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Understanding the Differences Between MRP and ERP (with Examples)

Manufacturing startups and businesses looking to upgrade their manufacturing systems have probably run across both material requirements planning solutions (MRP) and enterprise resource planning solutions (ERP). The two often come up in the same conversation when talking about backend manufacturing technology, and they overlap quite a bit.

With that in mind, let’s take a look at the differences and similarities between MRP and ERP systems, and where they fit together.

 

Understanding Material Requirements Planning (MRP)

An MRP system is specialized backend software that focuses on efficiently managing material resources related to a business. It identifies needed materials, estimates quantities required, calculates when materials will be required to meet production schedules, and manages delivery timing. MRP is essential software for most businesses that run efficiently, and this is why it is widely used by manufacturers, restaurants, consumer products firms, and even professional service organizations. 

Today’s more advanced and sophisticated versions of MRP are even more critical for business, because they help firms meet evolving customer needs, precisely control inventory levels, and manage global supply chains. When market demands change, MRP helps businesses stay efficient and evolve with these changes.

The basic functions of MRP include:

  • Stock control
  • Production scheduling
  • Inventory management
  • Supply chain management

Learn more about lean manufacturing inventory management.

Understanding Enterprise Resource Planning (ERP)

An ERP system is a complete, end-to-end backend software solution that manages all areas of a business and serves as the central nerve center for a company. It helps businesses with material resources planning, but it also encompasses operations, finances, HR, sales and marketing, logistics, project management, and all other core business functions.

ERP began life as software for manufacturers, but it expanded to help run all areas of a company as the original comprehensive business software solution. All large enterprises uses ERP today, including those not in the manufacturing industry, and the emergence of cloud ERP has expanded its use to now include small and medium-sized businesses since the cloud has lowered both rollout time and ongoing system costs.

Unlike MRP, ERP solutions are integrated systems with a common database, a common user interface, real-time operational capabilities, and support for connecting third-party applications and components.

Some of the basic functions that ERP commonly provides:

  • Customer management
  • Quality management
  • Financial accounting
  • Management accounting
  • Manufacturing
  • Order processing
  • Supply chain management
  • Data services integration and analytics

 

The Relationship Between MRP and ERP

Both MRP and ERP systems handle material resources planning. MRP focuses exclusively on the functions around material resources planning, while ERP started life as an MRP system but then went on to include all of the other functions that a business needs so there is tighter integration with data and software functions across a business.

Because MRP benefits from coordinating and sharing data with other parts of the business, this is why much of MRP now happens within a larger ERP solution instead of as a standalone solution. The business benefits of tight data and operational integration are just too great to warrant a best-of-breed approach that relies on stitching together standalone solutions.

Some standalone MRP solutions do still exist, however, largely to provide deep, highly industry-specific functionality that has historically not existed in MRP modules within larger ERP solutions. Manufacturers that are happy with their current systems setup and only need a boost in MRP functionality also sometimes have historically chosen a standalone MRP solution due to the cost and complexity of rolling out a larger ERP solution.

The key word is “historically,” however.

The cloud has significantly changed the ERP landscape, and now ERP cost and rollout times have significantly decreased. Businesses looking for robust MRP that rolls out fast can now get that as part of a larger cloud-based ERP solution such as SAP S/4HANA Cloud Public Edition, further reducing the need for standalone MRP solutions. Plugin marketplaces such as the SAP Business Technology Platform also enable industry-specific functionality within a comprehensive ERP solution, reducing the need for a standalone MRP solution.

The choice between an MRP system and a complete ERP solution was once a hard call, but now most businesses are going with the advantages of a comprehensive ERP solution because the legacy considerations around ERP such as cost and complexity have been removed thanks to the cloud.

Learn more about erp and mes integrations.

Learn More About MRP and ERP Solutions for Your Business

We’ve helped manufacturing and other growing businesses with ERP and MRP functionality for more than 25 years as an SAP Gold Partner. Because we’ve assisted with more than 500 successful ERP rollouts, we understand both the needs of business and how ERP solutions fit those needs.

Learn more about ERP solutions for manufacturing. For help with understanding the fine nuances between MRP and ERP, or to see if an ERP solution is right for the specific needs of your business, contact one of our experienced consultants at (801) 642-0123 or by writing us at info@nbs-us.com.

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