ERP vs MRP: what is the difference?

MRP, or manufacturing requirements planning, is a type of computer-based system developed to help manufacturers get the right material in the right quantity at the right time.  MRP was developed in the 1970’s and helped many businesses optimize their inventory leading to improved profits.

As we moved into the 1990’s developers added features and integrations to MRP and began to rename it ERP, or enterprise resource planning.  ERP still helped optimize inventory and now it also helped with financial management, customer relationship management, human resources, purchasing, sales, and marketing.  MRP could be included as an optional module if the business required those features and functions. ERP centralizes all data in a set of shared databases that help a business keep a common message between different departments and functions and even in different locations around the globe.  Without ERP, manufacturing can have a version of the “truth” based on systems they use while finance can believe in a different “truth” based on different systems.

What is the difference between ERP and MRP?

MRP is more specific in its target customer with benefits primarily for manufacturers who often are smaller businesses.  MRP takes a demand for a product with a quantity and time frame. The system then multiplies the demand times the quantity of each component of the product and returns the quantity of that component required.  Finally, any existing inventory or open purchase orders for those components are subtracted providing net requirements by date for each component. The last step is to calculate a date the purchase order must be opened based on the supplier lead time.

ERP is targeted toward a broader range of customer businesses that can include manufacturers and include nearly any type of business or even other organizations such as governments, schools, and nonprofits.  ERP begins with all demand requirements, not only product sales and forecasts. ERP, for example, can calculate the number of programmers required to develop an application for a customer using known and assumed factors.  The end results are the money, people, and other resources a business should expect to need based on future demands.

What are the similarities between ERP and MRP?

Both systems run on computers using database management software.  Both can be used in the cloud or as an on-premises tool set.. Both kinds of system can help a business achieve their goal if higher profits and improved utilization of capital.  ERP and MRP are both available today from a variety of sellers and the choice depends on the needs and requirements of a specific business at a moment in time and the expected future.  Both ERP and MRP can be integrated with other software needed for the business and either can be customized to meet unique requirements.

What should we choose?

Begin with your prioritized list of requirements for your business.  Every ERP (and MRP) starts with your requirements. If you are not a manufacturer, probably move right to ERP.  If you are a manufacturer, either one could work, just evaluate your needs versus the capabilities of the system and find software that meets all your “must-have” top tier requirements and as many as possible of the next tier “nice-to-have” desires.