The short answer
Planning parameters are the per-item settings that tell MRP how to plan each item — make or buy, how long it takes, how to size the order, how much buffer to hold and when to reorder. They live on the item master and MRP reads them on every run. The demand and the BOM decide what is needed; the parameters decide how the need becomes an order — its type, its timing, its quantity and its buffer. Two items with identical demand can generate completely different plans because their parameters differ, which is why parameter hygiene sits right beside BOM accuracy as a make-or-break input.
This guide is the setup companion to how MRP works and sits under the pillar, what is production planning software? The parameters described here are what the MRP explosion & netting engine consumes.
The parameter set at a glance
| Parameter | What it controls | Gets wrong → |
|---|---|---|
| Procurement method | Make, buy or outsource — which document MRP raises | Wrong order type |
| Planning method | MRP-driven vs reorder-point vs manual | Item planned the wrong way |
| Lead time | Order offset — when to start | Right quantity, wrong date |
| Lot-sizing rule | Net requirement → order quantity | Over- or under-ordering |
| MOQ / multiple | Rounding to pack, batch or cavity | Unbuyable quantities |
| Safety stock | Buffer against variability | Stockouts or dead cash |
| Reorder level | Threshold for auto-replenishment | Late or missed reorder |
Procurement method — make, buy or outsource
The first thing MRP needs to know about an item is how you get it. The procurement method — the make-or-buy flag — decides which execution document a net requirement becomes:
- Buy → a purchase requisition handed to purchasing, for raw material and bought-out parts.
- Make → a work order for in-house production, for semi-finished sub-assemblies and finished goods.
- Outsource (OSL) → a make-side work order sent to a job-worker for outside processing, with its own send-out and return legs.
The flag has to match how the item is really sourced. Label a bought part as make and MRP raises a work order for something nobody manufactures; label an outsourced operation as an ordinary buy and the job-work leg is lost. In an Indian shop the outsource flag is especially load-bearing because it drives job-work documentation and the extra lead time of the send-and-return, as covered in make-to-order vs make-to-stock.
Planning method
Beyond make-or-buy, the planning method decides how an item is planned at all. Some items are MRP-driven — planned by exploding demand through the BOM. Others are best left to a reorder point — cheap, steady consumables where a threshold is enough. A few are planned manually. Setting the planning method per item is how a plant avoids over-engineering its consumables and under-planning its critical components: demand-linked parts to MRP, the long tail to reorder points. The planning method and the reorder level together decide whether an item is topped up by the dashboard or planned in the run.
Lead time
Lead time is how long it takes to obtain an item once ordered — purchase lead time for bought items, manufacturing lead time for made ones, and the send-and-return time for outsourced ones. MRP uses it for the lead-time offset: it subtracts the lead time from the need date to get the order-start date. This is the parameter that most often makes a correct plan ship late, because quantities can be perfect while the dates are optimistic. Lead time also feeds the reorder point, where it sets how much stock must remain to cover the wait. Understated lead times are the single most common timing error in MRP.
Lot-sizing rule, MOQ and multiples
A net requirement is rarely the order quantity. The lot-sizing rule and its values turn the shortfall into something orderable:
- Lot-for-lot orders exactly the net requirement — leanest, for expensive or made-to-order items.
- Fixed / economic order quantity orders a set batch that balances ordering against carrying cost.
- Minimum order quantity (MOQ), multiple and rounding force the quantity up to a supplier pack, a process batch or a mould-cavity count — the reason MRP may suggest 500 when only 430 are short.
Because these live on the item, the same demand becomes a different order for a differently-configured item. A furnace-batch part rounds up to the batch; a bolt rounds to the box; a machined casting orders lot-for-lot. Getting the multiple wrong produces quantities a supplier will not accept or a process cannot run.
Safety stock and reorder level
Two parameters protect an item against variability. Safety stock is the buffer MRP keeps on hand — netting adds it to the requirement so the plan never plans stock to zero. Reorder level is the threshold the reorder-level dashboard watches between runs, proposing a purchase requisition when free stock drops below it. The two work together: safety stock sets how much protection is built in, the reorder level sets when the top-up fires. Left blank, an item runs with no buffer and no auto-replenishment — fine for a made-to-order special, dangerous for a line-stopping consumable.
