What Is MRP? A Plain-English Guide for Australian Manufacturers
Material Requirements Planning (MRP) is one of the oldest disciplines in manufacturing, and one of the most misunderstood.
If you are running production off spreadsheets, whiteboards, and a fair amount of institutional memory, you have probably heard the term MRP thrown around.
Vendors sell MRP systems in Australia as if each is a single product. They are not. MRP is a category of system with a specific job: working out what materials you need, when you need them, and how much to order.
This guide explains what MRP actually does, the signs your business has outgrown manual planning, and how MRP differs from inventory software and full ERP. At Cohesis, we work with manufacturers at exactly this decision point, and the first job is always the same: understand the problem before naming a product.
This matters most for small to medium manufacturers who have grown past the point where a spreadsheet and a good memory can hold the operation together. It applies just as much if you have not yet reached the scale where a full enterprise system makes sense. If that describes where you are, this guide is written for you.
What an MRP system actually does
Planning production and materials
An MRP system explodes your bill of materials against demand and works backwards from your required completion dates. It accounts for lead times, so a part that takes six weeks to arrive gets ordered six weeks earlier than a part that ships overnight. This time-phasing is the defining feature of MRP, and it is what separates it from a simple reorder-point system.
Take a job with fifty components, some sourced locally and some imported. A reorder-point system flags stock when it runs low, regardless of when the job actually needs it. An MRP system works the other way round. It starts from the finished product’s due date, then works backwards through every level of the bill of materials. At each step, it subtracts that component’s lead time to find the date it must be ordered. Each order is placed at the latest point that still meets the deadline, based on how long that specific component takes to arrive. That difference is what prevents both late jobs and unnecessary early stock sitting on the shelf.
Connecting inventory, purchasing and finance
A proper MRP system keeps stock levels, purchase orders, and work orders in the same place. When a job consumes raw material, the system reflects that immediately. When you place a purchase order, it adjusts what is still outstanding. This is what stops the classic problem of three people relying on three different versions of the truth.
This single source of truth is the part manufacturers underestimate most. Without it, the production team, the purchasing team, and finance each keep their own running total. Those totals only get reconciled when someone notices a discrepancy, usually at the worst possible moment. An MRP system removes the need for that manual reconciliation because every transaction updates one shared record. When we map a manufacturer’s operation before any system goes in, this is one of the first problems we look for. It rarely shows up on a feature list, but it almost always shows up in the day-to-day.
The signs your business has outgrown spreadsheets
Production planning keeps breaking down
If you are regularly caught out by a part that was not ordered in time, your planning process has hit its ceiling. The same is true if a job cannot start because a component is missing. Spreadsheets do not time-phase automatically. Someone has to remember to check, and at a certain order volume, that becomes unreliable no matter how careful your team is.
This usually shows up as a pattern rather than a single incident. A production supervisor spends part of every morning chasing down what should already be on hand. Purchasing orders extra stock as a buffer against uncertainty, which ties up cash that could be used elsewhere. Neither response fixes the underlying problem, because the underlying problem is the planning method, not the people running it.
Stock and finance figures no longer agree
What MRP does well, and what it does not
MRP is very good at time-phased material planning: telling you what to order, when, and in what quantity, based on demand and lead time. It is not designed to run your finances, manage your customer relationships, or handle multi-site inventory logic on its own.
This matters because the manufacturing software market includes systems that look similar on the surface but solve different problems. Some, like MRPeasy, are built specifically for structured production planning. Katana, on the other hand, combines manufacturing with strong real-time inventory management. Cin7, for example, is built primarily for inventory and multi-channel order management, with manufacturing as a secondary function. None of these is a better or worse system in the abstract. Each fits a different shape of business, and matching the tool to the problem is the work of independent software selection.
Be equally clear about what MRP will not fix. If your production planning is sound but your quoting process is slow, or your customer communication is inconsistent, an MRP system will not touch either problem. Buying a planning tool to solve a sales or service issue is one of the more common and avoidable mistakes we see manufacturers make.
MRP, inventory software and ERP: how they differ
Where inventory-first tools stop
Where full ERP begins
Local compliance and integration for Australian MRP systems
Connecting MRP to Xero and Quickbooks
Most Australian manufacturers run Xero or QuickBooks for accounting. Your MRP system needs to post transactions back to that ledger accurately, including GST treatment, so that stock movements and financial records stay aligned. Native connectors handle basic scenarios well.
More complex account mapping, particularly around cost of goods sold, often needs closer attention. Where a native connector cannot do what the operation requires, the integration has to be built, which is work our technical team at Agendis handles. We go into this in detail in our dedicated article on integrating MRP with Xero.
Traceability and record-keeping requirements
Depending on your sector, you may need to trace a finished product back to specific batches of raw material, whether for warranty, recall, or compliance purposes. Confirm early that any system you are considering can record this level of detail without manual workarounds bolted on afterwards.
Food, pharmaceutical, and some export-facing manufacturers face the strictest requirements here, but the principle applies more broadly. If a customer raises a fault on a finished product, you should be able to identify which supplier batch went into it within minutes. It should not require searching through paper records or a chain of phone calls.
Getting the right system for your business
The hardest part of choosing an MRP system is not the software. It is being honest about the problem you are actually trying to solve. Get that right, and the shortlist narrows quickly. Get it wrong, and you can spend six months evaluating tools that were never going to fit.
We start every engagement by understanding your business, your people, and the systems you already run. Only then do we talk about platforms. That order matters, because the most expensive mistake in this category is choosing a system before the requirement is properly understood.
Whether you are still working out which category fits, or you already have a shortlist to validate, independent software selection starts with your operation, not a product demo. It covers MRP platform fit specifically, alongside the rest of your technology stack.
frequently asked questions
MRP stands for Material Requirements Planning. It is a method for calculating the materials, quantities, and timing needed to meet a production schedule, based on your bill of materials and current inventory.
Simon Cohen
Written by Simon Cohen, Founder, Cohesis. Simon has over two decades of experience working with Australian SMEs and local government organisations on technology strategy, governance, and implementation.
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