In your software search, you’ve likely come across MRP manufacturing solutions and ERP software. You may have also experienced confusion when differentiating the two. However, you don’t need to panic. This article offers a detailed ERP vs MRP comparison to help you better understand how each system works, their benefits, limitations and more.
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Well, we’re here to alleviate some of that confusion by conducting a full-throttle comparison of the two systems — showcasing their unique qualities, perks and limitations — and identifying their vital differentiators and associated market trends.
Table of Contents
- What Is ERP?
- What Is MRP?
- Key Differences
- Which System Should I Use?
- Market Trends
- How To Choose the Best Software
- Final Thoughts
What is ERP?
Enterprise resource planning (ERP) is a business software comprised of modules that serve numerous industries and departments. This program can also serve one department and integrate with other solutions for optimal performance.
A preview of an ERP solution.
Standard ERP modules may include HR, customer relationship management (CRM), accounting, inventory management, warehouse management, etc. These functions include back-office workflows that connect to other systems effectively.
Brief History
MRP was the first ERP system in the ’60s and ’70s strictly implemented to facilitate the manufacturing industry.
However, Gartner first termed enterprise resource planning in 1990 to encompass all companies and industries — bookkeeping, HR, CRM, inventory, etc. — instead of just manufacturing. Long story short, this solution evolved over the years to include various modules, serve businesses of all sizes and streamline all manual tasks to perform more pressing jobs that require more creative and analytical thinking.
Key Features
ERP applications come with near infinite standard features and tools.
- Accounting/Financial Management: Manage your company’s financial intel and status with general ledgers, accounts payable and receivable, profit-and-loss reporting and other components.
- CRM: Upkeep customer data with sales analytics, campaign management, reports, dashboards and other appliances.
- Sales and Marketing: Employ this module to streamline your sales and marketing strategies to reach new clientele while maintaining current patrons.
- HR: Execute this apparatus for recruiting new and handling current employees. You may also implement features like talent management, time and attendance management and benefits management to maintain employees’ PTO, sick days, benefits and other valuable data in one centralized location.
- SCM: Visual supply chain maps, demand forecasting, billing, cross-dock planning and freight matrix are just a few accessories to bring more transparency to your supply chain.
- Integration: Merge this system with other ERP solutions or modules to keep data, communications and more centralized.
- Automation: Expedite tasks from balancing general ledgers and performing bank reconciliations to allocating invoices and managing purchase orders with automations.
- Data Analysis: Leverage ideal business intelligence (BI) or business analytics (BA) tools to create and analyze in-depth informational reports and KPIs to understand what’s working and address bottlenecks.
- Reporting: Craft several thorough documents to highlight operations and productivity. You can also draft invoices, bills, receipts and more.
Primary Benefits
ERP software comes with plenty of upside. These advantages include:
- Enhances Customer Service: You boost customer satisfaction and service with an ERP thanks to handy CRM components that help keep and maintain your customer base.
- Offers Better Data Management and Security: Before this program existed, you had to input and re-input information manually for other departments in your company to see via Excel spreadsheets or pencil and paper.
This solution lets you kiss those caveman tools goodbye because you only insert details once, and it automatically appears in other departments. Cloud solutions also offer various security tactics to keep information safe such as two-step or multi-factor authentication, user access, data encryption and more. - Streamlines Business Processes: You may automate routine tasks with this application. For example, when your accounting department needs to do month-end reporting and bank reconciliations, this program automatically handles these and other assignments so that you can address high-priority responsibilities.
- Provides Competitive Advantage: Investing in this solution keeps you ahead of or aligned with your competition. It also keeps you relevant in the modern era so you can boost productivity and garner more clients for your goods or services.
Limitations
This program has a few drawbacks. Its limitations are:
- Implementation and Maintenance Costs: Like a car, you need to maintain this program and ensure that it’s running at total capacity. It’s best to talk with vendors and resellers about their support teams. If they’re reliable and easy to get in touch with, you have a prospective vendor. But if not, you may need to cross this vendor off your list.
This platform can also have a lengthy installation process that could run into unnecessary downtime for your company, which is why I want to reemphasize that you should ask vendors about an effective installation schedule that you both can agree on to avoid conflicts. - Generally Expensive: This software is typically more expensive because it comprises several appliances to serve diverse industries and company departments. If you’re just looking for an application to help your manufacturing plant, look for a thorough MRP.
