How to Do MRP: A Step-by-Step Guide for Manufacturers

MRP (Material Requirements Planning) is a production planning process that calculates what materials you need, how many, and when — based on your sales orders, bill of materials, and current inventory. To run MRP, you gather three inputs, explode your BOMs, and calculate net requirements to generate planned purchase and work orders. Here's how to do it step by step with real numbers.

If you've been managing production with spreadsheets and gut instinct, you've probably already felt the limits. You order too much of one component, run out of another, and spend half your week chasing answers instead of building product. MRP fixes that by turning your demand into a precise, time-phased plan for every material you need.

Whether you're running MRP manually in a spreadsheet or evaluating your first MRP software, this guide walks you through the entire process — inputs, steps, a worked calculation, and the most common mistakes that trip up growing manufacturers. For a broader look at whether MRP is right for your operation, see our breakdown of the advantages and disadvantages of using an MRP system.

What is MRP and what does it actually do?

MRP answers three questions for every product you make:

1. What materials and components do I need?
2. How many of each do I need?
3. When do I need them?

It does this by working backward from your finished-goods demand. If you need to ship 200 units of Product A by March 15, and each unit requires three components with a two-week lead time, MRP tells you to order those components by March 1 — and exactly how many, after accounting for what you already have in stock.

The result is a set of planned orders: purchase orders for raw materials you need to buy and work orders for sub-assemblies you need to build. Instead of reacting to shortages, you're planning ahead.

MRP is the backbone of production planning for growing manufacturers. It doesn't replace your judgment — it replaces the mental math and spreadsheet gymnastics that stop working once you have more than a handful of products.

The 3 core inputs you need before running MRP

Before you can run MRP, you need three pieces of information. If any of these are inaccurate, your entire plan falls apart.

If you don't have a solid MPS yet, start there. Our guide to the master production schedule walks you through building one from scratch. And if your BOMs are still informal — maybe a recipe card or a list in someone's head — read up on what a bill of materials is before running MRP.

The quality of your MRP output is only as good as these three inputs. Garbage in, garbage out.

How to do MRP: a step-by-step walkthrough

Here's the full MRP process broken into seven steps. This is the same logic whether you're doing it in a spreadsheet or using dedicated software — the software just does it faster.

1. Lock your master production schedule

Start with your MPS. This tells you what finished goods you need to produce and in what time periods. For example: 100 units of Product A in Week 1, 150 units in Week 2.

Your MPS should be based on confirmed sales orders and reliable demand forecasts. Don't start MRP with a moving target — lock the schedule for at least the planning horizon you're working with, usually two to eight weeks out.

2. Explode your bill of materials

"BOM explosion" means taking each finished product on your MPS and breaking it down into every component and raw material required to build it. If Product A requires 2 units of Part X, 1 unit of Part Y, and 3 units of Part Z, then 100 units of Product A creates gross requirements of 200 Part X, 100 Part Y, and 300 Part Z.

If your product has sub-assemblies — for instance, Part X is itself made from two other components — you need to explode those too. This is called a multi-level BOM, and it's where manual MRP in spreadsheets starts to get complicated.

3. Calculate gross requirements

Gross requirements are the total quantity of each component you need across all finished goods, before accounting for anything you already have. If Product A needs 2 units of Part X and Product B also needs 1 unit of Part X, your gross requirement for Part X is the sum across both products.

Lay this out by time period. You need the components by the time period when production starts, not when the finished good ships — so account for production lead time when placing requirements into the right week.

4. Check on-hand inventory and scheduled receipts

Pull your current stock levels for every component. Then check for scheduled receipts — open purchase orders or work orders that are already in progress and expected to arrive before the requirement date.

This is where accuracy matters most. If your inventory records say you have 50 units of Part X but the actual count is 30, your MRP plan will be wrong by 20 units. Cycle counting and keeping your inventory records current isn't optional — it's a prerequisite for MRP to work.

5. Calculate net requirements

Net requirements tell you what you actually need to order or produce. The formula is straightforward:

Net Requirement = Gross Requirement − On-Hand Inventory − Scheduled Receipts

If net requirements come out to zero or negative, you already have enough. If positive, you need to plan an order. Run this calculation for every component in every time period.

6. Generate planned orders

For each positive net requirement, create a planned order. This is either a planned purchase order (for raw materials you buy from suppliers) or a planned work order (for sub-assemblies you make in-house).

Here's the critical step most people miss: offset each planned order by the item's lead time. If Part X has a two-week lead time and you need it in Week 4, the planned order release date is Week 2. Skip this, and you'll be placing rush orders constantly.

Also consider lot sizing rules. Your supplier might require a minimum order quantity of 100 units, or you might get a price break at 500. Adjust planned order quantities accordingly, but be aware that ordering more than your net requirement creates projected on-hand inventory that carries into the next period.

7. Release purchase orders and work orders

Once you've reviewed and confirmed your planned orders, release them. Purchase orders go to suppliers. Work orders go to your production floor. This is where the plan becomes action.

Review the full MRP output before releasing. Look for unrealistic lead times, capacity conflicts, or suppliers you know are unreliable. MRP gives you the math — you still need to apply judgment.

Want real-time visibility into every SKU? See how Brahmin tracks inventory across all your channels →

A real MRP calculation example with numbers

Let's walk through a simple example. You manufacture a wall-mounted shelf kit (Product S). Each kit requires:

• 2 wooden shelves (Part W)
• 4 metal brackets (Part B)
• 1 hardware pack (Part H)

Your MPS says you need to produce 100 shelf kits in Week 3 and 150 shelf kits in Week 5.

Step 1: Explode the BOM to get gross requirements.

