Understanding the difference between ERP and material requirements planning is important to getting the most out…
Enjoy this article as well as all of our content, including E-Guides, news, tips and more.
You forgot to provide an Email Address.
This email address doesn’t appear to be valid.
This email address is already registered. Please log in.
You have exceeded the maximum character limit.
Please provide a Corporate Email Address.
Please check the box if you want to proceed.
Please check the box if you want to proceed.
By submitting my Email address I confirm that I have read and accepted the Terms of Use and Declaration of Consent.
of these systems.
Today’s ERP evolved from yesterday’s MRP systems, which were focused on calculating material requirements and grew from there to incorporate more of the manufacturing enterprise. Remnants of MRP still form the backbone of most ERP systems, but the two are very different and operate in connected yet nonetheless distinct realms.
As its name suggests, MRP is focused on planning, scheduling, ordering and tracking the raw materials and components needed for the manufacturing process. In contrast, ERP encompasses a much wider range of business functions, such as accounting, financial management, human resources, customer relationship management and inventory management.
ERP is an integrated software suite that manages the majority of company information, while MRP is one application, or module, in that suite. Nearly every ERP system includes a basic MRP module.
Of the two, ERP is the more dominant system on the software market today.
The key to understanding the difference between ERP and MRP is to trace the evolution of the software category to which both belong from its inception more than half a century ago.
Early mainframe computers were used only for straightforward calculations and simple storage, retrieval and sorting of data. The breakthrough for the manufacturing industry came with the development of a way to recognize relationships between raw materials, parts, assemblies and products — the bill of materials that is the basis of material requirements planning.
This article is part of
Download this entire guide for FREE now!
MRP is a calculation of what parts and materials are needed to make a subassembly or product, as well as when those components are needed based on the due date for the final product. MRP considers inventory balances and availability, production and purchasing lead times and current order status, as well as forecasts and customer orders that drive the master production schedule.
Building on this framework, software developers created inventory management, production control, customer order management and purchasing applications integrated into a comprehensive software suite that also included accounting applications, resource and production planning and scheduling. While the first generation of these systems were known simply as MRP, eventually the name was changed to manufacturing resource planning or MRP II.
Although MRP II and ERP were originally designed for manufacturing companies, these systems contain significant functionality that supports many different kinds of businesses, from distribution and retail to services, hospitals, insurance companies and more (see the chart). Software developers added functions such as point-of-sale, service billing, document management, business intelligence and workflow, to appeal to these broader markets. ERP is now available for every kind of business, not just manufacturing.
MRP II continued to grow year after year as the integrated applications matured and expanded and others were added. These improvements — along with adaptations to take advantage of computing advances like relational databases, natural language query and optimization technologies — were not reflected in the market’s perception of MRP II, which was seen as old and outdated.
Thus, a new acronym was invented: ERP, for enterprise resource planning. Today, the term MRP II has virtually disappeared and all such systems are called ERP. However, the term MRP is sometimes used incorrectly to refer to inexpensive, less capable manufacturing software suites marketed to small companies.
Many modern ERP systems today are developed as cloud-based applications and nearly all offer cloud deployment as an option. Cloud ERP is considered to be the most flexible, easiest to implement and most scalable type of ERP.
ERP systems generally consist of modular applications that each address a specific business process. For example, in addition to the core modules that support basic records, such as product items, bills of materials and resources, a manufacturer’s ERP will have modules for the following:
Most systems have additional modules that make the system more complete. These include human capital management (HCM) and support for business functions that not every company needs, such as field service management, deep quality management capabilities, as well as advanced and finite scheduling. The ability to mix and match these optional modules provides a way to tailor the system to fit specific industries like food and beverage, industrial equipment, electronics, consumer goods or process manufacturing.
The modular design also makes a “standard” ERP system more adaptable to the needs of nonmanufacturing companies. An accounting or consulting firm, for example, would not need material planning, production scheduling or inventory management but would need schedule (calendar) management, document management, service billing, HCM and general accounting.
