MRP Inputs, Outputs, and Action Messages

MRP Inputs, Outputs, and Action Messages: A Comprehensive Guide for CPIM Exam Success

Why Is This Topic Important?

Material Requirements Planning (MRP) is the backbone of manufacturing planning and control. Understanding MRP inputs, outputs, and action messages is critical for the CPIM exam because it ties together almost every concept in the Internal Supply Sources module. Without a solid grasp of what feeds into MRP, what it produces, and how planners use action messages to manage exceptions, you cannot effectively plan production, manage inventory, or keep delivery promises. This topic typically appears in multiple exam questions and serves as the foundation for understanding capacity planning, scheduling, and inventory management.

What Is MRP?

MRP is a computer-based planning system that calculates what materials are needed, how many are needed, and when they are needed based on demand. It uses a time-phased approach to ensure materials arrive just in time for production, minimizing excess inventory while avoiding shortages. MRP translates the master production schedule (MPS) into detailed component and raw material requirements.

MRP Inputs

MRP requires three primary inputs to function:

1. Master Production Schedule (MPS)
The MPS is the primary driver of MRP. It states what end items (or finished goods) need to be produced, how many, and when. The MPS represents the anticipated build schedule and is stated in specific product configurations. Without an accurate and realistic MPS, MRP output will be unreliable.

2. Bill of Materials (BOM)
The BOM is a structured list of all components, subassemblies, and raw materials required to manufacture one unit of a parent item. It defines the parent-component relationships and includes:
- Quantity per assembly
- Level in the product structure
- Component part numbers

The BOM enables MRP to explode requirements from the finished-good level down through every level of the product structure. Accuracy of the BOM (target: 98%+) is essential for MRP to produce valid plans.

3. Inventory Status Records (Inventory Master File)
These records provide real-time data about each item, including:
- On-hand balance
- Scheduled receipts (open orders already released)
- Allocated quantities
- Lead times
- Lot-sizing rules
- Safety stock levels
- Scrap allowances

Inventory record accuracy (target: 95%+) is critical. Inaccurate records cause MRP to plan for materials that are already available or fail to plan for materials that are actually needed.

Additional Inputs:
- Planning factors such as lead times, lot sizes, safety stock, and scrap rates
- Open purchase orders and shop orders (scheduled receipts)

How MRP Works: The Process

MRP follows a systematic logic:

Step 1: Netting
MRP calculates net requirements by subtracting on-hand inventory and scheduled receipts from gross requirements.

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

If net requirements are positive, material must be planned.

Step 2: Lot Sizing
Net requirements are grouped into order quantities based on the lot-sizing rule (e.g., lot-for-lot, fixed order quantity, EOQ, period order quantity).

Step 3: Time Phasing (Offsetting)
MRP offsets the planned order receipt by the item's lead time to determine when the order should be released (planned order release date).

Planned Order Release = Planned Order Receipt − Lead Time

Step 4: BOM Explosion
Planned order releases at a parent level become gross requirements at the component level. This explosion cascades through every level of the BOM.

Step 5: Iteration
Steps 1–4 repeat for every level in the BOM, from level 0 (finished goods) down to the lowest-level raw materials.

MRP Outputs

MRP produces two categories of outputs: primary outputs and secondary outputs.

Primary Outputs:

1. Planned Order Releases
These are the most important MRP output. They indicate the quantity and timing of orders that need to be released to purchasing (for purchased items) or to the shop floor (for manufactured items). They are recommendations — the planner must authorize them before they become actual orders.

2. Order Rescheduling Notices (Action Messages)
These are exception-based messages that tell planners what actions are needed to align supply with demand. (See detailed section below.)

3. Cancellation Notices
When demand disappears or decreases sufficiently, MRP recommends canceling existing open orders.

Secondary Outputs:

- Planning reports — forecasts, planning summaries, budget commitments
- Performance reports — tracking missed deliveries, stock-outs, or order changes
- Exception reports — highlighting items requiring planner attention (e.g., past-due orders, items with errors)

Action Messages (Exception Messages) — In Detail

Action messages are the mechanism by which MRP communicates required planner actions. They are generated when MRP detects a mismatch between existing supply plans and current demand. Key action messages include:

1. Release Order
A new planned order has reached its release date and should be converted to a scheduled receipt (shop order or purchase order).

2. Reschedule In (Expedite)
An existing open order's need date has moved earlier than its current due date. The planner should attempt to pull the order in to avoid a shortage.

3. Reschedule Out (De-expedite)
An existing open order's need date has moved later than its current due date. The planner may push the order out to avoid carrying unnecessary inventory.

4. Cancel Order
The demand that generated an open order no longer exists. MRP recommends cancellation to prevent excess inventory.

5. Increase/Decrease Order Quantity
Demand has changed, requiring an adjustment to the quantity of an open order.

Why Are Action Messages Important?
Action messages implement management by exception. Rather than reviewing every item, planners focus only on items requiring attention. This dramatically improves planner efficiency and responsiveness. However, action messages should always be reviewed by the planner — they are recommendations, not automatic actions. The planner uses judgment, considering capacity constraints, supplier capabilities, and business priorities.