For Week 3 (100 kits):

• Part W: 100 × 2 = 200
• Part B: 100 × 4 = 400
• Part H: 100 × 1 = 100

For Week 5 (150 kits):

• Part W: 150 × 2 = 300
• Part B: 150 × 4 = 600
• Part H: 150 × 1 = 150

Step 2: Check inventory and scheduled receipts, then calculate net requirements.

*On-hand is zero because the Week 3 production consumed all available stock. If Week 3 planned orders brought in exactly the net requirement, there's no carryover.

Step 3: Review and release.

You now know exactly what to order, how much, and when. The planned order release dates (rightmost column) are offset by each component's lead time so materials arrive before production starts.

That's MRP. The logic is simple for one product with three components. Now imagine running this across 50 products, each with 10–15 components, some of which share parts. That's where manual methods break down.

Common MRP mistakes growing manufacturers make

MRP is logical, but the real world is messy. Here are five mistakes that undermine the process:

1. Running MRP with inaccurate inventory counts

This is the single biggest failure point. If your system says you have 200 units of a component but you actually have 140, MRP will under-order by 60 units. The fix: regular cycle counts and a discipline of recording every transaction — receipts, issues, adjustments, scrap — in real time. Not once a week. Not at month-end. Every time.

2. Ignoring lead time offsets

Calculating net requirements is only half the job. If you don't offset planned orders by lead time, you'll generate the right quantities but release them too late. A two-week lead time means the order must go out two weeks before the requirement date, not on the requirement date. This seems obvious in isolation, but when you're juggling dozens of components with different lead times across multiple products, it's easy to miss.

3. Running MRP against an unlocked MPS

If your master production schedule keeps changing — sales adds a rush order on Tuesday, removes one on Wednesday — your MRP output changes every time you run it. Planned orders flip-flop, and your purchasing team loses trust in the system. Freeze your MPS for a reasonable planning horizon. Changes inside the freeze period should require approval, not just a quick edit.

4. Using a flat BOM when your product has sub-assemblies

If your product requires a sub-assembly that has its own components and its own lead time, a flat (single-level) BOM won't capture that. You'll miss the lead time needed to build the sub-assembly before it goes into the finished product. Use multi-level BOMs that reflect your actual production process, and make sure MRP explodes every level.

5. Never reviewing planned orders before releasing them

MRP is a calculation engine, not a decision-maker. It doesn't know that your primary supplier for Part B just went on a two-week shutdown, or that your production floor is already at capacity in Week 3. Always review MRP output before releasing orders. Check for supplier constraints, capacity limits, and anything the math can't see.

If you're doing MRP in spreadsheets and finding that the manual effort is eating up hours every week, you're not alone. Many manufacturers hit a ceiling around 15–20 SKUs where spreadsheets stop being practical for MRP.

How MRP software automates this process

Every step described above — BOM explosion, net requirements calculation, lead time offsets, planned order generation — can be automated by MRP software. Instead of building formulas and maintaining cross-referenced tabs in Excel, you enter your BOMs and inventory once, set your MPS, and let the system run.

Here's what changes when you move from manual to software:

• BOM explosion happens instantly, even across multi-level BOMs with shared components. No manual lookups, no missed sub-assemblies.
• Inventory is always current because every receipt, shipment, and adjustment updates in real time. MRP runs against accurate numbers instead of last Tuesday's spreadsheet.
• Lead time offsets are automatic. You set the lead time for each component once, and every planned order is backdated correctly.
• Planned orders convert to real POs and work orders with a few clicks, not a manual re-entry process.
• You can rerun MRP as often as you want — daily, if needed — without rebuilding a spreadsheet from scratch.

The manual approach works when you have a handful of products and a manageable component list. Once you grow past that, the time you spend maintaining the spreadsheet starts to outweigh the time MRP is supposed to save you.

How Brahmin Solutions can help

Brahmin Solutions is a cloud-based manufacturing platform purpose-built for growing manufacturers doing $500K–$50M in revenue. It runs full MRP — from BOM explosion to planned order generation — so you can stop managing production in spreadsheets and start planning with confidence. If that sounds like the right next step, book a demo and see how it works with your products.

Frequently asked questions

What are the steps of MRP?

The MRP process follows seven steps: lock your master production schedule, explode your bill of materials, calculate gross requirements, check on-hand inventory and scheduled receipts, calculate net requirements, generate planned orders (offset by lead time), and release purchase orders and work orders. Each step builds on the previous one.

How do you calculate net requirements in MRP?

Net requirement equals gross requirement minus on-hand inventory minus scheduled receipts. If you need 400 brackets, have 150 on hand, and have 100 on order, your net requirement is 150. If the result is zero or negative, you have enough and don't need to order.

What is the difference between MRP and MRP II?

MRP focuses specifically on material planning — figuring out what to order and when. MRP II (Manufacturing Resource Planning) expands on that by adding capacity planning, shop floor scheduling, and financial integration. Think of MRP as the materials engine and MRP II as the broader system that also asks "do we have the machines and labor to execute this plan?"

Can you do MRP in Excel?

Yes, and many growing manufacturers start there. You can build a basic MRP spreadsheet with columns for gross requirements, on-hand, scheduled receipts, net requirements, and planned orders. It works for simple products with a few components. The challenge is maintaining accuracy and managing multi-level BOMs as your product count grows. Most manufacturers outgrow Excel MRP somewhere between 15 and 30 active SKUs.

What is the difference between MRP and ERP?

MRP is a specific function — material requirements planning. ERP (Enterprise Resource Planning) is a broader system that includes MRP along with accounting, HR, CRM, and other business functions. For growing manufacturers, you often don't need a full ERP. A focused MRP system paired with accounting software like QuickBooks covers the same ground at a fraction of the cost and complexity.