Enterprise Resource Planning (ERP) and Material Requirements Planning (MRP) are two important systems used by manufacturers to manage operational processes. While both systems are related and often used in conjunction with one another, they have distinct differences and serve different purposes.
Any manufacturing company searching for new software will likely come across both ERP and MRP. Given that most ERP software now includes MRP functionality, it’s easy to find a solution that does both.
If you’re looking to upgrade your software but not sure where to invest your money, this guide will help you understand the key differences between ERP and MRP.
What is ERP?
ERP software integrates and automates various business processes in one system. For manufacturers, that includes inventory, purchasing, production planning, sales, accounting and more.
The main goal of ERP is to provide a single platform for all business functions, allowing for efficient information flow and real-time data analysis. It’s designed to not only help you manage your manufacturing processes more effectively, but also expand those benefits to the other areas of your organization.
The goal is to get your entire company operating in the same system to simplify processes, reduce manual effort and boost efficiency in all areas of the business.
What is MRP?
MRP, on the other hand, is a production planning and inventory control system that helps you manage the materials and components required for manufacturing. MRP uses data from the bill of materials (BOM) and the production schedule to determine the necessary quantities and timing of materials needed for production.
It also helps identify potential shortages and excesses in inventory and adjusts production plans accordingly.
Essentially, MRP helps you plan what you need to purchase or produce to make sure manufacturing can meet demand efficiently. Like ERP, it helps you optimize your production processes, focusing on inventory forecasting and material management.
ERP is a broad system that manages processes across the business, while MRP is a more specialized system focused on production planning and inventory management. Both systems can be integrated to provide a comprehensive view of the organization and facilitate better decision-making.
ERP vs. MRP: The important differences
1. Integrated solutions vs. stand-alone software
MRP software tends to be a stand-alone application that specifically addresses your manufacturing needs. While many of these solutions deliver their proposed benefits, the data in the system will remain separate from the rest of the organization.
Some MRP systems can be integrated with other software, but it’s not always easy to do. An ERP system, on the other hand, is integrated by design. Which leads us to our next point.
2. Scope of functionality
While MRP is specific to manufacturing processes and inventory management, ERP does it all. Think of all the key aspects of your business and how you currently manage them. There’s likely a separate system (or collection of spreadsheets) to manage each area.
An ERP solution eliminates those systems and gives you one place to manage it all. You’ll notice that most modern ERP solutions include MRP as a component of the larger system, so you can still reap the benefits of MRP without needing a stand-alone system.
3. User groups
As MRP systems are limited to manufacturing capabilities, your users will be limited to those that manage your production planning and inventory management. Those same users would be users of your ERP system, but so would many others in your organization. Your accounting team, sales reps, service department – the list goes on.
There’s an obvious benefit here that all your teams have easy access to information from other areas of the organization, allowing them to do their jobs more effectively. But it also simplifies employee onboarding and training because you have one main system to train on. It may not seem significant, but with a single integrated system, your processes will be much simpler and your people will get up-to-speed faster.
4. System cost
When you look at the capabilities of each solution, it’s no surprise that an MRP system is less expensive. But don’t let cost be your sole determining factor. Consider what you really need to improve and grow your business. Particularly for high growth companies, the higher price tag of ERP software is worth the investment to see a greater ROI across multiple business areas.
Does your business need ERP or MRP?
Take a step back and think about the objectives you want to meet with your software implementation. If you need to focus specifically on your manufacturing processes, MRP might be a good fit.
But we’d encourage you to consider your needs over the long-term as well – an MRP system might make sense right now, but will it be enough in five years? ERP software gives you much more flexibility, so you can add functionality and continued value over time. The same can’t be said for MRP.
Are you interested in learning more about the benefits of an ERP system for your manufacturing organization? Download our guide on how to select manufacturing ERP software.