Author: Dr. İlker Guclu Latest Update: 26 October 2026 Related: Production Planning Training , What Is Production Planning , What Is Inventory Management
In brief: Materials planning is the process of determining in advance when, in what quantity and at what quality the raw materials and components required in production will be needed. The production plan, capacity check and material requirements calculation are carried out together. This article covers the planning stages, innovative approaches and the applicability of just-in-time (JIT). For the production plan, see What Is Production Planning?. For inventory policies, see What Is Inventory Management and Optimization?.
In this article:
We define Materials Management as organizing the entire lifecycle of materials: from procurement to storage, movement, stocking and use in production. In this respect, materials management is an important function within supply chain management.
By materials we mean production inputs such as raw materials and components used in manufacturing processes. Generally, once a product is completed it falls outside the scope of materials planning.
Materials Planning is the process of determining in advance when, in what quantity and at what quality the materials required in production will be needed.
Materials planning distinguishes two kinds of demand. Independent demand comes from outside the organization, such as customer orders and forecasts. Dependent demand is derived from the production plan of a parent item. For example, the production quantity planned for a finished product determines the requirement of every component in its bill of materials. Material requirements planning is the core method for calculating dependent demand, while independent demand is managed through inventory policies. For how inventory policies are set, see What Is Inventory Management and Optimization?.
Material Planning covers raw material and component needs before production, Production Planning covers processes for semi-finished and finished products, Logistics & Distribution Planning covers storage and shipment of products.
Although materials and production planning are defined as distinct tasks, they are activities with reciprocal information flow and must be executed in an integrated manner.
Changes on the demand side affect production plans and therefore materials plans. Changes in material availability affect material plans and therefore, production plans and service performance.
Uninterrupted production depends on procuring the right materials at the right time and in the right quantities. Wrong decisions in materials planning can lead to production stoppages, delivery delays or excessive inventory costs.
The quality of a materials plan depends on the accuracy of the data it is based on. When bills of materials, lead times, inventory records and lot-sizing rules are out of date, the plan does not reflect reality even if the calculation is performed correctly.
For these reasons modern businesses do not run materials and production planning independently. These processes must be managed in an integrated way.
Strong coordination between materials and production planning provides a competitive advantage, especially in sectors with high demand variability or long/variable lead times.
Based on demand plans (orders + forecasts), the traditional approach to prepare production and materials plans is generally as follows:
To learn more on developing demand plans, click here.
The output of this step is called the Master Production Schedule (MPS).
Time and quantity planning is done by products. For products in the demand plan, it is decided which product will be produced, in which period and in what quantity.
When preparing this plan, inputs such as forecasts, customer orders and stock positions are considered along with production constraints like lot sizes.
The production plan is the finished-product level plan that feeds the material requirements calculation. In which periods the plan may be changed (time fences) and how the quantity that can be promised to customers is calculated are covered in How MPS, MRP and JIT Work Together.
To learn more about production planning, click here.
Rough-Cut Capacity Planning (RCCP) evaluates the feasibility of production plans by analyzing alignment with critical resource capacities.
At this stage, production plans and current capacity data are used to determine when and to what extent critical or bottleneck resources (machines, labor, etc.) will be used.
Rough-cut capacity planning works at the level of product family or key resource without going down to component detail. When capacity proves insufficient, the production plan is reviewed. Options such as adding capacity, overtime, subcontracting or shifting demand are evaluated.
Material Requirements Planning (MRP) is the planning activity that ensures required materials in the production process are produced or procured in the right quantities at the right times.
This stage uses production plans, open orders and Bill of Materials (BOM) information to determine which materials are needed, when and in what quantities.
The calculation starts from the gross requirement at the top level of the bill of materials. Net requirement is found by deducting on-hand inventory and receipts from open orders. The net requirement is grouped according to the lot-sizing rule and offset backwards by the lead time to give the planned order date. The result is a set of purchase or work order proposals, and the calculation is repeated at each bill-of-materials level to derive component requirements.
Capacity Requirements Planning (CRP) aims to ensure that required capacity is available in time and used effectively according to material requirements plans.
At this stage, production plans and existing capacity data are used to evaluate the periodic workloads of all relevant resources.
Material requirements planning calculates as if capacity were unlimited. Capacity requirements planning compares the resulting workload with resources. In periods of overload, work orders are shifted, capacity is added or the plan is changed. Approaches that include capacity constraints directly in the calculation are discussed in the next section.
Advances in information technologies help make better decisions in production and materials planning. Operations Research (OR) techniques are particularly effective in solving complex planning problems.
Decision support mechanisms such as optimization and simulation can be integrated into planning processes to speed up and improve decision making.
For example, simulation makes it possible to test in advance how a materials plan behaves under different demand and supply scenarios. Optimization allows decisions such as lot sizes and order timing to be optimized under capacity, budget and storage constraints.
Organizations should first identify their needs in production and materials planning and design/configure their process flows. Afterwards, evaluating and implementing tools and software that facilitate planning can be done more effectively.
In spare parts environments with rare and intermittent demand, materials planning calls for different methods. This is covered in Spare Parts Planning in Defense and Aerospace. For the total cost of ownership approach to purchasing decisions, see Total Cost of Ownership (TCO) in Purchasing.
To learn more on optimization techniques, click here.
Kanban systems, the foundation of Just-in-Time (JIT) manufacturing, are used in materials planning to implement pull-based production and procurement. The core idea is to trigger material replenishments and transfers according to actual demand or the consumption rate on the production line.
Kanbans -whether physical containers or digital signals- trigger replenishment orders when materials or semi-finished products are consumed. This allows continuous monitoring of inventory levels and timely fulfillment of material needs.
In practice, inventory levels are not continuously monitored. Orders or production are triggered when a signal appears.
The pull-based approach works well where demand is stable, lead times are short and part variety is limited. For items with highly volatile demand or long lead times, push-based calculation such as material requirements planning can be more suitable. In practice many organizations use both approaches side by side, item by item. For the pull logic and the calculation of the number of kanbans, see Lean Production and Kanban Systems.
Whether Kanban or other JIT practices are suitable for a given materials planning situation is a decision manufacturers should analyze carefully. Benefits should be weighed against organization's dynamics, constraints and capabilities.
The parameters of materials planning differ from one organization to another. Lead times, lot-sizing rules, safety stock policies, supplier relationships and bill-of-materials structures are not the same. In multi-site or multi-supplier structures, the split of responsibility between central and local planning also needs to be defined.
For this reason materials and production planning processes are configured according to the organization's own conditions. Production Planning Consulting is available for tailoring the process and its parameters, Inventory Management Consulting for inventory parameters, and Maturity Assessments for evaluating the current state.
For all guides and articles, visit the Knowledge Center.
Optimum Planlama provides hands-on trainings and consulting services to help design/configure materials and production planning processes, as well as determine required tools and software.
In-house workshops are recommended for teams of manufacturers with multiple sites or complex supply/production processes.
Our materials and production planning services and related offerings are listed below.
Manage orders, capacity-material requirements and production flow better.
Learn forecasting processes, methods and analytics through hands-on exercises.
Balance demand and supply plans through competitive tactics and cross-functional reconciliation.
Develop innovative processes for planning and operational execution.
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