Aspects of Business: Enterprise Resource Planning (ERP) and Material Requirements Planning (MRP) Although interrelated and frequently integrated, they have different purposes. Let’s dive into these concepts in depth.
Overview of ERP
Enterprise Resource Planning (ERP) aims to centralise the various processes of a business onto one platform. It can cover different aspects of an organization, like finance, HR, procurement, supply chain, manufacturing, and sales, among others. ERP aims to consolidate an organization’s data in a single system, streamline processes, and support key business decisions with instant information.
Key Features of ERP Systems:
- Centralized Data: Single database used across all departments, ensuring consistent use of accurate information
- Live Insights: ERP systems offer current reports which assist managers in decision-making.
- Automation Automates repetitive processes like payroll, invoicing, and order tracking
- Scalability: Scales up in accordance to a business’s expanding needs.
Popular ERP Tools:
- SAP ERP
- Oracle NetSuite
- Microsoft Dynamics 365
- Odoo
Example Use Case:
For instance, a retail company would use the ERP to manage its inventory, sales, and financial reporting in real-time, ensuring that all departments are working together seamlessly.
Exploring MRP (Material Requirements Planning)
What is MRP: MRP is a system specifically designed for manufacturing operations. It is actually focused on the planning and execution of materials, the production schedule, and inventory levels to ensure the proper materials are available for production at the proper time.
Key Features of MRP Systems:
- Inventory Control: It keeps a tab of raw material, work-in-progress, and finished goods.
- Production Planning: Schedules the production processes according to the demand forecasts.
- Demand Forecasting: Helps predict future demand to prevent overstocking or shortages.
- Procurement Management: Assists with effective ordering of the materials to fulfill the production requirements.
Popular MRP Tools:
- SAP Business One
- Epicor MRP
- MRPeasy
- Fishbowl Manufacturing
Example Use Case:
An Material Requirements Planning system at a manufacturing company may take sales orders in hand and calculate how much raw material it needs to produce 1000 units of a product by a certain date.
ERP vs MRP: Key Differences
|
Feature |
ERP |
MRP |
|
Scope |
All business functions. |
Emphasis is largely on manufacturing and materials. |
|
Objective |
Simplifies overall business processes. |
Ensures Efficient Production and Material Planning. |
|
Users |
Used across all departments (finance, HR, sales, etc.) |
Used primarily by production and inventory teams. |
|
Features |
More general use (finances, HR, etc.) |
More focused (inventory, production, procurement.) |
|
Intergation |
Usually includes MRP as a module. |
Standalone system or part of ERP |
The Interaction Between ERP and MRP
Today, Material Requirements Planning is simply a module in an ERP solution. This integration helps to ensure that manufacturing processes are aligned with the rest of the business, including sales and finance. For example:
- Order Management: A customer makes an order through the Enterprise Resource Planning system.
- With the order, the Material Requirements Planning module determines the material planning.
- Procurement: Enterprise Resource Planning connects with suppliers to procure materials.
- Production: Production is planned within the Material Requirements Planning module, production progress is tracked within ERP.
- Delivery and Billing: Once the product is ready ERP takes care of shipping and invoicing.
Advantages of ERP and MRP Systems
ERP Benefits
- Better collaboration between departments.
- Live view of business performance.
- Improved financial management and reporting.
- Improved efficiency and business processes.
MRP Benefits
- You do not have to worry about material shortages and overstocking.
- Analyses production schedules for optimization.
- Decreases waste and lowers production costs
- Products are delivered in a timely manner.
Choosing the Right System
- Material Requirements Planning System for Small Manufacturing Companies
- Startups: Seek Enterprise Resource Planning solutions with Material Requirements Planning as a module.
- Large Enterprises: Deploy all-in-one Enterprise Resource Planning systems such as SAP or Oracle, for greater usability and scalability.
Well-Known Tools That Consolidate ERP and MRP
- SAP ERP: provides strong Material Requirements Planning capabilities built into their ERP software.
- Oracle NetSuite: Offers enterprise planning and physical assets.
- Microsoft Dynamics 365: Manufacturing and business operations tools.
- Odoo: Enterprise Resource Planning (ERP) Solutions for Manufacturers
Conclusion
These ERP and MRP systems are vital for the modern enterprise, especially manufacturing-focused ones. Material Requirements Planning typically has a particular concentration for cost and quantity production (What do we create and in what number) however ERP covers another piece of the business. Ultimately, proactive understanding of your business and its goals will guide your decision as to whether you may want to implement Material Requirements Planning, Enterprise Resource Planning, or both.