ERP systems, or Enterprise Resource Planning tools, are a key part of how businesses manage their day-to-day operations. They bring together different areas like finance, sales, supply chain, and HR into one system, making it easier to run things smoothly. By reducing unnecessary steps and errors, ERPs help businesses save money, boost teamwork, and access real-time information to make smarter decisions. For instance, businesses using NetSuite ERP reported a 40% to 60% boost in order process efficiency and a 40% to 55% reduction in reporting times—clear improvements that translate into measurable cost savings and increased productivity.
Even though ERP systems handle a lot, manufacturers might need extra help when it comes to managing production. This is where MRP systems, or Material Requirements Planning tools, come in. But what exactly is an MRP system, and why would a business already using ERP still need one?
What is an MRP?
MRP stands for Material Requirements Planning. It is a type of software that helps manufacturers manage their production process more effectively. MRP focuses on making sure that the materials needed for production are available at the right time, in the right amount. This means less waste, fewer delays, and smoother production overall.
How Does MRP Work?
An MRP system looks at important information like customer orders, production schedules, and the materials you already have in stock. Then, it uses this data to decide what materials you need, how much, and when to order them. This helps businesses avoid running out of stock or having too much inventory sitting around.
MRP is different from an ERP. While ERPs manage many parts of a business, like finance, sales, and HR, MRPs focus only on production and materials. Many modern ERP systems include MRP functions, but smaller companies might use MRP on its own if they only need help with manufacturing.
Types of MRP Systems
- The Basic MRP (MRP I) system focuses on tracking the materials needed for production to ensure there are no shortages.
- The Advanced MRP (MRP II) system goes beyond material tracking by adding planning features for labor, machine scheduling, and other resources.
- The Demand-Driven MRP (DDMRP) system adjusts material planning in real-time based on customer needs, helping to reduce waste and improve efficiency.
Goals of an MRP System
The main goal of an MRP system is to make production efficient and cost-effective. Its key objectives are:
- To make sure materials are available when production begins.
- To avoid having too much or too little inventory.
- To reduce delays in production caused by missing materials.
- To create clear schedules for production based on customer orders.
Main Functions of an MRP System
- Managing Inventory helps track the materials you already have and what you still need to keep production running smoothly.
- Creating Schedules outlines when to produce and how much, ensuring operations stay on track.
- Predicting Demand uses past orders to estimate the materials needed for future production.
- Tracking Orders involves creating and managing purchase orders to maintain the right supply of materials.
- Capacity Planning ensures that machines and workers are used efficiently to avoid delays.
Main Differences Between ERP and MRP
To choose the right system for your business, it’s important to understand how ERP and MRP are different. Here’s a simple breakdown:
1. Scope
ERP systems handle many areas of a business like accounting, HR, customer records, sales, and inventory. For example, an ERP can help pay employees, track customer orders, and manage warehouse stock. MRP systems are much simpler—they only focus on production tasks like planning materials, scheduling production runs, and making sure everything needed for manufacturing is ready.
2. Functionality
ERP systems are all-in-one tools that allow different departments to work together easily. They can automate many tasks and keep all business information in one place. Meanwhile, MRP systems are designed specifically for manufacturing—they calculate what materials are needed, plan when to start production, and help avoid waste.
3. Integration
ERP systems connect many parts of a business. For instance, when a sale happens, it can update the inventory, generate an invoice, and record it for accounting automatically. MRP systems, however, mostly work within production and inventory areas, ensuring raw materials are available when needed.
4. Focus
ERPs focus on improving the entire business by connecting departments. They’re best for businesses that need a system managing all operations. MRPs focus just on manufacturing, helping production run smoothly and on time.
5. Costs
ERP systems are more expensive because they cover so much more. On average, they cost between $150,000 and $750,000, depending on how big or complex your business is. This includes software, setting it up, training, and maintenance. MRP systems cost less, usually between $10,000 and $50,000, as they’re made just for manufacturing and have fewer features.
Does Your Organization Need an MRP More?
An MRP system can be extremely helpful for industries that rely on efficient production and managing their inventory well. Here are some industries where MRP works best and why:
1. Manufacturing
MRP is perfect for manufacturing companies, especially those making complex products. It helps plan what materials are needed, schedules production processes, and keeps things running smoothly. This means less wasted materials and better use of resources.
2. Automotive
The automotive industry uses many parts that must come together in the right order. MRP makes sure all the parts are ready when needed, avoids delays, and stops businesses from holding onto too much extra stock.
3. Electronics
Electronics production often needs small and specific parts that must be ordered ahead of time. MRP helps organize this process, prevents overstocking, and ensures the business can produce items quickly to meet demands.
4. Food Production
Food and beverage companies deal with perishable items, so timing is crucial. MRP helps production match demand, reduces spoilage, and ensures materials are used before they expire, saving money and resources.
Combining ERP and MRP for Better Efficiency
Even though ERP and MRP systems are different, using them together can make your business work much better. Each system has its own purpose—ERP manages the big picture of your business, while MRP takes care of production details. When you put them together, they make your operations smoother and more effective.
An ERP system keeps track of everything happening in your business, like sales, purchasing, and finances. Meanwhile, the MRP system focuses on what’s needed for production, like materials and schedules. For example, the ERP system can pass sales orders to the MRP system, which then plans the production process. This teamwork eliminates mistakes and delays.
Sharing data also becomes simpler when you use both systems. Everyone—sales, production, and inventory teams—can access the same updated information. This makes it easier to plan ahead, avoid running out of supplies, or order too much.
Another big plus is automation. Both systems can handle tasks like reordering materials, updating schedules, or recording expenses without needing much manual work. This saves time and cuts down on errors.
Your business can function more efficiently if you combine the production focus of MRP with the overall management of ERP. These systems together can improve how teams work, help you use resources wisely, and keep everything on track.