Key Takeaways
- Often compared to project management systems, ERPs and MRPs have a lot more to offer. The biggest difference between ERP vs MRP is its final purpose. MRPs are used solely in manufacturing, specifically repetitive manufacturing. ERPs are used in a variety of industries, including some repetitive manufacturing.
- Top ERP modules for ETO manufacturers include automation, centralization, inventory/purchasing, supply chain management, and integration with your CAD and accounting systems.
- ETO manufacturers struggle with many MRPs but do appreciate BOM generation features, part tracking, and order management. That’s why many Custom Machine Builders need a system that’s part ERP, part MRP, and completely designed for custom machining.
ERP vs MRP
What’s the difference between an ERP and an MRP? The short answer is “its purpose”. A materials requirement planning (MRP) system is a reliable software dedicated to improving manufacturing processes. Meanwhile, an enterprise resource planning (ERP) system expands to include many more functions for a larger variety of organizations. In fact, due to the growing list of functions, ERPs are being used more and more in the manufacturing space. This crossover is part of the rising confusion between ERPs vs MRPs.
Additionally, Custom Machine Builders are starting to realize their ideal solution is a combination of both systems. They’re searching for software that is truly Engineer To Order (ETO). A key distinction for these platforms is integrating directly with their computer-aided design (CAD) system, a necessary feature for ETO success. We’ll explore both ERPs and MRPs in this article, helping you find the best solution for your ETO organization.
This comparison chart offers a quick view of some of the major differences in the ERP vs MRP debate.
| ERP | MRP |
| Usually works as an integrated system throughout an organization. | Typically, a standalone system that focuses on materials and requirements for the production process. |
| Used in a variety of industries. | Used solely in manufacturing |
| Can include many applications such as inventory tracking, human resources, accounting, etc. | Focuses function on production planning, scheduling, and ordering. |
| Is typically expensive but comes with an impressive ROI. | Usually comes with a smaller price tag but limited features. |
| Can meet the needs of the organization with some customizations. | Applications are often standardized, making it a little trickier to integrate and train staff. |
The History of Enterprise Resource Planning
G2, one of the most trusted resources for learning about software, confirms that ERP systems were first developed in the 1960s. The term “Enterprise Resource Planning”, however, wasn’t formulated until the late 1980s. Before then, “Inventory Control Systems” and/or “project management software” were often used to describe ERPs. Since these systems were originally used to oversee inventory and quality control, the manufacturing industry was the first to value this software.
ERP solutions are heavy-duty programs, though, providing users with a variety of industry-related applications. That’s why their name had to evolve from ICS to ERP; to reflect the (still growing) size of their applications (sometimes referred to as “modules”). Applications developed to expand the coordination of various business processes under one enterprise.
It’s fair to say that the incredible advancements in computer technology over the last 60 years have steered how ERPs evolved. Coupled with the growing affordability of powerful computers, ERP software has transformed from a luxury for large corporations to a necessity for businesses big and small.
The History of Materials Requirements Planning
J.I. Case, a manufacturer of construction machinery, may not be a household name, but neither was IBM at the time (the 1970s). It was their partnership, though, that took materials requirements planning (MRP) software mainstream.
A decade earlier, Engineer Joseph Orlicky developed a production capacity planning system that could only be afforded by a select few organizations. The hardware required to run MRP software was so complex, it took up an entire room, sometimes two. Fortunately, the manufacturers that had early access to this technology were an ideal place for its growth. Thanks to the increasing demands and complexities of purchasing materials, building products, and then selling them, the software took off.
A new term was coined in the 80s, after several advancements in technology; Manufacturing Resource Planning (MRP II). With this update, MRP II focuses on much more than inventory. Instead, the software optimizes productivity, identifies customer demand, and automates the planning process. Still, its feature list remains small compared to ERPs.
Top Modules of Modern Enterprise Resource Planning Systems
Thanks to the growing number of enterprise resource planning systems, there is no shortage of options available. Many designed for specific verticals with varying features and characteristics. For example, BOM management is usually an MRP function, but ERPs are starting to include their own versions.
Despite the variety of features and modules, it’s fair to say that all ERPs provide:
1. Automation: Being able to automate anything within the system, from receiving quotes to sending invoices and creating reports.
2. Centralization: Users can group tasks without switching screens. The system can house all necessary information for a project, and every department can access its data in the unified interface.
3. Integration: Every application included within an ERP should work seamlessly together, allowing a user to switch easily from one function to another within the system. Additionally, each application typically shares information in real-time.
The above characteristics help the applications or modules within an ERP system come to life. There are dozens of modules available, that vary by industry.
As an Engineer To Order machine builder, these are the top features that will boost your efficiency, accuracy, and profitability.
- Integration with CAD: We mentioned the importance of smooth transitions in your ERP/MRP, creating a better workflow. Custom Machine Builders have an additional integration that they cannot compromise on connecting your system to SOLIDWORKS, Inventor, or whichever CAD your team uses.
