ERP Vs MRP: Key Differences & Integration Possibilities

As manufacturing expands to meet increasing demands, real-time data and advanced software systems enable manufacturers to automate processes and make informed and data-driven decisions. Enterprise Resource Planning (ERP) and Material Requirements Planning (MRP) are the two impactful tools that play pivotal roles in this transformation.

At first glance, they may seem similar, but each serves a distinct purpose. The question is: how do they work together, and can their integration transform your business? In this blog, we’ll explore the key differences, and similarities, and how the right combination of ERP and MRP can enhance operational quality and resource allocation.

Key Similarities & Differences in ERP and MRP

ERP and MRP systems are vital tools that companies use to streamline operations, manage resources, and improve efficiency. While they share some common ground, they are designed to address different challenges and serve distinct purposes. Let’s start by exploring their similarities before diving into their definitions and key differences.

Similarities between ERP and MRP

Both ERP and MRP systems focus on improving resource management, streamlining workflows, and centralising data to support decision-making. They share several core features, including:

• Inventory management: Each system plays a role in ensuring materials, components, and finished products are available when needed.
• Planning and scheduling: These systems help businesses optimise resource allocation and efficiently manage schedules to avoid bottlenecks.
• Centralised data: Both systems integrate data from multiple sources into a unified database, providing users with a unified, real-time view of business operations.

While these similarities create a foundation for operational efficiency, the systems differ significantly in their scope and applications.

What is an ERP?

ERP is a comprehensive system that integrates and manages core business functions within an organisation. Think of it as the central system of a business, where various departments - such as finance, human resources, supply chain, sales, and production - are interconnected to share information seamlessly.

For example, an ERP system allows the finance team to access up-to-date sales and inventory data or lets sales teams track production schedules to provide accurate delivery timelines to customers. This ensures better coordination and decision-making across the organisation.

ERP systems are particularly valuable for businesses seeking:

• End-to-end visibility into multiple functions beyond production;
• Data centralisation to break down silos between departments.
• Scalability to adapt as the organisation grows.

Are you new to ERP? Read more: ERP for Dummies: Key Modules, Cost, & Top Solution Providers

What is an MRP?

MRP is a system specifically designed to support manufacturing operations by focusing on materials, production scheduling, shop floor control, and resource optimisation. It calculates what materials are needed, when they are needed, and in what quantities, ensuring production runs smoothly. 

For example, an MRP system can automatically calculate how much raw material is needed based on customer orders, generate a Bill of Materials (BOM), and create purchase orders to keep production on track.

MRP systems are ideal for manufacturers who:

• Need precise material planning to avoid overstocking or shortages.
• Focus primarily on production efficiency rather than broader organisational needs.

Key Differences Between ERP and MRP

ERP and MRP systems are both essential for improving manufacturing operations but differ significantly in their purpose, functionality, and target users. Here’s a breakdown of their main differences:

ERP and MRP Integration: Is It the Key to Better Operations?

Do you know that nearly 40% of ERP implementations fail to meet their full potential due to insufficient focus on system integration?

This highlights a critical challenge: while ERP systems are designed to streamline business operations, their effectiveness often depends on how well they integrate with other specialised systems like MRP. Let’s explore how to evaluate your current systems and identify when integration is the right move for your business.

1. Evaluate your existing systems

Case 1: If you have an ERP system

An ERP system is a comprehensive tool that manages various business functions, including finance, HR, and supply chain. However, its manufacturing-specific capabilities might not be robust enough to handle detailed production scheduling or inventory control. To determine if integration with an MRP system is necessary, consider these aspects:

• Depth of production features: Does your ERP system offer advanced production planning capabilities, real-time shop floor monitoring, or handling complex production processes?
• Work orders and complex BOM: Can your ERP system handle intricate or frequently changing BOMs with multiple components and variations? Is it able to efficiently manage work orders for both standard and custom production runs?
• Multi-warehouse capabilities: Some businesses often manage complex supply chains or high-volume operations. So verify if your ERP supports managing inventory across multiple warehouses.
• Demand forecasting: Does your ERP provide tools for demand forecasting? Accurate demand forecasts help reduce both waste and stockouts and optimise overall production efficiency.
• Lot and batch tracking: Does your ERP system support advanced lot tracking for materials and finished goods? This is particularly important in industries like food production or pharmaceuticals, where tracking the origin and journey of materials is crucial for quality control.
• Shop floor insights: If your ERP system lacks detailed shop floor insights (e.g., real-time data on machine performance, production progress, and downtime), it could restrict your ability to optimise production workflows and identify bottlenecks in the manufacturing process.