Although MRP II and ERP were developed to support the information management needs of manufacturers and distributors, more recently, ERP has become the general name for any integrated business management application suite. You can now find ERP systems for retail, service businesses, wholesale distribution, utilities, hospitals and just about any other kind of business you can think of.
These ERPs usually contain the same or similar functionality for the basic processes that all businesses share, such as customer order management, billing and collection, financial management and accounting, payroll and HR. In addition, they support specific needs of the business, like shop floor control, dispatching personnel and vehicles, scheduling appointments or tracking service use.
Keeping in mind that MRP is a specific function or module within an ERP suite, MRP is the backbone of the system and the thing that brings the entire manufacturing business together in a coordinated effort toward the overall goal of delivering quality products to customers on time. MRP, in conjunction with master scheduling, turns the demand plan (forecast and orders) into specific tasks for production, procurement, resource management and the rest of the enterprise. The rest of the system then tracks and manages the execution of those tasks.
As such, MRP directly contributes to:
The main purpose of ERP is to:
Because the software basically models the operation of the enterprise, it can offer additional insight into the cause and effect of relationships between activities and decisions across functional areas of the business, enabling more effective and efficient operations.
It has been said that information is power, and in today’s business world, managing and exploiting information is critical. ERP encompasses the entire enterprise, bringing the various functions together to coordinate their activities and decisions and keep them focused on achieving the ultimate purpose of the enterprise, which is to generate a profit by delivering the goods and services customers expect in the most economical way.
The real question is not, what are the benefits of ERP? Rather, it’s how can a modern company ever expect to operate effectively without control over its information and the decision-support functions provided by ERP?
Oracle plans to acquire Cerner in a deal valued at about $30B. The second-largest EHR vendor in the U.S. could inject new life …
The Supreme Court ruled 6-2 that Java APIs used in Android phones are not subject to American copyright law, ending a …
This handbook looks at what Oracle Autonomous Database offers to Oracle users and issues that organizations should consider …
The database-as-a-service vendor advanced the change data capture capabilities of its cloud database with technology from its …
The database-as-a-service platform vendor looks to make it easier for developers to build data-driven applications and revert …
The open source Apache Pinot OLAP data store is set to become easier to deploy, manage and operate in the cloud with improved …
Because customizations have long-term implications, organizations currently running SAP ECC as their core ERP system must give …
Many companies can benefit from analytics’ capabilities, and organizations staying on SAP ECC can still create an effective …
Implementing S/4HANA comes with significant risk — yet it also offers a real opportunity for digital transformation. Here’s the …
The past two years have shown the vital role of analytics, and even as some COVID-19 restrictions ease, many organizations now …
Organizations are adopting a collaborative analytics model to tap the full potential of their workforces and increase data …
The vendor’s platform update highlights its focus on applications as a way to extend analytics to more business users and expands…
Good database design is a must to meet processing needs in SQL Server systems. In a webinar, consultant Koen Verbeeck offered …
SQL Server databases can be moved to the Azure cloud in several different ways. Here’s what you’ll get from each of the options …
In this book excerpt, you’ll learn LEFT OUTER JOIN vs. RIGHT OUTER JOIN techniques and find various examples for creating SQL …
Sitecore CEO Steve Tzikakis took over during the pandemic — amid massive growth — and has reimagined the company as a digital …
Organizations planning content migrations should verify file integrity and ensure files weren’t corrupted in the move. File …
A successful ECM deployment requires planning. Content managers should consider their organization’s content lifecycle, security …
Despite the current reality of the hybrid work model, office building owners might have to invest in amenities such as gyms and …
Conducting employment background checks on existing employees and contractors is a growing trend. But the practice raises ethical…
Vodafone, the U.K.’s telcommunications giant, has upgraded its recruiting tech with automation that will analyze resumes and CVs …
All Rights Reserved, Copyright 2017 – 2022, TechTarget
Privacy Policy
Cookie Preferences
Do Not Sell My Personal Info