In the 1960s, consumption had enormously risen due to the post-World War II economic boom. Manufacturers worldwide struggled to keep up with market demand, making inventory tracking and stock management unmanageable.
This led to the development of Material Requirements Planning System (MRP) software. MRP primarily helped manufacturers monitor inventory, reconcile balances, and handle basic purchasing and delivery processes.
During the 70s, more manufacturers began using MRP, and the system progressively became more sophisticated. In The 1980s, MRP evolved into what is known as MRP II, capable of handling more processes.
It wasn't until the 1990s that the Gartner group first used the term "Enterprise Resource Planning" Modeled after MRP, ERP was a more complex and holistic tool at its launch than MRP ever was.
Modern ERP solutions and MRP tools share a similar origin but are fundamentally different. This article explains the differences between ERP and MRP, providing insights into what to consider when choosing either.
Modern MRP systems help manufacturers determine the materials and components required to manufacture a product. MRP enables manufacturers to plan and ensure ample room for changes based on developing needs. Other features include recording and monitoring details such as delivery dates, raw material shelf life, products in stock, vendors, etc.
Demand planning and forecasting: Predicting the raw materials necessary to complete manufacturing on a schedule by considering market trends, consumer demand, and availability of raw materials.
Inventory management: Ensuring the availability of the raw materials and supplies necessary for manufacturing.
Production scheduling: Using available data and insights to help plan and generate production schedules to complete production on time. Order management: Automatically identifying all the items necessary for manufacturing and ensuring orders are placed on time.
An MRP is a tool specifically designed for manufacturers and those handling materials and components. It bears many similarities to ERP, such as managing inventory, deriving insights, ensuring quality, and scheduling production.
ERP is a more complex and holistic tool encompassing a broader spectrum of business processes like sales and marketing, finance, accounting, customer service, etc. Manufacturing ERP systems designed explicitly for manufacturers often incorporate MRP as an ERP module.
This means a manufacturer looking for a complete automation solution will do better to invest in an ERP with an MRP module.
Here is a quick comparison that weighs ERP vs. MRP and lays down the main difference between MRP and ERP.
The question of choosing between ERP and MRP only arises if manufacturing is a part of your business process. Inventory management, stock control, purchase and procurement, warehouse management, and other raw materials-related operations can be effectively managed by an ERP alone.
Choosing suitable materials is of utmost importance for your production operation.
You need to make sure that customers receive products on time.
Inventory levels need to be maintained at all times according to the said schedule for manufacturing.
There must be cohesion between manufacturing activities, purchases, and sales orders.
An ERP can handle all these tasks, and an ERP tool might serve you better if your company is involved in more than just manufacturing.
If you are a small manufacturer or a workshop, you might need an MRP for automating tasks like purchasing raw materials, ensuring their quality, and tracking their location.
As your business grows and you hire more people, you will need more complex inventory management and an ERP HRM module.
MRP is sufficient if you are a small manufacturer with several employees. Otherwise, you will need to move from MRP to ERP.
If you plan to automate only your manufacturing, stock control, and inventory management, you need an MRP.
As your business grows and you include more operations like accounting and human resources, you will need an ERP.
MRP costs less than ERP. If you are a manufacturer on a tight budget and want to automate a few basic processes, MRP can work.
If you have the budget to invest in a cloud ERP, it is better to choose ERP because it is more comprehensive and scalable.
If you foresee growth in your future, you will need an ERP to accommodate all business processes.
The implementation process is similar for both ERP and MRP. You should define your goals, budget, vendor selection, training, data migration readiness, and support expectations.
MRP helps manufacturers handle materials and components and is sufficient for smaller organizations focused only on manufacturing.
ERP is more complex and versatile than MRP, and companies that need more than materials management should consider ERP.
If you decide on an MRP solution for your business, you can read more about key features for MRP software and implementation considerations.