Planning horizon and order interval
Two more settings shape the rhythm of planning rather than a single item's order. The planning horizon is how far ahead a run looks — long enough to cover the longest cumulative lead time, or the plan cannot see far enough to order long-lead material in time. The order interval (or period) groups requirements: instead of a separate order for each day's need, requirements within an interval are combined into one order, trading a little inventory for fewer, larger orders and fewer setups. Together they decide how often you plan and how finely the plan slices time.
Keeping parameters clean
Parameters are not set once and forgotten — they drift as suppliers, processes and demand change. A supplier who now delivers in five days instead of ten, a process re-batched, a consumable whose usage has doubled: each is a parameter that is now wrong and quietly distorting the plan. Because MRP does exactly what the parameters say, reviewing them — especially lead times and lot rules — is one of the highest-return maintenance tasks in planning. The practical discipline is periodic review of the parameters on the items that matter most: the high-value, long-lead and line-critical parts where an error costs the most.
How Fast Planning holds parameters
Fast Planning Software — built by Improsys in Pune under the Fast Technology brand, cloud or on-premise — carries every planning parameter on the shared item master: procurement method (make, buy or outsourced OSL), planning method, lead time, lot-sizing rule with minimum order quantity and multiples, safety stock and reorder level. The MRP engine reads them on every run, so the same demand and BOM produce orders correctly typed, timed and sized per item, and the reorder-level dashboard uses the same thresholds between runs. Because the parameters sit on the one master that purchasing and production also read, the lead time MRP plans with is the lead time the whole shop sees — the reconciliation that keeps a plan honest, and the reason parameter hygiene pays off across demand, planning and execution alike.
Frequently asked questions
What are MRP planning parameters?
MRP planning parameters are the per-item settings that tell the MRP engine how to plan that item — whether to make or buy it, how long it takes to get, how to size an order, how much buffer to hold and when to reorder. They live on the item master alongside the item's description and unit of measure. MRP reads them on every run: the same demand and BOM will produce different orders depending on the lead time, lot rule and safety stock set on each item, which is why the parameters matter as much as the demand itself.
What is the procurement method in MRP?
The procurement method, or make-or-buy flag, tells MRP how to satisfy a net requirement for an item. Items flagged buy become purchase requisitions handed to purchasing; items flagged make become work orders for in-house production; and items flagged for outside processing become outsourced (OSL) work orders sent to a job-worker. The flag decides which execution document MRP raises, so it must reflect how the item is actually sourced — a mislabelled item is planned as the wrong kind of order.
What is lead time in MRP and why does it matter?
Lead time is how long it takes to obtain an item once you order it — purchase lead time for bought items, manufacturing lead time for made ones. MRP uses it to offset the order: it subtracts the lead time from the date the item is needed to get the date the order must start. If lead time is wrong, quantities can be perfect while every date is off — too short and orders start late and arrive after they are needed, too long and inventory builds early. Accurate lead times are what make the timing of a plan trustworthy.
What is a lot-sizing rule?
A lot-sizing rule turns a net requirement into an order quantity. Lot-for-lot orders exactly what is short; a fixed or economic order quantity orders a set batch; and a minimum order quantity, order multiple or rounding value forces the quantity up to a supplier pack, a mould cavity count or a process batch. The rule and its values live on the item master, so the same shortfall becomes a different order depending on how the item is set up. Lot sizing is why MRP may suggest more than the exact net requirement.
Where are MRP planning parameters stored?
Planning parameters are held on the item master — the same record that carries the item code, description and unit of measure — so that MRP reads them automatically for every item on every run. Keeping them on one master, rather than in a planner's spreadsheet, is what lets the plan reconcile with execution: the lead time MRP plans with is the same one purchasing and production see. It also means parameter hygiene is a data-maintenance task, reviewed as items and suppliers change.
What happens if planning parameters are wrong?
Wrong parameters quietly distort the plan even when demand and the BOM are correct. A missing or short lead time schedules orders too late; a stale lot size or minimum order quantity over- or under-orders; a wrong make-or-buy flag raises the wrong document; a missing safety stock or reorder level leaves an item unprotected between runs. Because MRP is arithmetic, it does exactly what the parameters say — so reviewing them, especially lead times and lot rules, is one of the highest-return maintenance tasks in planning.