In electronics manufacturing, precision is everything. A single forecasting error or mismanaged material order can lead to costly downtime, excess inventory, and wasted components.
That’s where Material Requirements Planning (MRP) comes in. More than just a scheduling tool, MRP is the backbone of efficient, sustainable production. When combined with solutions like InPlant™, it transforms how manufacturers manage resources, reduce waste, and maximise value from every component.
In this post, we’ll explore what MRP is, its benefits in electronics manufacturing, how it differs from ERP, and how solutions like Component Sense’s InPlant™ can further enhance efficiency and reduce waste.
Material Requirements Planning (MRP) is a production planning and inventory control system designed to ensure that manufacturers have the right materials in the right quantities at the right time. In simple terms, an MRP system takes a production schedule and converts the manufacturing plan into a specific timetable by calculating the quantities of raw materials and components needed.
It utilises data from bills of materials (BOMs), current inventory levels, and master production schedules to determine what to order, how much, and when. With MRP, businesses can forecast demand, generate purchase orders automatically, and adjust production plans as needed. In effect, MRP “identifies what is needed, how much is needed, and when it is needed.”. By doing so, an MRP system helps manufacturers streamline ordering and production, avoid costly stockouts, and keep inventory at optimal levels.
Electronics manufacturers rely heavily on MRP because of the complexity of their products. A single circuit board might contain hundreds of different components— from resistors and ICs to connectors and wires. MRP enables planners to monitor this intricate inventory automatically. For example, an electronics factory might use its MRP software to track on-hand stock of capacitors and chips, automatically scheduling new orders when levels fall below a threshold. This data-driven approach prevents production delays.
Without MRP, companies risk running out of critical parts and facing unplanned downtime. By coordinating procurement with the production schedule, MRP ensures that components arrive just in time for assembly, which boosts efficiency and reduces waste.
When a design update renders certain parts obsolete, MRP flags unused components as surplus. By integrating MRP with Component Sense’s InPlant™ system, manufacturers can identify this excess inventory early and redistribute it to other product lines or through our global network. InPlant™ is an on-site automated tool for handling excess and obsolete components, and it is built to work hand-in-hand with any MRP system. Our InPlant™ solution offers effortless communication with any MRP system.
This process helps companies recover up to 100% of their costs, turning surplus stock from a liability into a profit opportunity while supporting sustainability.
MRP works best in real manufacturing operations, helping teams manage inventory, plan production, and keep materials on hand exactly when they’re needed.
MRP is the future of modern supply chain management and inventory optimisation. It keeps inventories low but also high enough to meet production needs, minimising carrying costs while avoiding shortages. In the supply chain context, MRP takes customer orders and demand forecasts and translates them into material orders downstream. Modern MRP-based systems let companies “meet production plans and customer demand, control inventories, [and] facilitate supply chain management” even amid disruptions. In other words, MRP ensures the entire supply chain is synced: when a manufacturer’s MRP signals a shortage, purchasing can act immediately, and suppliers can plan production accordingly.
In terms of inventory management, MRP is invaluable. It uses the master production schedule (MPS) and current inventory data to generate exact requirements for raw materials and sub-assemblies. This often means creating a hierarchical list of parts needed for each product, checking existing stock, and automatically ordering the difference. For electronics manufacturers facing volatile demand and long lead times, this precision is vital. MRP helps prevent both excess and obsolete (E&O) inventory – a major concern in electronics. As SAP notes, inventory is a significant cost, and without a robust planning system, companies struggle to balance the costs of excess inventory against the risks of stock-outs.
By keeping inventory data current, MRP improves visibility, and planners always know which parts are running low. This visibility supports just-in-time (JIT) practices in manufacturing. For example, warehouse operators might scan incoming shipments on tablets that update the MRP system in real time.
With accurate, real-time data, MRP-driven inventory management can respond rapidly to changes. If demand spikes, the MRP system can expedite orders or reallocate stock where it’s needed most. If a design change makes a part obsolete, the system will register unused items as surplus. In all cases, MRP makes inventory data transparent, helping supply chain teams prevent costly delays or overstock situations.
In electronics manufacturing, MRP offers many specific benefits. These include:
Optimised Inventory Levels: MRP calculates exactly how many of each component to keep. It uses information, like production schedules, to precisely calculate the quantity of required inventory. This ensures enough parts are on hand without overstocking. In practice, this means fewer dead-stock components tying up capital.
Cost Savings: By ordering only what is needed at the right time, MRP helps reduce carrying costs and obsolescence. The system may automatically trigger orders at optimal prices and avoid rush orders. Proper MRP use can speed production at the lowest possible cost by cutting inventory carrying expenses. In electronics, where parts quickly depreciate, this precision can significantly cut excess inventory losses.
Improved Production Efficiency: With MRP, manufacturers can plan operations backwards from finished-product schedules. An MRP system compiles a list of requirements for the raw materials and component parts needed to produce the final product within the specific schedule. This synchronisation means production runs smoothly and that assembly lines have components ready as needed, reducing downtime. Component shortages and last-minute scrambles are greatly reduced.
Agility and Responsiveness: Electronics markets can swing quickly; having an MRP lets firms react fast. A change in customer demand or a supplier delay can be incorporated into the plan by updating the MRP. Businesses that utilise MRP enhance their flexibility and can adapt swiftly amid the escalating demand for their products, avoiding stockouts and production snags.
Better Data and Decision-Making: Finally, MRP provides a single source of truth for materials planning. Instead of separate spreadsheets or siloed systems, all departments see the same updated inventory levels and production plans. This data-driven visibility helps managers make informed decisions, such as when to expedite orders or launch new product variants.
By leveraging these advantages, electronics companies can boost productivity, adaptability and profitability of manufacturing operations by ensuring components are available at the lowest cost and preventing costly downtime.
Many managers wonder how MRP compares to ERP (Enterprise Resource Planning). MRP and ERP are related but not identical. In fact, MRP is essentially a subset of ERP. Historically, MRP (and MRP II) focused on production and materials; ERP systems, on the other hand, expanded beyond that to include finance, HR, and other functions. ERP is a direct descendant of MRP; companies originally built ERP by adding accounting and HR to the core MRP modules.
|
Material Requirements Planning (MRP) |
Enterprise Resource Planning (ERP) |
| Solely focuses on production management |
Integrated software for managing multiple aspects of a business |
| Cheaper to implement and run |
More expensive to implement and run |
| Requires a complicated process to integrate with other software |
Connects with other software easily |
What this means in practice is that an ERP system includes an MRP module, allowing inventory and production data to flow seamlessly into purchasing and accounting. Modern cloud ERPs offer “real-time data analytics” and integrate MRP with supply chain operations to keep manufacturers agile. However, some smaller electronics manufacturers might use standalone MRP software (or MRP-focused ERP) that concentrates on inventory and scheduling. The key takeaway is that whether stand-alone or part of an ERP system, the core MRP function remains the same: determine what materials are needed for production and when.
Material Requirements Planning (MRP) is an essential system for electronics manufacturers aiming to optimise production and inventory. By accurately forecasting material needs, synchronising purchasing with production schedules, and providing real-time inventory visibility, MRP systems help companies reduce costs, prevent stockouts, and maintain smooth operations.
Ultimately, whether you call it MRP or ERP’s materials module, the principle remains: give your electronics manufacturing the tool to know what’s needed, how much, and when.