ERP vs MRP: A Helpful Guide & 3 Differences You Need To Know
As a leader managing people and the one responsible for day-to-day business operations, you need to know about ERP vs MRP systems. The daily running of your organization can feel heavy and overwhelming—but an ERP or MRP system can help.
Here we’ll discuss the uses of ERP vs MRP systems and look at three key differences so you leave feeling more confident about which system is best for you and your business.
I’ll cover:
- ERP vs MRP Systems: What Are They?
- A Quick History Of MRP And ERP
- 3 Key Differences Between ERP vs MRP Systems
- Can ERP And MRP Systems Be Used In Tandem?
- How Do I Decide Which Software Is Right For My Business?
ERP vs MRP Systems: What Are They?
ERP is an acronym for Enterprise Resource Planning — it’s software used by businesses and organizations to manage time-consuming daily activities in one place.
These activities include business needs like:
- Accounting
- Human Resources
- Project production and management
- Sales
- Supply networks
- Risk management
An ERP solution is fundamentally the vehicle for integrating people, processes, and technologies across a modern enterprise. The software uses a common database instead of a separate standalone system to bring organization to multiple workflow areas so all users — from clerks to the CEO — can create, store, and use the same data derived through common processes.
As a manager, you know the importance of being able to view software systems and your organization as a whole in order to determine:
- Areas of need
- Potential shortages
- Automation possibilities
Having all departments on the same page allows for improved customer relationship management because all departments are able to relay the same, transparent information to consumers.
Enterprise Resource Planning systems also reduce the duplication that occurs between separate software, and help plan for the future needs of the business.
If you want to know even more, check these articles out:
MRP is an acronym for Material Requirements Planning (MRP), and its software is used to help with manufacturing processes and production planning — but companies outside of manufacturing businesses can use an MRP system to increase their profitability by using the software to forecast and plan for every necessary raw material.
Netsuite.com defines MRP as “a standard supply planning system to help businesses, primarily product-based manufacturers, understand inventory requirements while balancing supply and demand. Businesses use MRP systems to efficiently manage inventory levels, schedule production and ensure delivery of the right product — on time and at optimal cost.”
MRP gives businesses of all sizes the ability to see inventory requirements needed to meet demand ahead of time, helping your company utilize inventory levels and accurate scheduling. Without this upfront information, businesses have less visibility over their entire business process and aren’t able to respond to supply chain management needs.
This leads to problems like:
- Ordering too much inventory, which increases holding costs and uses money that could be allocated elsewhere.
- Not meeting demands because of unmet material requirements – resulting in lost sales, canceled agreements, and unavailable items.
- Interrupting the manufacturing operation and delaying product assembly that results in increased costs and less yield.
Manufacturing companies depend on MRP software to accurately forecast inventory levels and assembly needs. But MRP is also applicable in many other industries to balance supply and demand needs – businesses like retail and restaurants.
A Quick History Of MRP And ERP
MRP systems were first created in the 1960s when computer usage became prominent in the manufacturing industry. There was an increased need for companies to find a way to manage materials and costs during manufacturing to factor into their production schedule, and MRPs were the answer.
MRP systems evolved into MRP II software during the 1980s to meet additional needs like master scheduling, rough-cut capacity planning, capacity requirements planning, sales and operations planning (S&OP), and other concepts. The software allowed for accurate forecasting and resulted in cost-savings.
Enterprise Resource Planning (ERP) software later emerged during the 1990s to answer the call for a system that went beyond materials and manufacturing needs. ERP systems didn’t replace MRP systems – they expanded the scope and offered business management solutions to other types of companies requiring a broader range of possibilities.
Finally came “Postmodern ERP” systems. These systems allow companies to choose multiple standalone products for integration in order to meet their specific needs without having to pay for a larger ERP system they may not need.
3 Key Differences Between ERP vs MRP Systems
1. Integration Levels
This may be the biggest difference between ERP and MRP systems and will help you decide which is right for you and your business.
ERP solutions are integrated and able to provide real-time information with a professional appearance across all modules in a shared database. This means employees working across various departments of your organization all have access to the same information.
MRP software is generally stand-alone. It can be integrated into systems used by your business through imports and exports but requires inputting information manually.
2. Extent of Use
Because ERP solutions can streamline a broad range of organizational departments, the types of users vary. Employees ranging from the Office Services Assistant to the CEO are able to use the same system functionality to view real-time information and present the same information to customers.
While ERP systems use a centralized system, role-based permissions can be created – allowing only designated employees to access sensitive data.
Managers can use ERP systems to schedule, manage business costs, predict future needs, and cross-check multiple departments for quality assurance.
MRP systems are limited in their scope based on their focus on manufacturing processes, and are utilized mainly by those employed in departments like manufacturing operations — employees on the shop floor and managers — to analyze inventory management. Viewers are more limited because of the focus on manufacturing resource planning.
MRP software allows for up-to-date inventory control information, accurate production scheduling, and makes working with distributors a lot easier.
3. Operation Costs
Pricing is a concern among business owners, and it’s important to know what kind of expense you’re looking at when purchasing a new software system.
ERP systems are more expensive than MRP systems due to their wide-ranging scope of business possibilities.
If you don’t have the budget for a full or limited ERP system but control of manufacturing processes is a critical need for your business then an MRP system might be right for you.
Postmodern ERP software may also be an option with a more limited budget, due to its ability to “mix and match” different standalone systems and only requiring users to pay for what they need.
Can ERP and MRP Systems Be Used in Tandem?
Yes!
Integrating ERP and MRP systems allows for information sharing and collaboration within all other departments of the organization. This allows viewers to easily access streamlined information faster — resulting in time saved, increased cost-savings, and overall customer satisfaction.
How Do I Decide Which Software Is Right for My Business?
When debating whether an ERP vs. MRP software solution is best for your organization, take time to consider these questions:
- What business software do you utilize now? Are you satisfied with the results?
- Do you have business processes in your organization you’d like to have automated to save time and effort?
- Would your business benefit from streamlining workflow among multiple departments?
- What are your fully functional areas and what areas need attention?
- What is your current budget?
ERP software will equip your diverse business to gain full control across the whole process. Many ERP systems available now are modular – you can choose the specific areas of your business to integrate and therefore which modules are required.
This allows for a customizable system fit to meet your own business needs.
A small business focused specifically on manufacturing needs may derive more benefit from an MRP system.
Final Thoughts
Managing an organization is tough, and the weight of handling your various roles can feel heavy.
If it fits your business needs, an ERP or MRP system can shift some of the time-consuming processes taking your attention and allow you to focus as a leader on what matters most to you and your organization.
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