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Material Requirements Planning (MRP) balances supply and demand for purchased and manufactured items. Given a set of demands or requirements, MRP automatically calculates a time-phased schedule of planned supply orders or replenishments to satisfy those demands. Material Requirements Planning (MRP) looks at demand for finished items and uses product structure information / Bill of Materials (BOM) to calculate demand for component items.
For each item in the BOM, Material Requirements Planning (MRP) looks at the ordering information, the Quantity currently on hand and lead time to procure or manufacture, and generates planned orders suggesting how many of that item to buy or make and when to do so.
There are two modes of MRP
It recalculates demand and plans supply for all items. The first time you run MRP, it should be regenerative.