What is Difference Between ERP and MRP?

Material Requirements Planning (MRP) and Enterprise Resource Planning (ERP) are common business terminologies. These are business automation solutions that make your business operations more efficient, productive, and cost-effective. So, let’s understand ERP and MRP systems better!

What are MRP and ERP?

What is MRP?

MRP (Material Requirements Planning) is a software application that enables manufacturing processes to plan, schedule, and control materials and their requirements. It is an inventory control system or management system.

The primary function of an MRP system is maintaining the right quantities of inventory. Inventory management includes what material is required, when is that needed, and in what numbers.

The system helps record the inventory data accurately to include details of materials and components required in the manufacturing process and their inventory status. It makes detailed and updated information about inventory in use and in backup readily available for creating purchase orders. The MRP solution also generates reports and alerts, including, rescheduling notices.

Top MRP solutions include Katana MRP, MRPeasy, Active MRP, and E-Z-MRP.

What is ERP?

ERP (Enterprise Resource Planning) is a set of software solutions that support and integrate broader organizational needs including accounting systems, human resources, marketing, sales management, database management, inventory management, and supply chain management. Material requirements planning or inventory management is thus one of the multiple modules available in ERP systems.

Top ERP solutions include SAP, Oracle, Microsoft Dynamics ERP, and Netsuite.

What is the Relationship Between ERP and MRP?

There is a strong relationship between ERP and MRP. MRP can be termed as a subset of ERP as ERP solutions have MRP modules. Depending on the industry type, both MRP and ERP offer time and cost savings to businesses. That is the reason why these solutions are adopted widely.

Research suggests that around 53% of businesses consider ERP, along with CRM, as a priority investment in 2020. Besides, it predicts that the ERP system market will grow globally by up to $47 billion in revenue by 2022.

What is the Difference Between ERP and MRP Systems?

The most crucial question to answer is, what is the difference between MRP and ERP systems? So, here’s an infographic that will help you distinguish between ERP and MRP.

Also, Read: PLM and ERP Systems – How They Work Together?

Difference Between ERP and MRP:

Let’s understand the difference between ERP and MRP systems in detail.

1. 1. Range of Operations

      ERP systems have unlimited scope and cover a broad range of organizational operations. These have different ERP system modules for accounting, HR, operations management, supply chain management, inventory management, and many more. These help in the overall automation and syncing of various departments and processes in one central system.

      MRP systems have a limited range of operations or scope. These are meant for only inventory or material requirements management and do not cover other organizational activities.

   2. Complexity

      ERP software applications have numerous modules for different functions. These are complex systems that can be managed by trained personnel only.

      MRP is a simple application that covers only a narrow aspect of materials and inventory management. It does not have many modules. Thus, it can be used with much ease and without specialized staff.

   3. Costing

      ERP systems cost higher due to complexity. The systems need to have provisions for managing large volumes of data, syncing data from various departments, and enabling many users at the same time. It is also crucial for ERP systems to ensure data security for the organization. The aforementioned reasons collectively make ERP systems costly for organizations implementing these.

      MRP systems have limited functionality. Thus, these are pocket-friendly for organizations that need automation in inventory management but cannot spend a lot. These can, therefore, be utilized by small businesses too.

   4. Integrated vs. Standalone

      As the MRP system offers specific functionality for inventory management, it can work as a standalone application or desktop application.

      ERP solutions integrate with other software and modules with ease. It combines all operations within one system enabling well-synced cross-department functionality, unlike standalone applications. These help organizations save a lot of time and minimize conflict and delays in data transfer across departments. Nowadays, these are available as cloud-based solutions.

   5. Target Industry

      MRP systems are useful for businesses that majorly deal with inventory only. These businesses may not need or have a budget for the high-costing ERP systems or may not have staff with high technical abilities to be able to learn complex digital processes and ERP systems.

      For example, a factory with only a manufacturing unit does not have staff comfortable with complex computer applications. The MRP system is simple and easy to learn and can prove useful for such businesses.

      Complex ERP systems are suitable for more extensive business organizations with multiple functions and departments. ERP solutions are prevalent in all major industries including retail, ERP for construction, hospitality, manufacturing, pharmaceutical, and many more.

   Also, Read: Top 8 ERP for Process Manufacturing
   

   What are the Benefits of MRP and ERP Systems?

   Both ERP and MRP solutions help businesses save time and money. These help in better data management.

   Benefits of MRP

   MRP systems help businesses reduce human errors and time through automation. These enable better data management and documentation.

   With automated and paperless resource and inventory management, MRP solutions help prevent overstocking and reduce inventory costs for businesses.

   With MRP systems, work scheduling and distribution planning gets simplified. Businesses also get the advantage of material requirement forecasting.

   With easy access to updated data in real time through MRP solutions, businesses can serve their customers promptly. 

   Being simple, standalone solutions, the MRP systems have a lot to offer to businesses and at nominal costs!

   Benefits of ERP

   ERP systems offer increased efficiency and decreased effort by providing automated and paperless operations. Though ERP solutions have high costs of implementation, these decrease the overall costs of operations in the long run for businesses due to time-saving and reduced human monitoring.

   With a sound ERP system in place, organizations can better manage inventory and information management across departments. It helps avoid manual errors and offers enhanced accuracy with the data across multiple departments managed through a centralized system.

   Supply chains are the crux of most businesses. ERP systems help in better supply chain management for businesses by improving process efficiency and effectiveness.

   ERP systems offer enhanced security, updates, and retrieval of data. With better reporting, ERP systems enable quicker decision-making that surges business growth.

   With all the systems in place and integrated with each other, ERP solutions facilitate improved communication and better customer service. What more do businesses want?

   Does Company Need an ERP or MRP, or Both?

   Every business has a different set of requirements and budgets too. Based on the differences and benefits of ERP and MRP systems discussed above, businesses can choose the solution that matches their needs. We have listed the detailed parameters here that will help you decide between these solutions.

   Wrapping it Up

   ERP system vs. MRP may not be the most discussed topic for businesses, but it is a crucial decision. I have summarized the benefits of each and pointed out the minute differences between ERP and MRP to help you understand the two better.

   As such, you must base the selection of ERP systems and MRP solutions on the specific requirements of businesses. ERP can be better than MRP for businesses as it can accommodate all operations.

   If you have any more points to contribute, please don’t forget to drop a comment!

Kiran Bajpai is Marketing Associate at SoftwareSuggest. Her expertise lies in Software Analysis. She can never get bored of reading books, especially those related to History and Politics.