrectly (spares are additional gross requirements, not BOM explosion alone).