If you’re looking for something that streamlines HR, CRM, marketing and accounting, an enterprise resource planning system is our best choice. - Too Complex: Learning this software can be difficult if you don’t have the proper training materials and resources.
Before purchasing this system, ask your vendor if their training material and staff help you with onboarding. Also, ask vendors, resellers or current users who invested in the software how easy implementation and onboarding is, which can help you narrow down your list to find the ideal solution.
What is MRP?
MRP is an acronym that stands for material requirements planning. Its fundamental purpose is to measure what material you need, how much you need and when you need it, allowing you to ensure the highest production rate in your manufacturing center. It’s also known as MRP ERP systems.
An example of an MRP interface.
Brief History
In a nutshell, before MRP ERP solutions came to fruition, manufacturers had to plan and take inventory manually with pencil and paper. General Electric and Rolls Royce aero-engine makers developed the first “computerized” MRP in the early 1950s. By 1964, this program was released commercially for businesses, and after multiple upgrades, MRP became one of the most globally well-known manufacturing solutions.
MRP I and MRP II
Think of MRP I and MRP II as smooth and crunchy peanut butter: they’re both essentially the same but have different characteristics.
MRP I is material requirements planning. It focuses on raw materials, bill of materials (BOMs), inventory tracking and master production scheduling.
MRP II is material resource planning. In addition to BOMs, inventory tracking and scheduling, it also offers quality management, general accounting, demand estimations and machine capacity scheduling. This program includes the whole company instead of just the manufacturing sector.
Ironically, people say material requirements planning and material resource planning interchangeably, but remember that they have unique qualities.
Key Features
MRP ERP platforms carry a few standard features to streamline manufacturing practices.
- BOM Management: BOMs, in essence, are recipes that detail specific raw materials and steps needed to construct particular products. A BOM management tool documents and archives these recipes and reassures you that you complete each step.
- Inventory Management: As aforementioned, manually taking inventory is tedious and time-consuming. An inventory management apparatus counts all of your goods and materials with precision. Some of these tools even permit you to set minimum quantities on items. You’ll receive notifications when you reach these quantities, so you reduce running entirely out of vital merchandise.
- Accounting: Typically, accounting software is sold separately or as one module in an ERP platform. But this and other manufacturing solutions adopt accounting with general ledgers, accounts payable and receivable and reporting tools to closely monitor your financial status.
- Master Production Schedule: This tool exhibits production plans for building products in an easy-to-understand format. It can also feature estimates and capacities.
- Purchase Planning: Implement purchase planning tools to obtain the right materials at the right price. This module is also effective in maintaining inventory levels to avoid overstocking.
- Capacity Planning: Leverage this tool to maximize production line operations with the ideal machinery and employees.
- Cost Reporting: Draft and review transaction reports to understand where your money goes.
- Forecasting: Develop better budgets and product numbers with in-depth estimation tools. Compare budgets to actuals to better manage plans and address obstacles early.
Primary Benefits
The difference between MRP and ERP systems is that MRP comes with industry-specific benefits. These advantages include:
- Offers Inventory Control: Maintaining your inventory is a must for manufacturing, warehouse and supply chain management (SCM) industries. Knowing what’s available and in need of replenishment ensures products are constructed and delivered to your customer within a reasonable timeframe.
- Improves Purchase Planning: In essence, purchase planning initiates parameters and strategies to receive the most suitable value of a particular purchase. This accessory ensures manufacturers buy the best raw materials and machinery for production.
- Enhances Data Management and Documentation: Real-time data may sound futuristic, but modern facilities and companies utilize it daily. It’s a trend that’s here to stay. Obtaining current information and printing the proper reports permits you to oversee all the ideal KPIs such as cycle time, throughput, production attainment and take time, amongst others, so that you can make informed business decisions.
- Improves Production Planning: To understand which materials, employees, machinery and other required resources are needed to manufacture items, companies use production planning attributes. This tool assures that you’re leveraging proper assets for various responsibilities.
- Utilizes Better Resource Management: Ensure you’re using the right materials, machinery, employees and other resources for specific jobs for correct usage and increased productivity.
