MRP vs. ERP: What You Need to Know
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MRP vs. ERP: What You Need to Know

The manufacturing industry requires a great deal of organization to ensure production is maintained at an optimum level, and order fulfillment is handled expediently. To do this, manufacturers generally need an intricate organizational system to track sales, production, and inventory. 

Each company has its own way of doing this, but it depends on a variety of factors from the size of the company to how sophisticated their production processes are to the industry and market they serve, etc. 

The solution for most manufacturers is to use an manufacturing software system, and two of the most popular solutions are MRP and ERP. Both MRP and ERP systems are designed to improve manufacturing efficiency via smart forecasting, but they’re intended for different audiences. 

While MRP was developed purely for managing the ever-expanding manufacturing industry, ERP was to help manage the entire business and supply chain. Luckily, Prodsmart knows a lot about both of these software systems, since we’re no stranger to organizing and optimizing your warehouse with our own manufacturing execution software. 

In this MRP vs. ERP article, we’ll be exploring everything there is to know about these systems, but first, here are some quick definitions of the two. 

What is MRP?

Most manufacturers started with a single product line produced using the same components that were either created internally or sourced locally. Consequently, customers didn’t have the option of ordering custom-tailored products. 

Improving the efficiency of core manufacturing processes such as master production scheduling, tracking inventory, and bills of materials were the key to dominating the manufacturing industry. 

The automation of these areas laid the groundwork for Material Requirements Planning or MRP. An MRP system is a software solution that provides for efficient management and control of stock, OEE, master production scheduling, production requirements, etc. in the manufacturing process. 

Manufacturing companies use MRP systems to oversee production planning, forecast, and order materials in the right quantities to arrive on the right day and time, so there are no production interruptions. 

While MRP systems come with a collection of tools primarily used in the manufacturing industry, they can also be used in other sectors to maximize inventory profitability. 

Related: Inventory Management: A Review of the Decade

What is ERP?

Unlike an MRP system, Enterprise Resource Planning or ERP systems were designed to map processes across the entire business. Instead of providing an isolated solution, ERP systems that are continuously integrated, enhance resource management across the whole company. 

Much like MRP, ERP systems help manufacturers manage their processes, such as inventory, planning, and scheduling of production. However, ERP systems go beyond the manufacturing processes. 

ERP systems were also designed to incorporate other organizational units such as accounting, finance, marketing, sales, product data management, supply chain management, etc. to streamline communication and enhance collaboration. 

ERP software facilitates the coordination of workflow processes, the centralization of information, and resource management across the company through effective data management. Data is stored in a database that can be accessed and interacted with via a user interface to provide insights. 

By integrating all departments into one system, ERP software improves transparency by providing updates and real-time costs to run the business effectively. 

MRP vs. ERP: What are the Benefits?

MRP systems were developed in an era where mass production dominated the global manufacturing landscape and was designed to improve production efficiency. 

However, because of the snowballing effect of new consumer products, fierce global competition, reduced production times, the need for transparency, and greater control of costs laid the foundation for ERP software. 

MRP vs ERP: The Benefits

MRP

  • Allows bills of materials to be created, modified and duplicated
  • Enhances inventory management by tracking components
  • Makes it easy to develop a master production schedule
  • Provides the means for manufacturers to compare production forecasts against actual data
  • Improves manufacturing processes, which promotes efficiency. 
  • Performance can be easily analyzed
  • Minimizes production interruptions 

ERP

  • Easy to plan and schedule machine runs in production 
  • Uses manufacturing scheduling in the extrapolation of demand estimates
  • Increases control over the shop floor up to the machine level
  • Allows manufacturers to track and record supplier quality using shipments
  • Makes it easy to monitor quality using the plant, product, and machine
  • Provides general ledgers for analyzing and reporting transactions 
  • Consolidates indirect and direct procurement into under one system
  • Improves the flow of communication across the entire business
  • Enhances company-wide resource management and coordination
  • Capable of running “what if” simulations to provide insights into consumer demands
  • Helps streamline and automate data collection and workflows to minimize errors and grow revenue

What Motivates Manufacturers To Change from MRP to ERP? 

boxes and packages in warehouse

Over the past few decades, more and more manufacturers are switching over from MRP to ERP mainly because of having a diverse range of product lines in response to evolving consumer expectations, wants, and needs for products that offer more customization options and are configurable as well. 

Most startups start managing production scheduling and finances using a patchwork of spreadsheets and QuickBooks before switching over to a much more integrated solution, and this is analogous as to how most manufacturers migrate from MPR to ERP. 

As they become increasingly dependent on outside suppliers and distributors, so do their needs, and the features and benefits of ERP make it a much more attractive option for managing production. 

On-time order fulfillment

One of the main problems of using a patchwork of tools or siloed systems to manage production is that sometimes, there’s no way of integrating departmental units and have them communicate. This leads to a variety of problems, including failing to fulfill orders on time. 

However, by using a centralized system for collecting, accessing, and managing the data required for production scheduling, quality control, and fulfillment, manufacturers can significantly improve on-time order fulfillment.

Real-time data

Scrap and rejects have always been part of the production process and are often collectively categorized as waste. The key to reducing scrap and reject production is to minimize waste, and one of the best ways of doing this is through real-time tracking and monitoring of production to identify where and how waste is produced. Prodsmart MES on mobile tracks and analyzes all aspects of your operations, from orders and materials to workers and maintenance — even when you’re offsite. 

ERP systems help provide answers to these quality assurance problems and improve the rate of scrap or reject being produced. 

Related: What is WMS? 

Scalability

In an era with highly dynamic consumer interests, demands, and expectations, it’s increasingly vital for manufacturers to continuously innovate and improve upon quality to stand out in a fiercely competitive global arena. 

ERP systems allow manufacturers to quickly develop and test new strategies for product development to meet the ever-evolving consumer wants and needs. This helps improve manufacturing efficiency through effective collaboration and communication, which are scalability boosters. 

Conclusion

MRP and ERP are quite similar, but there are key differences that make each solution unique, depending on the needs of the business. For manufacturers looking to streamline supply chain management, then an ERP system is the most sensible choice. 

If a manufacturer already has a system in place for managing customer-focused operations such as order processing and wants to gain more control over areas such as production scheduling and inventory management, then the best solution would be to use an MRP. 

Contact Prodsmart today to learn more about how we can make your warehouse more efficient, organized and profitable — all without any paper., by integrating with your ERP or MRP solution.

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