Manufacturers and distributors have different technology needs than many other types of businesses. Managing materials, inventory, purchasing planning, and scheduling production activities becomes complex and will either make or break profit margins.
There is no shortage of business management technology available, from Enterprise Resource Planning (ERP) to Material Requirements Planning (MRP). But how do you determine the type of technology that will best support your business operations? ERP? MRP? Both? Here’s what you need to know.
What is MRP?
Commercially available since the 1960s and primarily used in manufacturing processes, the main purpose of MRP systems is to measure materials, anticipate needs and maximize production rates. Manufacturers and distributors rely on MRP systems to gain greater control and visibility into their inventory and purchasing needs.
Standard MRP features include:
- Inventory Management
- Bill of Materials Management (BOM)
- Master production schedule
Understanding customer needs and inventory movement is critical to strategic planning and forecasting decisions. Inventory management and warehouse management both play a pivotal role for many manufacturers and distributors, and become even more important as the business grows.
Getting the right stock in the right quantities at the right time is a challenge to say the least. Overstocking of the warehouse restricts cash flow and increases the risk of maintaining inventory that becomes outdated, expires on the shelf, becomes damaged or unusable.
Shortage of stock leads to other risks, such as interfering with production when stock is not available, frustrating customers with late orders, out of stock and related delays.
Material Requirements Planning (MRP) meets these needs and is suitable for any plant of any size, as long as there is no requirement for integration with other business processes. Typical users include warehouse managers, warehouse workers, production planners, and production line workers. MRP systems are usually installed in workplaces as a standalone application.
What is ERP?
ERP is a single, comprehensive system used to manage accounting and financial operations, inventory, supply chain, manufacturing and distribution operations, human resources, payroll, and more. In other words, it supports many moving parts of your work.
Traditionally more comprehensive and more expensive than MRP, it was originally used only by large companies. However, ERP has evolved to become more modular and affordable for all sizes and budgets of businesses. It offers many platform options from on-premises to cloud-based.
You can think of MRP as the first ERP but only for manufacturing. Gartner is credited with coining the term “ERP” in the early 1990s as a way to categorize enterprise software designed for many industries and provide more comprehensive capabilities than MRP. ERP functionality includes integration with other applications and back office workflows, allowing all types of small to large businesses to automate and simplify operations.
ERP functions can include:
- Financial management
- Customer Relationship Management (CRM)
- supply management
- business intelligence
- Inventory Management
- stores management
What should I use?
The answer depends on factors such as your budget, number of users, workflows, and your unique needs. ERP solutions provide greater functionality and flexibility in all aspects of your business and a central data model to enable better and faster decision-making. As ERP is an end-to-end, turnkey management solution, it can integrate business processes and applications from start to finish.
Material requirements planning (MRP) is more specific and specifically targeted to manufacturing and inventory management activities. Material requirements planning software helps your company simplify manufacturing efforts by reducing spoilage and using demand forecasts to develop estimates of material requirements. However, the MRP stops there. It cannot support financial or accounting needs and other essential business operations.
You may need both ERP and MRP, but that doesn’t necessarily mean that you need two different systems to run a business. There are ERP solutions like RealSTEEL that can meet all your needs in one solution so you don’t have to buy and deploy two different systems.
As you can see, ERP and MRP for manufacturers have a lot in common but there are also fundamental differences. Both offer excellent manufacturing support and capabilities, but Enterprise Resource Planning (ERP) is worth considering if you’re looking to integrate with business processes beyond manufacturing.
Contact The Wolcott Group for guidance and additional questions. Our industry experts are ready to help you determine how best to move your manufacturing and distribution business forward.
Publication What is the difference between ERP vs ERP? It first appeared on the ERP Software Blog.