Limitations
This system, like most software, has a few drawbacks. Its limitations include:
- Steep Prices: Although this application is significantly cheaper than ERP systems, they can still have hefty price tags. Other factors that affect pricing are company size — especially if you have an enterprise — deployment options and more.
- Lengthy Implementation Time: This suite can have a long installation and training process, which could interrupt your routine activities. It’s best to speak with vendors and resellers about their implementation processes, how efficient their installation team is and how they can best fit with your schedule.
- Needs Accurate Data Inputting: To get the best results, you have to ensure you enter information into the program with keen precision. Otherwise, you’ll receive wrong information, have improperly measured KPIs and make bad business choices. It’s critical to get a meticulous person to operate the system to ensure everything is smooth sailing.
MRP vs ERP – Key Differences
It can be hard to differentiate between MRP and ERP, mainly because of their similar acronyms and mutual presence in the manufacturing industry. However, they have many distinctions that affect how exactly they are used in a business. Let’s review the difference between ERP and MRP:
Standalone vs. Integrated
The most significant difference in MRP/ERP systems is MRP working as solo software with only manufacturing accessories, while an ERP system can easily connect to other software modules. Some manufacturing systems combine with other software, but it is a more complex process.
Postmodern ERP is highly modular, so companies can pick and choose which aspects of the software are the best fit and only reserve money and space for those features. They can support several modules for total business control.
Due to the potentially overwhelming nature of so many departments and workflows coming together in the program, enterprise resource planning is often a good solution for large businesses and slowly becoming available for companies of all sizes.
MRP ERP systems are suitable for any business size, as long as the company requires a tool to assist with manufacturing needs and isn’t looking for intense integration with other processes.
Users
The type of people who use ERP MRP systems often varies drastically as well. Because an ERP is standard among many industries and handles many departments, it can have infinite users. Users could include someone in HR who’s checking on payroll, a sales rep checking the status of a lead or a data analyst creating a BI report.
An MRP system is exclusive to manufacturing operations. People who use it are generally in that department of a business, like a warehouse manager checking on the inventory of necessary raw materials, a warehouse worker checking on lead times or a production planning specialist overseeing the entire operation. Users are limited for this software type because it serves one industry instead of several.
A preview of SYSPRO, an ERP solution.
Cost
One significant and essential differentiation in MRP and ERP systems is that ERP is more expensive. This program performs functions for multiple facets of a business rather than just manufacturing. It’s not said to discount the effective MRP systems come with a cost, but ERPs are typically pricier.
Which System Should You Use?
The right software choice for you is always subjective. It depends on factors such as your unique business processes, your budget and the number of users. Enterprise resource planning integrated suites generate a diverse range of data points from a centralized source.
ERPs provide more control, opportunities for personalization and the ability to make big decisions faster. With custom solution packages, you have the chance to shape critical functions to match the needs of your business.
Material requirements planning software helps your company streamline its manufacturing efforts by reducing spoilage and using demand forecasts to develop estimates of material requirements.
When deciding between MRP/ERP systems, you should ask yourself a few crucial questions to determine which solution will give your company more bang for your buck:
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1. What business processes are you seeking to automate?
If you are specifically looking for something to assist in your manufacturing efforts, then an MRP solution might be right for you. Suppose you’re toying with the idea of using software to automate other facets of your business, such as accounting or distribution. In this case, you should look into ERP because it’s easier to integrate and contains more features.
2. What software programs are you currently using?
The number and type of software programs your company is already using will also be critical in your decision. If you are not using many software systems currently, the smooth integration associated with ERP programs might not benefit you. However, if you use several disparate systems that need to be connected, an enterprise resource planning platform would be a good option due to its ease of connectivity.
3. How much is your software budget?
Budget is a crucial factor to consider when making a software selection in general. ERP software is jam-packed with features and is expensive, while MRP systems are less costly because they only contain manufacturing functionality. With this situation, you need to do a pro/con analysis of the upfront costs of each system and how they benefit your organization on a long-term basis.
4. What type of IT resources are available at your company?
This question is relevant to both software. Implementing either of these tools will require training and IT resources. However, due to the complexity of ERP, you will likely spend more time and energy on training. Without proper training, your solution will have an upward battle and could even fail, so you must have the appropriate resources in place before you obtain the software.
