Material Requirements Planning

Material Requirement Planning (MRP) creates recommendations for purchase orders and production order based on current status of transactions in the system. MRP does not place orders automatically but gives suggestions as an expert.It estimates how much should be purchased for purchase item and also estimates how much should be produced for manufacturing items at any particular time ,obviously taking into account all aspects at that time. This allows you to create production orders to purchase orders automatically based on 'order recommendation report'. The items could be outsourced ,if required,by converting production order to purchase order. Also, to streamline purchasing process it is simple to consolidate individual vendor PO's into single order.

As already mentioned above that MRP does not place order automatically, but suggests based on efficient analysis ,MRP gives opportunity for production experts, purchasing experts to improvise on the suggested orders, thereby, providing right balance between automation and  hand - 

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Running MRP - General Process, Prerequisites, and Procedure
The Material Requirements Planning (MRP) function lets you plan material requirements for complex manufacturing and procurement processes. To create and run MRP scenarios, you use the MRP wizard. The wizard generates recommendations (production orders, purchase orders, and inventory transfer requests) required to produce or procure the final product on time and in the required quantity. In the Order Recommendation report, you create production and purchase orders based on these recommendations.

The MRP Process in SAP Business One

• Prerequisites:You have defined the following settings on the Item Master Data: Planning Data tab.
• Planning Method:Only items with the Planning Method of MRP are available for selection when you are running the MRP wizard.
• Procurement Method:The procurement method affects the order type MRP recommends for items with demands.
• Order Interval:In MRP calculations, the application automatically groups the recommended orders into interval periods according to your definition, and arranges orders within the same period into the first working day of that period. For more information, see Example: Lead Time, Holidays, and Order Interval in MRP.
• Order Multiple:Your definition of order multiple may affect the order quantities MRP recommends.
• Minimum Order Qty: Your definition of minimum order quantity may affect the order quantities MRP recommends
• Lead time:The lead time definition affects the order recommendation calculation.

You can either run MRP with the planning parameters you defined for each item in the Item Master Data window, or you can define a set of parameters when running the MRP wizard and apply them to all the selected items in the MRP run.