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MRP, which is an acronym for "material requirement planning" refers to a class or type of computer software that calculates the requirement of material to be procured or manufactured to meet the material required for a given production plan. MRP uses two input information to calculate this. One is BOM, also called bill of material, that gives information on quantities of different items of material required for manufacturing one unit of a given product. The other input information required by MRP is data on quantities of different material already available in stock, on order, or under manufacturer.
When we say that MRP considers just one BOM what we mean is that there can be just one BOM for one product to be manufactured. However, there is no such limitation on multiple BOM for multiple products. As a matter of fact use of MRP is justified only when there are multiple products.
In many real life situations, when a required material is not available for planned production it might be desirable to use a substitute material, so that there is no shortage in production. Situations like these can be handled in one of two fays in MRP.
In the first alternative, same product that are manufactured using different set of input material may be treated as different materials and separate BOM may be used for each of such material. The second, alternative is to identify the for each input material the substitute material that may be used. It is also possible to use both the methods in the same MRP application.
When MRP shows that the planned production can not cannot be achieved because of shortage of some input material, it can also show the products affected and materials in short of requirements, along with alternative products and substitute materials. Based on this managers can decide on action to be taken, and input this information manually into the MRP system. Based on this MRP can then calculate revised material requirements.
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