5. What’s your projected company growth?
Your company’s rate of growth could be a critical factor in determining a suitable system. If your company is expanding and you feel that you will eventually need to implement more automation across various workflows, you may want to opt for an enterprise resource planning solution that will support that growth.
However, if you have a business that will stay relatively consistent in the number of employees or output, you might not need to plan for a more extensive solution and wish to go with a simple MRP.
Market Trends
There are various software and technological trends to consider as you browse for new software. We’ll discuss a few of the latest manufacturing and ERP trends to implement along with your new program. Remember that you don’t need to implement every trend, but utilizing at least one or two could keep you in line with or ahead of your competitors.
Cloud-based Deployment
Cloud ERP and other cloud solutions are a trend that affects the whole software ecosystem. Traditionally, programs and legacy systems had on-premise installation. However, as the market changes and new solution types enter the market, legacy providers offer cloud-based solutions.
The benefit of cloud-based deployment is that the software is less expensive upfront because you don’t have to deal with costly installation fees. Therefore, this type of solution might be more cost-effective for your business initially.
However, let’s say you work at an organization that doesn’t always have internet access readily available. You may prefer on-site installation because internet connectivity is necessary for access to cloud-based programs. MarketsandMarkets predict the cloud-computing sector will hit $832.1 billion by 2025.
Artificial Intelligence (AI)
AI is common in everyday items. If you can ask Siri, Alexa or Google to tell you the weather or set up a doctor’s appointment, leveraging it for manufacturing, accounting and other vectors should be a piece of cake. You can detect patterns and create predictions based on real-time financial and other company KPIs. MarketsandMarkets expects that the AI manufacturing market will reach $16.3 billion by 2027.
Advanced Planning Techniques
Good planning requires, in essence, knowing your available resources. Advanced planning and scheduling (APS)techniques enable you to properly disperse your assets such as employees, machinery, transportation and vendors on particular jobs. You could look for a system that supports this feature or invest in a standalone APS solution. ReportLinker foresees the APS software market will hit $2,941.27 million by 2028.
How To Choose the Best Software
There’s more to picking the right software than just going off online reviews and asking friends and colleagues. There are serious considerations to mull over, and diving in without a thought-out plan is foolish and costly. SelectHub has a surefire methodology called Lean Selection. This nine-step process simplifies selection and gives you all the right tools to pick the program with confidence.
- Establish: Ask yourself and company executives why you need a new program. What’s wrong with your existing practices? These and other questions are a starting block for what to look for in a new platform.
- Collaborate: Create a software selection committee that consists of a project manager, company department leaders, stakeholders, colleagues and end-users. Looking for software alone is more stressful, and let’s face it, more heads are better than one.
- Define: Sit down with your team and develop a requirements wishlist. Working with your team ensures you don’t forget any vital features.
- Distribute: Evaluate how vendors stack up to your requirements list. The higher their requirements score, the more likely you’ll want to see this vendor’s demos and use cases in Step 6.
- Justify: After crunching various vendor scores, it’s time to ponder three critical questions: Do I need a brand-new program? Do I just need add-on modules? Or do I want to stick to my current system?
- Prove: Whether you’re picking a new system or looking for compatible accessories, you’re ready to see how well vendors meet your requirements with demos, use cases or proofs-of-concept (POCs). Score accordingly.
- Rank: After the demo phase, rank your top two or three programs according to their requirements and demo points and total cost of ownership (TCO).
- Negotiate: Meet up with your ideal vendor to discuss conditions and negotiate terms. If contracts seem fishy or odd, take them to a lawyer or law firm for a second opinion. If you’re satisfied with the provider, you’re ready to sign the contract. If not, repeat this step with the other vendors.
- Sign: Once you’ve come to an appropriate compromise, it’s time to sign the contract and draft an effective implementation plan.
Final Thoughts
In this ERP vs. MRP system comparison, both platforms are winners. It’s up to you to determine which solution is best for your company’s needs and practices. An MRP system is focused on manufacturing processes specifically, while ERP platforms provide a range of solutions, including HR, CRM and accounting. Review our in-depth MRP and ERP comparison guides for a detailed look at industry leaders.
Do you prefer MRP or ERP? How have these solutions helped your company? Let us know in the comments below!