Key Concepts to Remember

- MRP is a push system — it pushes orders based on forecast and planned demand.
- MRP assumes infinite capacity. Capacity constraints are addressed separately through CRP (Capacity Requirements Planning).
- MRP is a dependent demand system. Demand for components is derived (dependent) from the demand for parent items.
- Low-level coding ensures that an item is not planned until all demand at all BOM levels has been accumulated, preventing double-counting.
- Pegging links component requirements back to the parent item that caused the demand. This helps planners trace where demand originated and make informed decisions about action messages.
- Firm planned orders (FPOs) are planned orders that the planner has manually frozen. MRP will not automatically change the quantity or timing of FPOs. They are used to override MRP logic in situations requiring human judgment.
- Time fences define zones where changes are restricted (demand time fence, planning time fence) to protect the near-term schedule from nervous system behavior.

How Inputs, Outputs, and Actions Work Together

Think of MRP as a translation engine:
- Inputs (MPS + BOM + Inventory Records) provide the data.
- The MRP engine processes the data through netting, lot sizing, offsetting, and BOM explosion.
- Outputs (planned order releases + action messages) provide actionable recommendations to planners.
- Action messages enable planners to manage exceptions efficiently, keeping supply aligned with demand.

Common Pitfalls That Undermine MRP

- Inaccurate BOMs — wrong components or quantities
- Inaccurate inventory records — wrong on-hand balances
- Unrealistic MPS — overstated or understated production plans
- Incorrect lead times — orders released too early or too late
- Ignoring action messages — letting exceptions accumulate without resolution
- Nervousness — excessive rescheduling caused by minor changes; mitigated by time fences and firm planned orders

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Exam Tips: Answering Questions on MRP Inputs, Outputs, and Action Messages

Tip 1: Know the Three Primary Inputs Cold
If a question asks what MRP needs to function, always think: MPS, BOM, and Inventory Status Records. These are the three pillars. Questions may try to distract you with options like "capacity data" or "routing files" — these are inputs to CRP, not MRP.

Tip 2: Distinguish Between Planned Orders and Scheduled Receipts
Planned orders are MRP recommendations that exist only in the planning system. Scheduled receipts are actual open orders that have been released. Exam questions frequently test whether you understand this distinction. A planned order release becomes a scheduled receipt once the planner authorizes and releases it.

Tip 3: Understand the Direction of Rescheduling
"Reschedule in" means move the order earlier (expedite). "Reschedule out" means move the order later (de-expedite). Exam questions may present a scenario where a due date and need date differ and ask what action is appropriate. Compare the dates: if the need date is before the due date, reschedule in.

Tip 4: Remember That MRP Assumes Infinite Capacity
If a question asks about capacity considerations within MRP, the answer is that MRP does not consider capacity. Capacity validation happens through CRP or RCCP. This is a frequently tested distinction.

Tip 5: Action Messages Are Recommendations, Not Automatic Actions
The planner always has the final say. If a question asks who is responsible for acting on MRP action messages, the answer is the planner. MRP does not automatically release or reschedule orders (except in a closed-loop or automated environment, but the CPIM exam emphasizes planner review).

Tip 6: Pegging vs. Where-Used
Pegging traces demand for a specific component back to the specific parent order causing that demand. Where-used shows all parents that could use a component. Exam questions may test the difference — pegging is dynamic and order-specific; where-used is structural and BOM-based.

Tip 7: Practice the MRP Grid Calculation
Many exam questions present a time-phased MRP grid and ask you to calculate net requirements, planned order releases, or projected on-hand. Practice the logic:
- Projected On-Hand = Prior On-Hand + Scheduled Receipts + Planned Order Receipts − Gross Requirements
- If Projected On-Hand goes negative, a planned order receipt is needed
- Offset by lead time to get the planned order release date

Tip 8: Understand Lot-Sizing Impact
Lot-for-lot orders exactly what is needed (minimizes inventory). Fixed order quantity and EOQ may create excess inventory that carries forward. Period order quantity groups demand over a fixed number of periods. Know how each method affects planned orders and on-hand inventory.

Tip 9: Watch for Nervousness and System Stability Questions
MRP nervousness refers to frequent, unnecessary changes to planned orders caused by minor demand fluctuations. Solutions include: firm planned orders, time fences, lot sizing, and dampening. Expect at least one question on this topic.

Tip 10: Link Inputs to Data Accuracy
If a question presents a scenario where MRP is producing bad results, look for data accuracy issues. The most common root causes are inaccurate BOMs, wrong inventory balances, or unrealistic lead times. The exam loves to test your ability to diagnose MRP problems by tracing them back to input quality.

Final Summary Table

Inputs: MPS, BOM, Inventory Status Records
Process: Netting → Lot Sizing → Offsetting → BOM Explosion
Primary Outputs: Planned Order Releases, Action/Exception Messages
Key Action Messages: Release, Reschedule In, Reschedule Out, Cancel, Increase/Decrease Quantity
Assumptions: Infinite capacity, dependent demand, valid data

Mastering this topic gives you a strong foundation not only for MRP-specific questions but also for related topics like capacity planning, shop floor control, and supplier scheduling. Keep the logic clear, practice calculations, and always trace problems back to the three primary inputs.