Materials requirement planning integrates operations, inventory control, and scheduling. MRP involves developing a process for ordering raw materials and components at the right time and in the right quantity so that they arrive shortly before their scheduled transformation into outputs and appropriate work in process is ready. JIT is part of inventory control, which is part of MRP. MRP is becoming more important as retailers are placing smaller orders with less lead time.

MRP is commonly used by firms that have different delivery systems and lead times. Coordinating and controlling such a complex system is virtually impossible for any manager. However, MRP software can forecast consumer behavior and track inventory both outbound and inbound. Enterprise resource planning (ERP) takes MRP a step further, as it collects, processes, and provides information about a firm’s entire enterprise.

Ordering, product design, production, purchasing, inventory, distribution, human resources, receipt of payments, and forecasting of future demand are incorporated into one network system. The economic order quantity (EOQ) is the optimal quantity of a product to order, determined on the basis of a mathematical model.

The more often you order, the higher the ordering cost—but if you order less often, your holding cost goes up. By using the EOQ, you can minimize ordering and holding costs without running out of stock. Calculating EOQs is a part of MRP.