What is MRP?

Picture a small furniture maker. Every order needs timber, fittings and packaging. Without a plan you order by gut feeling: too much of one thing, a shortage of another, and an order that sits waiting because one part is missing.

MRP does that sum for you. It starts from what you intend to deliver, uses the bill of materials to see which parts are needed, subtracts what is in stock and what is already on order, and shows what you still need to buy or make, with a date.

The result is only as good as the data underneath. If the bill of materials is wrong, or the stock in the system differs from what is on the shelf, you get tidy plans built on wrong numbers. Watch supplier lead times as well, and settings such as safety stock and the reorder point, which decide how generous or tight the plan is.

Not every business needs full material planning. A wholesaler that only resells can often manage with a list of items that have dropped below their minimum. It becomes worthwhile once you make or assemble products and parts come from several sources. The same data also drives the cost price of the finished product.

Start small. Record the bills of materials of your main products properly, keep the stock accurate, and watch what the plan suggests for a while before you rely on it.

Talk to the people who do the work. The buyer, the planner and the warehouse know where the gaps are, for example parts with a long lead time or items whose stock is never right. Fix those first, because they disturb any plan.