Industrial and manufacturing solutions have significantly evolved over the years as computers have become more powerful and manufacturing efficiency has gone from a competitive advantage to table stakes. Manufacturers now use a manufacturing execution system in resource planning and execution (MES), a material resource planning system (MRP) for preparing a batch manufacturing record, and an enterprise resource planning solution (ERP) for tying it all together.
Understanding the various industrial and manufacturing solutions and how they fit together can be confusing, especially when it comes to the relationship among MES, MRP and ERP. This article will focus on MRP, where manufacturers use it, and how it relates to ERP. For more on MES, read our article, What is a Manufacturing Execution System? [link to article]
Material Resource Planning software (MRP) has been around for decades, and it serves a core function for manufacturers: MRP manages manufacturing inputs and outputs. It tracks all manufacturing activity and material resources in real-time so manufacturing operations, schedules and resources stay in balance.
The three core functions of MRP include determining what needs to be produced, calculating demand and scheduling, and monitoring supply.
1. Determining what needs to be produced. When a product is created, the engineering team defines exactly what must go into each unit being produced. An MRP keeps track of this bill of materials (BOM) for each product, the order that material will be required to make the product, the quantity of resources needed, and the dependency of resources on other resources.
2. Calculating the demand and scheduling. MRP calculates how many final products must be produced to meet demand, and it manages manufacturing scheduling to meet those production goals. These calculations are based on sales order volume minus inventory-on-hand.
3. Monitoring and evaluating supply. With product specifications, demand and schedules already in the MRP system, an MRP then monitors and determines the components, assemblies and materials that should be produced or purchased during the planning period to meet the needs of the manufacturing operation. As part of this, MRP will monitor available inventory to determine any shortages, and it will calculate the proper make or buy quantities for each item. The MRP also will calculate the correct start date for purchases using either purchase or production lead time.
With data pulled from the MRP system, manufacturers then can prepare a batch manufacturing record for production. For more on preparing a batch manufacturing record, see our article Batch Manufacturing Records: What You Need to Know. [link to article]
As MRP systems have been involved, they have come to include additional awareness that improves the material resource planning process.
Specifically, modern MRP solutions now also encompass human resources, logistical considerations, accounting, and forecasting for better financial planning. These improvements are collectively known as MRP II, and they bring a more holistic view of actual operating capacity than what MRP I delivered.
Over time, this holistic view has been expanded further and become known as enterprise resource planning (ERP).
Borne out of MRP II, ERP enables manufacturers to house, monitor and coordinate all data related to the business, not just operations related to the shop floor. ERP centralizes financial management, inventory, logistics, sales, marketing and supply chain considerations into a single system for a complete picture of the business. This end-to-end approach enables complex automation, deeper analysis and better visibility for real-time adjustments. It also enables artificial intelligence applied to business data and processes.
Although ERP came out of MRP and the manufacturing space, non-manufacturing businesses now also use ERP for housing company data and managing operations.
MRP systems still are widely used today, but now they typically are a component of larger industrial and manufacturing solutions that revolve around ERP. MRP either is a standalone solution that connects with a manufacturer’s ERP system, or MRP is a component of an ERP system.
ERP is the backbone of manufacturing operations today. Whether it is using a manufacturing execution system in resource planning or preparing a batch manufacturing record with MRP, manufacturers lean on their ERP backend to bring it all together and ensure that each part of the business functions holistically as a part of the whole.
Cost and rollout times also have come down thanks to cloud computing. Whereas ERP once was the definition of a costly and time-consuming software installation, cloud ERP now makes it possible for manufacturers to pay for only what they need and roll out an ERP solution that includes MRP in as little as 90 days. Newer ERP solutions for manufacturing such as SAP S/4HANA Cloud Public Edition are quickly changing the reputation of ERP as an industrial and manufacturing solution only for the Fortune 500 companies.
For more on how ERP can help your business, or the relationship between MRP and ERP, contact one of our experienced consultants at (801) 642-0123 or by writing us at info@nbs-us.com.