- Accounting & Finance: Accounting tools generally support accounts receivable, accounts payable, tax reporting, time tracking, and general ledger tasks. In many cases, the accounting system that the business already uses for these tasks can also integrate with the ERP system, making it a seamless operation. For example, Total ETO integrates with QuickBooks, Sage, and other popular programs.
- Inventory & Purchasing: Managing an organization’s inventory is what ERPs were designed for in the first place. These days, however, inventory modules work with distribution, manufacturing, sales, customer support, and more. Tools such as warehouse management, bid and spend, compliance, and supplier management are also beneficial during procurement.
- Supply Chain Management: ERP software enables organizations to have a bigger picture of the supply chain. This helps reduce expenses, supervise demand, prevent mistakes, and automate finances. Such information also helps to predict bottlenecks, keeping your projects on time.
- Business Intelligence: The ERP should supply users with data to analyze and improve operation This is an important, additional feature above and beyond what any project management software can provide. These reports help ensure organizational leaders make strategic decisions based on real-time data.
While these are the core modules found in most enterprise planning systems, the technological advancements since its inception have opened the door for ERPs to offer more, including (but not limited to) distribution and warehouse management systems, product lifecycle management, computerized maintenance management systems, and electronic data interchange.
Common Features of a Materials Requirement Planning System
Similar to ERP systems, materials requirement planning has evolved to support many aspects of a business, including BOM Management, customer relationship management, invoicing, project management, and more. Below are the top features manufacturers require in their MRP.
- Accounting: This includes AP, AR, and GL duties. However, it’s more common for MRP systems to integrate with accounting, rather than supply its own proprietary accounting module. It’s important to identify your preference to ensure the organization has access to the specific features it needs.
- Order Management: Users can easily check on current stock. Alternatively, an automation could be programmed to trigger purchasing when it’s time to be replenished. When included in an MRP, the software can also create quotes and price lists, as well as track orders in the supply chain.
- BOM Generation: Manufacturing BOMs are more complicated than many think. A manufacturing BOM will account for consumables and other waste from production, as opposed to an Engineering BOM, which doesn’t include materials used. A good analogy is that an engineering BOM will state that a 6 foot metal pole has 6 feet of aluminum, while the manufacturing BOM will say that the 6 foot metal pole has 6.4 feet of aluminum (because of scrap from production). BOM management software is incredibly important to all manufacturers, but especially for Custom Machine Builders. Working with Dynamic BOMs saves a lot of time and money in engineering and procurement. Interested in perfecting your knowledge and use of a bill of materials? Check out the details for building an Engineer To Order BOM here.
The Future of ERP and MRP Systems
It’s likely that the ERP vs MRP battle will continue for years to come. The 1980s was a fascinating time to watch these two systems develop, along with the technologies at the time. That decade will seem like nothing, though, when we look ahead at the next 10 years. We have many advancements to look forward to, which makes it tough to sift through and determine what will stick. Machine learning does hold a lot of potential, particularly for ERPs. Intelligent enterprise resource planning (iERP) could, in theory, utilize data analytics to add to the predictive power of their operations. Or, imagine how efficient engineering could become if AI improved your BOM management software.
Meanwhile, MRP systems are expected to become more user-friendly. Usability has always been an important feature of materials resource planning. With many user interfaces becoming intuitive, it means that it won’t take long for employees to learn the system.
These systems are already being impacted by IoT devices, but they’re expected to become a bigger part of their success. Currently, production and distribution devices can be directly connected to their central database. This means users can expect impressive integration and will enjoy the peace of mind that their system automatically sends commands to purchasing, warehousing, and manufacturing.
GlobeNewsWire predicts the international ERP software industry will generate over $66 billion USD in the next three years. North America will account for 33% of the market. Many companies are already pursuing digital transformations, hoping to achieve an all-SaaS approach with 99.8% uptime. However, due to the number of organizations that are concerned about security, Forbes predicts hybrid systems will remain popular for several years to come.
The MRP industry is continuing to grow, just at a slower pace. Market Reports World shows us that material requirements planning software is currently valued at $4.5 billion USD. However, we can expect the MRP software industry to reach $7 billion USD within two years.
Conclusion
To some, the differences between ERP vs MRP systems are minuscule. But depending on your organization, those differences can make or break your success. It may be easy to think that manufacturers would prefer MRP systems, however, many manufacturers are choosing ERPs now, because of the impressive feature list.
Additionally, depending on what you build, a hybrid ERP/MRP might be your only choice. ETO organizations, including Integrators, Panel Shops, and OEMs typically build custom machines. Integrating their ERP/MRP with CAD helps to save time and money in engineering and procurement. Furthermore, by connecting sales, engineering, purchasing, manufacturing, and accounting, Custom Machine Builders can increase the organization’s efficiency, accuracy, and profitability. Most project management systems can’t come close to offering the same benefits.
Total ETO is a Totally Better ERP/ MRP Solution
Our software is easy to implement and use, affordable, and backed by a team of industry experts with a passion for the success of every client.
Packages start at $7,500/year for 5 users and include human-guided implementation and training. Experience it yourself; request a demo.
Written by Steve Williamson