When the manufacturing capabilities of your ERP are limited, integrating a specialised MRP module can provide deeper insights and better control over production processes.

Case 2: If you have a standalone MRP system

MRP systems excel in production tasks but often lack connection with other departments, leading to fragmented data and limited cross-functional collaboration. To assess whether your MRP system needs integration with an ERP, evaluate the following aspects:

• Work order alignment: Can your MRP system connect work orders with customer orders, financial records, or procurement? 
• BOM integration: Does your MRP provide visibility into how BOMs affect overall costs, sales, or delivery timelines? Are BOM updates automatically reflected in other business functions, like accounting or inventory management?
• Real-time collaboration: How well does your MRP collaborate with other teams (e.g., finance, sales) for unified planning?
• Integration readiness: Does your MRP system offer the flexibility to integrate with other tools as your business grows? If it lacks integration capabilities, it may be difficult to synchronise production with finance, sales, or inventory management. 

If your MRP system creates silos, integrating it with an ERP system ensures synchronised work orders, BOMs, and business-wide data, fostering smoother operations.

2. When should you integrate ERP and MRP?

Integration is not always necessary, but certain scenarios strongly indicate its value. Consider integrating ERP and MRP if your business experiences the following:

• Business growth and scalability: As your business expands, managing production becomes more complex. Integration helps streamline operations and ensures your systems can handle increased volume, complexity, and multiple production sites.
• Beyond production tracking: If you need to move past just tracking production and gain an overview of the entire business, integrating ERP and MRP provides visibility into finance, sales, inventory, and other critical areas.
• Connecting departments: Integration allows you to link different departments (such as production, inventory, sales, and finance), ensuring all teams have consistent, real-time data to make informed decisions.
• Consistent, unified data: An integrated system eliminates data silos, ensuring that all departments are using the same, up-to-date information for better decision-making and more effective collaboration.
• Improving operational efficiency: Integration optimises workflows across various functions, reducing inefficiencies and enabling smoother coordination between departments.

Get Started with Custom ERP & MRP Integrations

Integrating ERP and MRP systems can revolutionise how your business operates. However, since every business is unique, a one-size-fits-all approach often falls short of delivering optimal results. To achieve a seamless integration, it’s essential to work with an experienced team. Experts in ERP and MRP solutions can assess your existing systems, identify gaps, and design an integration strategy tailored to your unique needs.

ERP vs. MRP: Frequently Asked Questions (FAQs)

1. What is MRP and ERP?

MRP (Material Requirements Planning) manages manufacturing processes by determining the materials, quantities, and timing needed to meet production demands. It focuses on inventory control and ensures sufficient raw materials and components are available.

ERP (Enterprise Resource Planning) is an integrated software solution that connects various business functions such as finance, HR, sales, and production, providing a unified view to support decision-making and enhance efficiency across the organisation.

2. What are the key differences between ERP and MRP?

ERP is a broad system that integrates various business functions, such as finance, HR, and supply chain, while MRP focuses solely on managing production and inventory. ERP provides a comprehensive view of the entire organisation, whereas MRP is narrower in scope, concentrating on production-specific needs like materials, schedules, and inventory.

3. What are some examples of ERP systems?

Popular ERP systems include:

• Odoo
• Microsoft Dynamics 365
• SAP
• Oracle NetSuite
• Infor CloudSuite

These systems offer a variety of tools and modules that can be tailored to specific business needs, covering everything from accounting to production management.

Reference:

• Gartner. Gartner Magic Quadrant for Cloud ERP for Product-Centric Enterprises