Calculations

How to Calculate MRP, Reorder Points, and Production Schedule Capacity

A step by step walkthrough of the five formulas that drive MRP and production scheduling, each with worked numbers and where every input comes from.

Every MRP run starts with the net requirement. Net requirement equals gross requirement minus on-hand inventory minus scheduled receipts plus safety stock. If a work order needs 1,200 brackets, you hold 300 on hand, have 150 arriving Tuesday, and carry 100 safety stock, net requirement is 1,200 minus 300 minus 150 plus 100, or 850 units. That 850 becomes a planned order. The MRP Material Requirements calculator chains this down each bill of materials level, multiplying by the parent quantity per and offsetting by lead time so demand lands in the right bucket.

Reorder point tells you when to release that order. ROP equals average daily demand times lead time in days, plus safety stock. With demand of 40 units per day, a 12 day supplier lead time, and 90 units of safety stock, ROP is 40 times 12 plus 90, or 570 units. When on-hand plus on-order drops to 570, you buy. Safety stock itself is often set as a service factor times the standard deviation of demand over lead time. For 95 percent service, the z factor is 1.65. The Manufacturing Reorder Point calculator handles both the deterministic and statistical versions.

Economic order quantity sizes each buy to minimize the sum of ordering and holding cost. EOQ equals the square root of 2 times annual demand times order cost, divided by annual holding cost per unit. With annual demand of 24,000 units, an 80 dollar order cost, and 3 dollars per unit per year to hold, EOQ is the square root of 2 times 24,000 times 80 divided by 3, which is the square root of 1,280,000, roughly 1,131 units per order. That means about 21 orders a year. The Economic Order Quantity calculator also flags order frequency and cycle stock.

Manufacturing lead time is the sum of the stages a part passes through: queue, setup, run, wait, and move. Run time equals order quantity times cycle time per piece. A 500 piece order at 1.8 minutes each is 900 minutes, or 15 hours of run time. Add 40 minutes setup, 6 hours queue, 2 hours wait, and 30 minutes move, and total lead time is roughly 24.2 hours. The Manufacturing Lead Time calculator separates value added run time from the queue and wait time that usually make up 80 to 90 percent of the clock.

Capacity load compares required hours to available hours. Available capacity equals number of machines times hours per shift times shifts per day times days times utilization times efficiency. Four machines at 8 hours, 2 shifts, 5 days, 0.85 utilization, and 0.95 efficiency give 4 times 8 times 2 times 5 times 0.85 times 0.95, about 258 hours a week. If the schedule demands 240 standard hours, load is 240 divided by 258, or 93 percent. The Production Schedule Capacity and Rough Cut Capacity Planning calculators surface the overloaded work centers before you commit dates.

Available to promise protects your delivery dates. ATP for a period equals on-hand plus master schedule receipts in that period minus the sum of confirmed customer orders due before the next receipt. If you start with 200 units, a scheduled receipt of 500 arrives in week 3, and orders of 150 and 220 are booked before then, week 1 ATP is 200 minus 370, so you can only promise against later receipts. The Available to Promise calculator computes both discrete and cumulative ATP so sales does not oversell inventory that is already spoken for.

Master production schedule load ties these together. Projected available balance equals prior period balance plus MPS receipts minus the greater of forecast or actual orders. Run this weekly across the planning horizon and any negative balance signals a shortage you must resolve by pulling in a receipt or splitting a lot. The Master Production Schedule Load calculator rolls the whole grid, while Backlog Burn Down converts open order hours into weeks of runout at your current output rate, so you can quote realistic dates rather than guessing.

One discipline holds the math together: keep every input in consistent units and one time bucket. Convert cycle times to the same unit as capacity, express demand and lead time in matching days, and reconcile safety stock across ROP, MRP, and the MPS so you are not double counting the same buffer. A clean run of net requirement, ROP, EOQ, lead time, and capacity load, in that order, gives you planned orders with dates, quantities, and a load percentage you can defend to the floor.

Published 2026-07-01.