The differences between ERP and MRP explained

In the 1960s, consumption had enormously risen due to the post-World War II economic boom. Manufacturers worldwide struggled to keep up with market demand, making inventory tracking and stock management unmanageable.

This led to the development of Material Requirements Planning System (MRP) software. MRP primarily helped manufacturers monitor inventory, reconcile balances, and handle basic purchasing and delivery processes.

During the 70s, more manufacturers began using MRP, and the system progressively became more sophisticated. In The 1980s, MRP evolved into what is known as MRP II, capable of handling more processes.

It wasn't until the 1990s that the Gartner group first used the term "Enterprise Resource Planning" Modeled after MRP, ERP was a more complex and holistic tool at its launch than MRP ever was.

Modern ERP solutions and MRP tools share a similar origin but are fundamentally different. This article explains the differences between ERP and MRP, providing insights into what to consider when choosing either.

What is an MRP system?

Modern MRP systems help manufacturers determine the materials and components required to manufacture a product. MRP enables manufacturers to plan and ensure ample room for changes based on developing needs. Other features include recording and monitoring details such as delivery dates, raw material shelf life, products in stock, vendors, etc.

Key MRP functions include:

Demand planning and forecasting: Predicting the raw materials necessary to complete manufacturing on a schedule by considering market trends, consumer demand, and availability of raw materials.

Inventory management: Ensuring the availability of the raw materials and supplies necessary for manufacturing.

Production scheduling: Using available data and insights to help plan and generate production schedules to complete production on time. Order management: Automatically identifying all the items necessary for manufacturing and ensuring orders are placed on time.

The relationship between ERP and MRP

An MRP is a tool specifically designed for manufacturers and those handling materials and components. It bears many similarities to ERP, such as managing inventory, deriving insights, ensuring quality, and scheduling production.

However, ERP is a more complex and holistic tool encompassing a broader spectrum of business processes like sales and marketing, finance, accounting, customer service, etc. Manufacturing ERP systems designed explicitly for manufacturers often incorporate MRP as an ERP module.

This means a manufacturer looking for a complete automation solution will do better to invest in an ERP with an MRP module (an ERP MRP, in other words).

ERP Vs. MRP: What are the differences?

Here is a quick comparison that weighs ERP vs. MRP and lays down the main difference between MRP and ERP:

Considerations for choosing ERP or MRP

The question of choosing between ERP and MRP only arises if manufacturing is a part of your business process. Inventory management, stock control, purchase and procurement, warehouse management, and other raw materials-related operations can be effectively managed by an ERP alone.

When to consider an MRP solution?

• Choosing suitable materials is of utmost importance for your production operation.
• You need to make sure that customers receive products on time.
• Inventory levels need to be maintained at all times according to the said schedule for manufacturing.
• There must be cohesion between manufacturing activities, purchases, and sales orders.

Although an ERP can handle all these tasks, an MRP might suffice for companies purely into manufacturing. However, an ERP tool might serve you better if your company is involved in more than just manufacturing.

If you are a manufacturer, consider the following questions to determine whether you need an MRP or an ERP with an MRP module:

What is your business' size?

If you are a small manufacturer or a workshop, you might need an MRP for automating tasks like purchasing raw materials, ensuring their quality, and tracking their location.

However, as your business grows and you hire more people, you will need more complex inventory management and an ERP HRM module.

MRP is sufficient if you are a small manufacturer with several employees. Otherwise, you will need to move from MRP to ERP.

What are your industrial and operational needs?

If you plan to automate only your manufacturing, stock control, and inventory management, you need an MRP.

However, you'll need an ERP as your business grows and need to include more business operations like accounting, human resources, and others.

What is your budget?

As mentioned earlier, an MRP costs less than an ERP. If you are a manufacturer on a tight budget and want to automate a few basic processes, go ahead with an MRP.

However, even if you are a small manufacturer with the budget to invest in a cloud ERP, always choose an ERP over an MRP because it is more comprehensive and has more features to use as you begin to scale.

ERP costs more than MRP. MRP is the way to go if you're a manufacturer on a tight budget and want to automate a few basic processes.

However, given its more comprehensive features and scalability, if you have the budget to invest in a cloud ERP, it's always advisable to choose an ERP over an MRP.

Projected growth

If you foresee growth in your future, you'll need an ERP to accommodate all your business processes. An MRP can only handle manufacturing-related business processes.

To efficiently manage other functions like HR, finance, sales, and marketing, an ERP with an MRP module makes more sense.

ERP vs. MRP implementation

The implementation process is similar for both ERP and MRP. Once you've decided between ERP and MRP, consider these factors:

• What is your goal? Know why you want to invest in either tool and what processes you intend to automate.
• What is your budget? Discuss with decision-makers within your organization to set aside a budget for the product, maintenance, and training.
• Which product to choose? Many ERP and MRP products, both on-premise and over the cloud, are available today. Interview potential vendors and select the product that best fits your needs.
• What about training? Training employees to use the ERP or MRP is crucial for successful implementation. Make sure the vendor offers training services.
• Are you ready for data migration? Ensure your data is cleansed, verified, and compatible before implementing either ERP or MRP.
• Opt for a vendor that offers excellent customer support.

It makes sense to invest in an ERP with an MRP module.

In conclusion, MRP helps manufacturers handle their materials and components and is sufficient for smaller organizations that deal only with manufacturing.

However, ERP is more complex and versatile than MRP, and companies that need more than materials management should consider ERP over MRP.

If you decide on an MRP solution for your business, you can read more about the key features for MRP software and implementation considerations.

The Author

Leor Barth

CTO

A dynamic team leader, Leor oversees the entire technological spectrum at Priority. With a BA in Computer Science and nearly two decades in the ERP sector, Leor brings a wealth of experience from his time at Precise Software, where he specialized in creating performance monitoring software. Outside of work, he's an enthusiastic hiker and a devoted father of three, often found planning or embarking on his next uphill trek.