What’s the difference between MRP and ERP?
If you work in manufacturing or distribution and are looking for software to help you manage your business your hear the terms MRP and ERP often. How do they differ? What are their benefits?
The first thing to note is that MRP is designed for a specific thing. Inventory and Production control. On the other hand ERP might have MRP as a part of it because it is designed to incorporate all areas of your business. So not only inventory and planning but also costing, accounting, sales, CRM, engineering and more.
MRP or Material Requirements planning is a tool to aid you in the processing of orders. What is does effectively is looks at your demand ( sales orders, forecasts) and your inventory(the stuff you already have), and then tells you what you need to make or buy and when based on the demand. It looks at things like lead times, order quantities, safety stocks and again calculates what you need to make or buy. MRP is very useful for the inventory people and the production people but not so much in accounting and sales because it is not designed for those groups.
Not all business will find MRP useful. If your product is always different or if your order volume is low there are other ways to achieve the same results with out using MRP software.
MRP will generally by utilized by those with repetitive purchases and/or larger order volumes. But again the reality is that MRP is usually part of a larger ERP system, much like accounting or sales.
ERP (Enterprise resource planning) is also a tool but one that is useful in all areas of the business.
It will have things like MRP, Accounting, Sales and more all in the same package. These modules, as they are called, should all be connected having information flow from one area of the business to the next automatically. So saying that ERP is much bigger than MRP and does a great deal more. The benefit of ERP is that all areas are connected eliminating the need for entry of information more than once. The flow of information is seamless and everyone knows what is going on in all other departments because the are all connected to the same information. There are many benefits to using ERP, for example the automation of creating invoices from shipments automatically. The management of inventory simply by reporting production, shipping and purchasing.
There is no doubt that these tools can be used to create efficiencies in your business. The caveat here is that they must be used correctly. Like anything else you do if you put garbage in you will get garbage out. So while the terms ERP and MRP generally refer to software, don’t make the mistake of thinking that is all there is to it. You must learn to use the software correctly, develop processes and procedures to ensure that both new and existing employees understand the process that must be followed to generate good numbers.
If you are implementing these tools, see this as an opportunity to standardize and improve your business. These process and procedures should be designed with the goal of providing the information needed in the most intrusive way to those that have to use it. Remember the idea is to improve your operations not weigh down your staff with extra tasks.
The last point I will make is this and it holds true for any package. You can buy an MRP software or your can buy an accounting software package, but the reality is sooner or later you will have to change it because you will out grow it. Your staff will spend time, your organization will spend money. Why put you people through all that?
ERP is affordable and you can grow into it. Don’t waste precious time and money. Look at an ERP package today!
