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What is the Difference Between ERP and MRP?
Because data and scheduling resources located within an enterprise resource planning (ERP) are often used to facilitate materials requirements planning (MRP), ERP and MRP are closely related in the business world. An ERP is a software platform used to plan and keep records of business resources like finances, workforce, materials, and property. Generally, MRP processes specifically involve planning the use of materials necessary for manufacturing business products, so materials requirements planning is also a common function contained within an ERP.
Though ERP and MRP perform some of the same functions, they are not interchangeable because ERP platforms perform a number of functions not included in MRP. When considering either solution, a company that just needs to maintain inventory and manage the materials it uses to make its products does not necessarily need a whole ERP platform. It may simply need a materials management system equipped with MRP functions.
When comparing ERP and MRP, one advantage to consider is the ability of an ERP to integrate and share the different types of data it collects among different company departments. MRP solutions are usually standalone programs dedicated to that purpose, so they are not designed to integrate with types of data not used in materials requirements planning.
Employing materials requirements planning involves figuring out how much material a company needs to complete production and getting the right amount of inventory to avoid shortages or problems caused by overstock materials. MRP is most important for companies with perishable materials or limited storage. This process is important in almost all types of businesses that offer a product or service. A caterer ordering just the right amount of steak to serve an event or a restaurant owner stocking fresh produce might use MRP to ensure they have enough food while avoiding excesses leading to spoilage or unprofitable waste. In construction, a materials planner might use ERP and MRP to determine the right amount of concrete, drywall, or other building materials needed to complete the construction project.
By definition, an enterprise is a business designed to make a profit. Although a business designed to sustain employees as a non-profit may benefit from the use of an ERP, the business is not technically engaged in enterprise resource planning because these types of businesses are not considered to be enterprises. Other types of software used to perform MRP for non-enterprise businesses include association management software and organization management software.
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Discussion Comments
There is another solution related with production planning. The so called APS (Advanced Planning and Scheduling). They include Capacity Planning to perform a realistic production planning.
@SkyWhisperer - I think you’re correct. I’ve seen this especially with companies that have both an MRP system and an ERP system and they’re trying to talk to each other. There is some overlap of functionality and different people are in charge of the two applications.
I believe that before any business plunks money down on a system they should have a manual process down first. They should outline how they intend to communicate with different departments who use the systems to ensure that everyone is in sync. They should also run periodic reports between the two systems to ensure that they’re reporting the same numbers as far as inventory levels.
@Mammmood - The problem that I see with any MRP system is the classic problem of data integrity. If wrong information is entered into the system (and this is not uncommon) then the software will make incorrect projections about how much new material needs to be purchased to meet customer demands.
As a result the company may wind up buying more inventory than is needed, increasing their costs and overhead; or they may buy less inventory than needed, increasing the time it takes to actually produce their products and deliver them to the customer.
SAP is one of the big boys on the block when it comes to enterprise resource planning system software. That’s really where SAP made its debut, by offering a package that tracked the entire life cycle of production from the raw materials to finished product, and alerted management when inventory levels were low.
Computers in principle can do this kind of analysis much better than humans can. I’m not plugging SAP – there are other systems out there nowadays that can do the same thing – I'm just noting that they were the first on the scene.
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