What’s the Difference Between ERP and MRP?
When finding a solution that consolidates your inventory, procurement, manufacturing, and planning operations, there are two stand-out options: ERP and MRP.
- MRP (Material Requirements Planning) systems focus on manufacturing processes to ensure the availability of materials and components for production planning, allowing for delivery schedules to be met and shortages to be avoided.
- ERP (Enterprise Resource Planning) Software manages all core business functions, including manufacturing and production, allowing for data to flow throughout the organisation and ultimately improving decision-making.
What Do You Need An ERP Software For?
- Produce Products
- Provide Service
- Both of the Above
- Something Else
A Side-by-Side Difference Between ERP and MRP
ERP and MRP systems can be mistaken for being the same product, particularly for their shared manufacturing and inventory capabilities (shown in the image above). While there are industry-specific ERP systems for manufacturing, the two are separate.
| ERP | MRP | |
|---|---|---|
| Core Function | Integrates and manages core day-to-day business processes in one system. | Plans material purchases to meet production schedules. |
| Capabilities | Financials, procurement, inventory, CRM, HR, manufacturing, and supply chain. | Production planning, inventory control, procurement, capacity planning, and BOM. |
| Usage (Teams) | Finance, operations, supply chain, sales, HR, IT leadership, and executives. | Procurement/buyers, inventory, warehouse, shop-floor, and scheduling. |
| Implementation | Organisation-wide phased approach with heavy integration. | Module or standalone tool with a narrow scope and fast rollout. |
| KPIs | Revenue growth, order-to-cash cycle, DSO, on-time delivery, forecast accuracy, and employee productivity. | Planned vs actual lead time, stockouts, WIP, scrap/rework rate, and on-time order release rate. |
| Industry-fit | Manufacturing, construction, retail/e-commerce, supply chain, distribution, professional services, and public sector. | Manufacturing (discrete and process), production, food and beverage, automotive, and textiles. |
The similarities between the two systems are further convoluted with the history of ERP, which started out as an MRP system for manufacturers. But, as more businesses outside of manufacturing incorporated MRP, combining other business functions, it evolved into an ERP. Today, MRP is just a feature of an ERP system.
ERP or MRP: Which Best Suits Your Requirements?
Keep in mind: MRP software monitors the manufacturing floor, while ERP Software reaches across the whole business. This will help to define what system you require when deciding between ERP and MRP.
When You Require ERP
- Run finance, procurement, inventory, sales, service, projects, and HR in one system
- Provide a single source of truth to reduce siloed data
- Operate across multiple sites or countries
- Required to meet audit and regulator needs
- Require real-time, cross-functional reporting for business-wide decision-making
- Integrating e-commerce, warehouse management, CRM, payroll, and other core functions
- Require workflow automation, role-based controls, and master data management for scaling
When You Require MRP
- Manufacture and assemble products
- Plan materials against demand
- Need time-phased purchase recommendations to reduce stockouts or excess inventory
- You have multi-level BOM
- Align supply with demand and planning forecasts
- Design what-if scenarios for demand or supply changes
- Track shop-floor schedules, WIP, and capacity planning
| Business Area | MRP | ERP |
|---|---|---|
| Supply and demand forecasting | ✓ | ✓ |
| Materials inventory management | ✓ | ✓ |
| Production scheduling | ✓ | ✓ |
| Order and stock management | ✓ | ✓ |
| AI analytics and smart forecasting | ✓ | ✓ |
| Business finance and accounting | ✓ | |
| Supply chain and logistics | ✓ | |
| Sales leads, conversations, and performance | ✓ | |
| People management and HR systems | ✓ |
What About MRP II?
MRP II is the evolution of MRP. While it is still just a feature of ERP, MRP II advances on the capabilities of MRP by combining demand, supply, capability, and finance.
| MRP | MRP II | |
|---|---|---|
| Overview | Fixes material shortages. | Optimises throughput, cost, and due-date performance. |
| Inputs | Demand, BOM, inventory, and lead times. | Routings, workcentres, labour/machine schedules, and cost rates. |
| Planning Levels | Detailed material planning. | Links S&OP, MPS, RCCP, and CRP. |
| Users | Planners and buyers. | Operations, finance, and leadership. |