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MRP vs. ERP: The Definitive Guide

Your business is growing at a fast clip. You seem to get new customers every day and new orders every time you turn around.

And that means you need a planning solution that can keep pace with your evolving business needs. Especially your accounting and finances. To that end, you’re looking into your options–an MRP, an ERP, a straight accounting solution.

And while you’ve heard plenty of rave reviews one way or the other, you’re still foggy on the difference between an MRP and an ERP, and you’re definitely not sure who comes out on top between an MRP vs. ERP.

You’re not even sure whether you’ve outgrown your accounting system yet.

The good news? You’ve come to the right place. We’re taking a closer look at these two planning solutions, when they work for you, and how to choose the perfect system for your team.

What is MRP?

Materials requirements planning, or MRP, is a computer-based inventory management system. It is designed based on three basic questions:

  1. What is needed?
  2. How much is needed?
  3. When is it needed?

MRP is intended to help product managers schedule and place orders of items of dependent demand. Dependent demand items are components of finished goods for which the amount of inventory needed depends on the production level of the final product.

In a car manufacturing plant, for example, dependent demand items would be tires and hubcaps.

Fundamentals

An MRP works backward from a finished production plan for finished goods. Let’s say, for example, you were in an auto plant and wanted to produce 100 trucks in a month.

An MRP would take that goal and work in reverse, converting it into a list of requirements for raw materials, component parts, and subassemblies needed to produce the correct amount of the final product within the established schedule.

The software will also produce schedules and reports detailing when each production step needs to occur and any changes that might be needed along the way to ensure that production remains on schedule.

What is ERP?

If manufacturing companies choose a system other than an MRP for materials planning, they generally choose ERPs, or enterprise resource planning.

ERP is a type of software used more broadly in resource management–well beyond materials. It can be used to manage:

  • Risk management
  • Procurement
  • Project management
  • Accounting
  • Compliance
  • Supply chain operations

The best way to think of ERP is glue. Without ERP, businesses would have to have systems within each individual department optimized for department-specific tasks. Instead, an ERP allows businesses to access all of their specified systems in one database via a unified interface.

Fundamentals

Generally, ERPs are designed around a single schema (a defined data structure) with a common database. It then connects core constructs with business processes driven by workflows, thus connecting and integrating a variety of people and departments.

ERPs are useful to businesses because they grant a bird’s-eye view, allowing you to link information together from human resources, finance, production, and more. This way, instead of scrambling to track duplicate information, an ERP collects all systems information under one umbrella.

To return to our car manufacturing plant example, an ERP would uniformly identify hubcaps by part name, size, source, material, lot number, serial number, cost, and specification (to name a few). Anyone with access to the system could track components through the entire production process.

MRP vs. ERP: What’s the Difference?

The real question is: why choose an MRP vs. ERP? What’s the difference? And is either option actually the right fit for your company’s needs?

Both systems allow you to see information and how it fits into the bigger picture. Both are widely used in manufacturing, and both are useful in tracking materials through your production processes.

However, there are a few key differences between the two–and a few reasons why you might elect to go with a different solution altogether, depending on what your business hopes to accomplish.

Standalone vs. Integrated

The biggest difference between MRP and ERP is that MRP is a solo software and ERP is integrated software.

We said earlier that ERP works to integrate systems and data inputs across several departments into one unified interface and database system. If you had an ERP to unify your systems, it might integrate an MRP system under its umbrella.

Note that some MRPs can integrate other software, but this is typically an expensive and lengthy process. The ERPs of today, on the other hand, are highly modular, so businesses can pick and choose what software elements they want to be integrated and disregard the rest to bolster cost efficiency.

Users

The nature of each system also changes who tends to use them.

MRP systems are designed for materials handling, which means they are used almost exclusively in manufacturing operations. ERPs, on the other hand, are broadly applicable to other areas of business, since they’re designed to be handled by many different departments simultaneously.

In other words, MRPs are used predominantly in manufacturing, while ERPs are used by just about any person in your organization.

Your Smarter ERP Alternative

At the end of the day, the choice between an MRP vs. ERP comes down to what you want for your business. And the truth is, with the challenges of the manufacturing industry, it can be hard to find a solution that meets all of your needs.

That’s where we can help.

We know the real needs of our manufacturing clients, which is why we recommend manufacturing and wholesale solutions that make it easy to track all of your production in one easy interface. Because when your business is thriving, your management software shouldn’t be the thing that slows you down.

Want to find out more about how our solutions can help your business grow faster than ever? Click here to learn about our Acumatica ERP manufacturing software.

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About Fourlane Inc.

Based in Austin, TX with regional offices and consultants located throughout the country, Fourlane is an award winning professional services firm that provides a wide range of business services & solutions. Fourlane was founded in 2009 by Marjorie and Rob Adams and has seen strong growth since its inception. Fourlane is the #1 Intuit Premier Reseller Partner and has been awarded Intuit’s prestigious Premier Reseller / Partner of the Year every year since 2010. Fourlane offers several services for small to medium businesses including advisory services, CFO services, bookkeeping, and financial systems consulting. Fourlane also offers expert QuickBooks oriented services including consulting, programming, integration, data conversion, training, support, and more. Over the years, Fourlane has helped over 10,000 customers with their QuickBooks software.

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