MRP vs. ERP: Breaking Down The Difference Between Resource Planning Solutions

The manufacturing landscape has shifted dramatically with the adoption of internet-enabled and connected equipment. Commonly known as Industry 4.0, this revolution has also stimulated the widespread adoption of digital solutions to help manufacturers manage their increasingly complex production operations.

Two of the most widely known categories of digital tools currently in use include Manufacturing Resource Planning (MRP) and Enterprise Resource Planning (ERP) solutions. These two solutions are often misunderstood regarding their function in a manufacturing business because of their similar abbreviations.

While MRP and ERP differ distinctly in their application in manufacturing businesses, many companies might find it challenging to differentiate between the two.

In this post, we’ll take a closer look at MRP and ERP, detailing the different characteristics and how manufacturers should think about these different systems.

Simply put, a Manufacturing Resource Planning system is a tool used by manufacturers to manage the materials, equipment, and workforce operating within a production facility. MRPs are often used as standalone systems, but can also be an individual component of a larger ERP system.

There tends to be some confusion surrounding the acronym “MRP” as it is often used interchangeably to describe both Material Requirements Planning (MRP I) as well as Manufacturing Resource Planning (MRP II). MRP II are generally recognized as an evolution of original material requirement planning systems, leveraging additional data including employee and financial information.

While there are many similarities between Material Requirements Planning software and Manufacturing Resource Planning systems, there are some distinct differences when it comes to the functionality of the two tools.

MRP I vs. MRP II

An MRP I software allows manufacturing businesses to plan for raw materials and their use in the production process. In other words, materials requirements planning entails raw material management, bills of materials (BOM), inventory tracking, and production schedule planning and management.

However, as manufacturing operations become more complex, businesses need more robust mechanisms to manage their materials, track inventory, and improve scheduling. This has led more businesses to upgrade from MRP I to MRP II – manufacturing resource planning.

In addition to the features offered by material requirements planning, manufacturing resource planning also include things like capacity management, demand estimations, quality management, and general accounting.

In other words, a manufacturing resource planning system allows manufacturers to gain a more holistic view of their operations and improve production efficiency through data and performance analysis.

For the sake of the remainder of this blog post, we’re going to focus on the differences between MRP II and ERPs. Let’s get started with the pros and cons of MRP.

Pros of a Manufacturing Resource Planning system

The benefits associated with MRP include:

• Informed production planning: The software allows manufacturers to adequately plan for materials, labor, equipment, and other resources needed to run the production process efficiently.

• Better inventory control: MRP systems help manufacturers better understand and manage their inventory levels with greater accuracy, ensuring supervisors are well-equipped to re-stock critical materials and supplies.

• Improved purchase planning: By better understanding the inputs and outputs of the business, supervisors are able to improve their purchase planning and forecasting.

• Enhanced data management: In today’s world, manufacturers generate and use significant amounts of data. MRP systems enable businesses to manage and effectively use this data to identify bottlenecks and improve the overall efficiency of production.

Cons of a Manufacturing Resource Planning system

The downside to using MRP systems includes:

• Functionality can vary widely: As with any enterprise software, there can be a significant amount of variation across different platforms. Businesses must spend time understanding their specific needs and researching what solution will be best for their business.

• Meticulous data input required: MRP systems are only advantageous when working with accurate data. Ensuring shop floor data integrity can be challenging for some manufacturing operations.

Most enterprise resource planning systems include similar features and perform similar functions typically included in an MRP. However, ERP systems are generally more encompassing, covering other business processes outside the factory floor operations.

In other words, an ERP system handles resource planning at the factory level and also includes capabilities that address various tasks on the administrative side of the business. These include human resource management, customer relations, financial administration, supply chain mapping, and even sales and marketing.

Because of the all-encompassing nature of enterprise resource planning systems, they tend to be more common within enterprise businesses.

The presence of extended features entailed in ERP systems also means that businesses can use MRP as a subset of enterprise resource planning.

Pros of an Enterprise Resource Planning system

These include:

• Optimized business processes: ERPs handle several vital business processes, making the entire manufacturing operation more efficient as a business.

• Better collaboration: ERP systems bring data from all departments into one, centralized system. As such, personnel in different departments can access relevant information stemming from another section of the business.

• Reduced operational costs: Modern ERP systems are powerful enough to handle several operational and administrative duties concurrently. As a result, businesses are able to allocate resources across their business more efficiently.

• Improved customer service and satisfaction: ERPs often have customer relationship management features integrated into the platform. As a result, businesses have a more efficient way of serving their clients, resulting in satisfied customers and more repeat business and referrals.

• Tighter data security and management: These systems paint a complete picture of the business’ operations. Therefore, ERP system developers ensure that the software is robust enough to maintain business data integrity.

Cons of Enterprise Resource Planning systems

These digital solutions pose some drawbacks for businesses which can include:

• Costly: While MRPs tend to be more affordable for smaller businesses, ERPs are typically considered massive capital expenditures. ERP systems cover several facets of a manufacturing business, and as such, implementation and integration projects are both expensive and resource-intensive. In fact, companies can spend anywhere from 2-5% of their annual business revenue on their ERP system.

• Steep learning curve: Because ERP systems cover several operational areas, it’s challenging to familiarize employees with the digital tool adequately. As a result, it takes a significantly more extended period to realize the benefits associated with the software.

When it comes to an MRP vs. ERP analysis, business owners might find some challenges distinguishing the two systems. After all, they both appear to handle similar issues in a manufacturing setting.

However, the critical difference is that an MRP system is a standalone digital solution that only caters to the manufacturing process. On the other hand, the ERP system is integrated throughout the entire business, handling manufacturing operations as well as other facets of the overarching business.

Furthermore, ERP users in a single company are significantly more than those utilizing the MRP system. In the latter, only factory-centric supervisors and managers use the MRP tool. When it comes to the ERP system, individuals in different departments can access the system to gain information pertinent to their department.

Using Tulip, manufacturers have been able to completely eliminate the need for an MRP. Using flexible, extensible apps built with Tulip’s platform, businesses are able to track everything happening across their shop floor, automate production data collection, and make real-time data easily accessible to anyone who needs to access it.

Additionally, Tulip seamlessly integrates with ERPs including SAP, Netsuite, and Microsoft Dynamics. This enables manufacturers to gain a holistic view of everything happening within their operations from supply chain to distribution.

If you’re interested in learning more about how Tulip can help you drive continuous improvement across your operations, feel free to reach out to a member of our team today!