When looking for software, you’ve probably come across both ERP and MRP. In many definitions of these categories of software, there is not much difference between them, which can make the system selection process quite confusing. Not to mention that both of these systems are closely linked to the manufacturing industry.
What is MRP?
MRP system stands for material requirements planning. Its main purpose is to measure what material you need, how much you need and when you need it, allowing you to achieve the highest level of production in your manufacturing center. MRP contains tools used solely to assist production processes, although companies that are not only in production are encouraged to use the MRP system to improve inventory profitability. Businesses typically manage production planning with these systems, using them to forecast and order materials. This ensures that when these materials are needed for production, the correct quantity is available on the correct date.
When using the MRP system, you must be especially careful when entering data. If the data is old or incorrect, material forecasts can become skewed, which can result in too much or too little raw material being available for efficient business practice.
What is ERP?
ERP system stands for enterprise resource planning and is one of the most common categories of business software, especially among large enterprises. ERP systems help you manage production processes such as production planning, planning and inventory management. However, the full range of ERP capabilities is much wider than just manufacturing.
ERP is inherently an efficient way to centralize information processes and workflows through data management. Because ERP stores all your workflow data in one place, all your employees pull data from that location to inform. This helps ensure the quality of the data as it is never duplicated between systems. It also reduces the chance that the numbers will be corrupted or difficult to access by internal departments.
The ERP software also comes with modules for a range of business processes, including general and industry specific modules. For example, common ERP modules may include HR, customer relationship management, supply chain management, financial management, inventory management, warehouse management, and production management. These features include back office workflows that can be efficiently connected to other systems.
Ultimately, ERP is a solution for a wide variety of tasks. By integrating these various components, ERP can streamline and automate workflows and data collection to reduce human error and increase revenue.
MRP vs ERP: what are the biggest differences?
It can be difficult to distinguish between ERP and MRP systems, mainly due to their similar acronyms and their mutual presence in the manufacturing industry. However, they have many differences that affect how they are used in business.
Let’s look at some of the most significant differences between MRP and ERP systems:
- Type of users.
The type of people who use each system often also varies greatly. Because ERP is the standard in many industries and used by many departments, there is no limit to who the users of ERP software are. Users might include an HR person who checks a payroll, a sales representative who checks a lead’s status, or a data analyst who creates a business intelligence report.
Since MRP systems are purely for manufacturing operations, the people who use them are usually located in this department of the business. This could include a warehouse manager checking stocks of required raw materials, a warehouse worker checking lead times, or a production planner overseeing the entire operation.
The point is that the types of people who use MRP are much more limited because the services included are only related to production. A more diverse group of users can benefit from ERP due to the wide range of workflows it provides.
- Cost.
One significant difference between ERP and MRP systems is that ERP is the more expensive option. When you consider the fact that ERP can serve multiple aspects of a business, not just manufacturing, it makes sense that the solution is more expensive. This is not said with the intent to discount the fact that effective MRP systems also have a cost, but it should be noted that ERP is usually more expensive.
Depending on your company’s needs, the initial cost of investing in ERP can be well worth it due to the wide range of features available. However, if the cost of an ERP system makes it an unsustainable option for your company, MRP systems are available as a less complex but more cost-effective option.
In order to cut costs, we advise you to develop your own ERP system in a modular fashion. This will allow you to most effectively adapt the system to the company’s business process and significantly reduce the final cost of the system. Leave a request on our website to get detailed advice.
- Functions.
As mentioned earlier, ERP and MRP differ from each other due to the range of features they offer. MRP is a simpler solution than a complex ERP system. Material requirements planning software is focused only on production, while ERP contains a number of solutions designed to simplify various business processes, such as accounting and personnel management. MRP is a critical component of ERP, but depending on the needs of the company, it may not be the most important process in the suite.
If a company is looking for a solution that covers a range of business processes, then ERP is by far the best choice. However, this may be overkill for companies that simply need a manufacturing solution.
Choosing the right software depends on factors such as your unique business processes, your budget, and the number of users. Enterprise Resource Planning combines several modules and applications to create a variety of data points from a centralized source. This provides more control, personalization options and the ability to make important decisions faster. About 93% of ERP users work with custom packages. This significantly affects performance. This means you have the ability to shape mission-critical features to fit your business needs.
Material requirements planning software helps businesses, especially with manufacturing processes, unlike ERP, which includes a suite of office solutions. MRP systems can help your company optimize manufacturing efforts by reducing waste and using demand forecasts to develop estimates of material needs.
When choosing between these options, you should ask yourself some important questions to determine which solution will bring the most value to your company:
- What business processes are you trying to automate?
If you are specifically looking for something to help with your production efforts, then an MRP solution might be the right choice. However, if you like the idea of using software to automate other aspects of your business, such as accounting or distribution, then you should turn to ERP. This is because enterprise resource planning software is much easier to integrate and contains more features than a standalone MRP system. Therefore, if you are looking for a solution that has more tools than just manufacturing, then you should look to an ERP vendor.
- What programs are you currently using?
The number and type of programs your company already uses will also be a factor in your decision. If you don’t currently use many software systems, the seamless integration associated with ERP programs may not be very helpful to you. However, if you have a lot of heterogeneous systems that need to be connected, ERP is a good option due to the ease of connection.
- How much budget can you allocate for software?
Budget is a deciding factor when choosing software in general. ERP software contains many features and is known to be expensive. MRP systems contain only production functions and are less expensive. In this situation, you need to analyze in order to make the right decisions.
- How much growth is forecast for your company?
Your company’s growth rate can be the deciding factor in whether you should buy an ERP or MRP system. If your company is growing at a rapid pace and you feel like you will eventually need to implement more automation for various workflows, you can choose an ERP solution that will support this growth. However, if you have a business that will remain relatively constant in terms of number of employees or results, you may not need to plan for a larger solution and want to use an MRP system.
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