The Difference Between MRP and ERP Systems

A lot had changed in the business industry when technology paved the way for an innovative approach to handling business flow. A large number of black and white methods in making records of confidential documents are reduced rapidly and transitioned into utilizing computer-based software.

The most common systems are MRP and ERP, but what exactly is their role to your business? How does it affect the flow of productivity in your company? In this article, we’ve put a helpful guide on understanding the difference between the two systems.

Manufacturing Resource Planning (MRP)

In the year 1970, it was then the first MRP was developed and made its way to a private company for the specific purpose of meticulously recording and making an inventory of raw materials to monitor the quantity needed for the production ahead of time. This solution makes the operation of the business run smoothly.

Few years after it was launched, it became commercialized for others to take advantage of, entrepreneurs were able to use the MRP System for small business to make complicated things easy to manage. This gives productivity faster than the usual and a lesser chance of having some interference in the field.

From the name itself, the main objective of MRP is to have a plan to ensure the availability of materials for customers. Planning how the production goes, getting on time with deliveries, and handle orders without running into major issues.

Going into details on how MRP really works, there are several processes that are essential to this system. We all know by now that the main role of MRP is to control the inventory of resources in a manufacturing company, and to successfully, this should be chronologically:

—  Customer order – The first process is all about the customer’s needs, taking their orders carefully, setting up what kind of product/services they need, tracking the product to make sure it will be delivered to the right address, and guarantee they are satisfied with their purchase.

—  Forecast demand – An essential part of the MRP is demand forecasting, it is where estimating comes in handy, giving an approximate quantity of a product that consumers will purchase beforehand. This practical solution will foresee what needs to be replenished to avoid getting empty-handed to meet customer expectations.

—  Master production schedule – Another vital process is making the best out of production, recognize future issues, predict the needs and goods. This maps the demand of consumers and works directly with the supply chain, delivering promptly. Its cost-effective method can create production schedules daily to ensure that deadlines are met.

—  Bills of materials – This is a list of all raw materials needed in manufacturing a product/service, whether it is the smallest to the biggest details to make the end-product. Manufacturing partners used this as a form of communication to have clear information about the materials that will be used.

—  Inventory record – this tracks all the items and its transaction. It mostly includes a brief description of the item, the quantity, and where the location of each item will be heading.

—  Purchase order – this makes the purchase official by issuing legal paperwork from the manufacturer that indicates information of the item purchased and serves as a form of contract that the purchase was accepted by the seller.

—  Work order – it is where the company receives the order from a consumer and processed internally.

Enterprise Resource Planning (ERP)

The type of software that is responsible to enhance customer relationships by providing transparent data and be able to pinpoint what are the beneficial processes and the least one. It also allows the company to review the performances of each employee and identify what steps should be given to strengthening them. This type of system works on a wider range of solutions:

—  Customer relationship management – this aims to give a boost in customer service, which usually attracts potential consumers and handles different customer concerns at the same time.

—  Financial management – This handles the money from payments, expenses to tax administration matters. It manages financial reports from various company divisions.

—  Human resources management – this focuses on timesheets, payroll systems, and time tracker to monitor the daily schedules of the employees. Some include LMS training for new hire employees too.

—  Manufacturing resource planning – the basic flow of manufacturing that covers product planning, tracking production, until the distribution process.

—  Supply chain management –  focus on obtaining materials that are needed by the company. It handles the flow of raw materials to actively supply consumers and gain customer satisfaction.

—  Sales and Marketing – this handles sales, customer inquiries, sales orders, and invoices to gain profit.

—  Inventory – where all items are being recorded with serial numbers to track each one easily.

—  Purchasing – the final process that is responsible for all the essential documents that include supplier listings, purchase orders, and stock updates.

The world of the manufacturing industry can be overwhelming to understand with its terminology and the processes that need to be monitored 24/7. Luckily, with the help of technology, the long hours of manually checking all materials are shortened with user-friendly software. If you’re dreaming of building your own manufacturing company make sure to invest in the systems mentioned above.