MRP, also known as Material Requirement Planning is a business planning tool used by organizations to manage production planning, inventory control system and scheduling. It ensures timely availability of material, optimum utilization of resources, planning for manufacturing and procurement functions.
To be precise, an MRP system lays emphasis on three major functions, namely –
- It ensures there is no inventory stock-out for manufacturing of the products
- Waste is reduced by maintaining lowest possible inventory levels
- Planning for the purchase, delivery and manufacturing functions.
When we talk about Material Requirement Planning, it came into existence about six decades ago in the 1960s – to encourage lean manufacturing and increase ROI. At present, Material Requirement Planning is a subset of an ERP solution and is a vital component in the supply chain.. It’s a module or functionality incorporated within an ERP solution to seamlessly ensure a favorable production plan for complex as well as simple business processes. MRP is a set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials.
Why choose ERP over MRP?
Enterprise Resource Planning solution – The internet is flooded with a variety of content about the benefits of ERP and how ERP helps manufacturing industry perform better by improving workforce productivity, collaboration and innovation. Enterprise Resource Planning solution is a comprehensive solution, often known as the bedrock of the organization which manages multiple departments, cohesively. An ERP is a framework for planning all of the resources in a business, from strategic planning through execution. The solution addresses concerns of industries all over the globe and thus, is recommended for every business.
Drawbacks of stand-alone MRP system –
A wheel is to a truck as MRP is to an ERP. A wheel is just a subcomponent that drives the mechanism of the truck. Similarly, MRP includes the computational logic necessary to add more value to an ERP system and helps MRP driven companies take greater strides.
Let us take a look at some of the challenges faced with a standalone Material Requirement Planning system –
- A stand-alone MRP system does not support other associated applications (inventory control, planning and scheduling, customer service, purchasing, and the like).
- Planning material requirements is precisely what MRP does, and MRP is limited to this only.
- MRP was developed to meet the needs of a manufacturing environment that differs vastly from today’s world.
- A stand-alone Material Requirements Planning (MRP) system is antiquated and obsolete.
How can ERP help you overcome these challenges?
- One solution for all the business operations – The number of ERP users grow strongly. ERP market is likely to reach $ 41.69 billion by 2020. It allows you to seamlessly track the workflow while optimizing the resources to the fullest. It not only facilitates better decision making but also improves the speed and efficiency while performing functions. Every business operation – sales, distribution, purchase, accounts, finance, inventory, production, supply chain planning, quality control, administration, reporting, MRP etc. is managed well in an ERP.
- Increased innovation – In this modern world, cloud technology is leading the market. Customers are extensively leveraging Artificial Intelligence, Business Intelligence, Internet of Things, Power BI, collaboration tools and mobile applications. If you invest in a cloud ERP solution that encompasses all these standard innovative functions, it will undoubtedly automate processes such as data collection, remote working and more. MRP does not support a bunch of functionalities as ERP. Hence, it is better to go for ERP.
- Bring an equilibrium between market demand and supply – Modern ERP systems are flexible and less complicated. It lets you manage everything from purchase orders, inventory, sales, account receivables and more. An ERP system helps plan and control various aspects of the extended enterprise.
- Tracking becomes easy and less complicated – When we talk about MRP, this software hardly allows you to boost your day to day business operations. On the other hand, ERP embraces a wide variety of functionalities for carrying out almost every operation in an organization. Detail of every department can be seen on a single software and this enables improved decision making and easy tracking of record.
- Less IT maintenance and investment – Multiple software solutions demand multiple vendors and integration of different systems. In the hustle and bustle of so many business functions, it is a tough task to manage multiple vendors, software solutions, IT personnel and the expenses made on IT. One of the biggest challenges for enterprise IT architects is to link disparate systems in order to eliminate duplication and encourage interaction and data sharing. Investing in an ERP solution ensures integration becomes moot.
- Streamlined inventory – Inventory is the bedrock of any manufacturing/ distributing industry. With a versatile ERP, inbound, outbound, inventory transfers, label printing, barcoding and other tasks are performed with just a few mouse clicks.
In this blog, we’ve discussed what is MRP, what are the limitations of using MRP instead of ERP, how ERP can add value to your business and its benefits. Built from the basic functions through material requirements planning (MRP) and eventually to modern systems, the growth of ERP is built on adaptation to new technologies, evolving management techniques and theories, and changes in the way things are made and delivered to customers. It is confusing and misleading to promote something (MRP) as a replacement for existing solution (ERP) when it (MRP) is inherently that same technology, evolved. As mentioned above, MRP is a subset of ERP and this functionality is included in SAP Business One. Hence, it makes business sense to invest in an ERP solution that offers all the functionalities instead of looking for specific planning tools. OptiProERP is a reliable and trusted complete ERP solution which consolidates the functions of each department in one solution and encourages automation with streamlined business functions. To know more, you can reach us at firstname.lastname@example.org