An introduction to ERP and MRP
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An introduction to ERP and MRP

Enterprise resource planning (ERP) and manufacturing resource planning (MRP) software have changed modern manufacturing and shaped today's generation of businesses but what do they actually stand for?

What is an enterprise resource planning software system?

Enterprise resource planning is a term used to denote the integrated business management software that enables businesses with the coordination and control of every part of their complex operations, including all business functions such as product design, manufacturing process, sales and marketing, supply chain management, financial operations, delivery, shipping and payment.

The term ERP is used to describe the integrated management of operations and it lives off the collection, storage, management and interpretation of vast amounts of data, only made possible by the use of technology and software.

This integrated management of core business processes is used across a multitude of companies in a broad range of industries such as manufacturing, distribution, logistics, transportation, education, banking, retail and healthcare, among others. By delivering a single database containing all of the data from the various previously existing software platforms, it manages to address a highly complex amount of information from different areas such as human resources, supply chain management, project management and manufacturing.

ERP and MRP

Interestingly enough, the advantages of employing such a system that encompasses a highly complex integration can be easily understood. Enterprise resource planning systems are fully integrated and easy to manage, becoming a one stop shop for a business to communicate and interact with its employees, suppliers and customers while also providing a functional platform to address any problems that might arise. With this, you can maximise efficiency, spot opportunities and weaknesses in your business environment at a glance, boost your bottom line, and ultimately make your life easier. At the end of the day, a better use of your resources delivers higher quality to your customers, resulting in more value being created for your investors.

What is a manufacturing resource planning software system?

Manufacturing resource planning is sometimes also known as MRP II, as it has evolved from the original materials requirement planning. It ensures that materials and resources are available for products and production, while also addressing the management of manufacturing needs, using integrated production planning and inventory controls.

Essentially, it constitutes a methodology for an effective planning and allocation of resources within a manufacturing company or at least relating to manufacturing as a function, if we are discussing a business also encompassing other functions. While the benefits of implementing a system for the efficient allocation and use of manufacturing related resources may appear obvious at from the concept's description, it is still important to note them.

Manufacturing resource planning

These advantages are centered on an improved control of inventories, better scheduling, great quality and design control, more accurate records and the financial benefits of having a reduced inventory, which is effectively used to improve your cash flow. All of these advantages work together, creating a highly adaptive dynamic of synergy which delivers a more productive and fruitful relationship with your stakeholders such as your customers and suppliers as your manufacturing unit becomes the well-oiled machine delivering high-quality products you have always aimed to have.

How do they relate to one another?

An easy way to understand how these systems relate to each other is to think of materials requirement planning was initially absorbed by manufacturing resource planning when the latter offered capabilities that the previous couldn't. In a similar manner, enterprise resource planning can be thought of a system that encompasses all of the capabilities of manufacturing resource planning, as well as all the other business-related capabilities that MRP simply can't deal with such as billing, customer service, shipment and delivery, human resources, etc.

Because data and scheduling resources located within an enterprise resource planning are often used to facilitate manufacturing resource planning, these terms are closely used in the business community, with some people wrongly assuming they're interchangeable. An ERP is the platform that is used in planning and keeping records of resources such as finance, personnel, materials, and property. On the other hand, MRP processes involve organising for the use of supplies necessary for manufacturing products, so manufacturing resource planning is included in an enterprise resource planning solution.

Although ERP and MRP execute similar processes in certain spots, they are uninterchangeable since ERP platforms perform a considerable number of the functions not added in MRP. When analysing either solution, a business that just needs to maintain inventory and manage the manufacturing resources it uses in the production of its products does not necessarily need a fully fledged enterprise resource planning solution. In this situation, a manufacturing resource planning solution will suffice as it will fulfil the business' requirements.

Manufacturing resource planning software system

When one compares the two systems, an important advantage to consider is the capacity of the more complex ERP to collect, store, manage and interpret all the different types of data it handles between all the different company departments. Conversely, MRP systems are simpler standalone programs dedicated to the manufacturing function, and, as such, they are not built with the capacity to integrate types of data not used in manufacturing-related functions.

Employing manufacturing resource planning is predominantly about figuring out the optimum quantities of one or several materials a business needs to fulfil its production requirements in order to get the right amount of inventory so as to avoid shortages or other types of problems caused by overstocked supplies. MRP acquires a new type of importance when the business in questions deals with perishable goods or is impaired by limited storage.

This method is essential for almost all types of companies offering different ranges of products and services. For example, from a caterer who needs to order the right amount of food to serve at a specific event, to a restaurant manager who is required to stock fresh produce, the use and benefits of MRP are all too apparent, as it would ensure there was enough food for their clients in such a way that would avoid excesses, spoilage or waste. In order to analyse another industry, we can turn to construction, where the building planner can coordinate usage of enterprise resource planning and manufacturing resource planning systems to determine the right amount of concrete, drywall, or other building materials needed to complete the construction project, in addition to how to allocate the workers' schedules, organise their payroll, pay suppliers, apply for permits, etc.
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