ERP vs. MRP: Which Is Right for Your Manufacturing Business?

2ERP vs. MRP: Which is Right for Your Manufacturing Business?

Contents

Introduction

Integration Issues and Obsolete Systems Plague Manufacturers

What’s the Difference Between MRP and ERP?

Advantages and Disadvantages of MRP and ERP Systems

What Kind of Buyer Are You?

When an ERP System Will Do the Job—and When It Won’t

Niche MRP Vendors to Be Aware Of

Conclusions

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3ERP vs. MRP: Which is Right for Your Manufacturing Business?

Introduction

Small to midsize manufacturers have more software solutions to choose from than ever before. But when it comes to selecting and implementing a new enterprise resource planning (ERP) or manufacturing resource planning (MRP) system, the choices can be overwhelming. What’s more, every system has its own unique advantages and disadvantages.

At Software Advice, we speak to buyers from thousands of manufacturing firms each year who want to implement new MRP and ERP systems. These interactions give us vast insight into the problems manufacturers face with their current methods and what they want in a new system.

In this guide, we’ll:

• Explore the world of ERP and MRP software.

• Help you determine which systems are a fit for your organization.

• Explain how these platforms can improve every aspect of your organization’s operations—from the assembly line to the accountant’s office.

4ERP vs. MRP: Which is Right for Your Manufacturing Business?

We wanted to better understand the needs of modern manufacturers looking to upgrade their systems. So we analyzed a random sample of 100 interactions Software Advice had with prospective software buyers in the manufacturing industry.

First, we looked at the pain points they experience with their current methods.

Democratizing data is not without its risks, however. Data discovery tools can empower business users to make their own decisions and escape the bottlenecks of traditional BI—but without professional data governance, competing interpretations may lead to data chaos.

Buyers should be aware of the need to bridge the gap between user-driven and centralized BI, and analyze their options carefully.

Integration Issues and Obsolete Systems Plague Manufacturers

5ERP vs. MRP: Which is Right for Your Manufacturing Business?

We can see a common theme for the majority of prospective buyers: Their existing systems aren’t delivering the necessary functional depth to effectively and efficiently manage their manufacturing processes.

A new MRP or ERP system can solve those issues. But to determine the best solution for your organization, it is imperative to understand the world of MRP and ERP software—and to accept that every potential solution has its unique advantages and disadvantages.

Top Pain Points for Manufacturers

6ERP vs. MRP: Which is Right for Your Manufacturing Business?

What’s the Difference Between ERP and MRP?To better understand the relationship between MRP and ERP software, a little bit of history is in order.

MRP I

Material requirements planning software, or “MRP I,” was first introduced in the 1970s. The first incarnation of MRP I software was limited in scope: In general, it only had a few modules for common tasks, such as bill of materials and production scheduling.

MRP II

The original MRP I systems proved inadequate by the 1980s, paving the way for manufacturing resource planning (or “MRP II”) software. These MRP II systems closely integrated the whole scope of a manufacturing operation with other aspects of the business, such as accounting, sales, marketing and human resources.

For example, a toy manufacturer during this time would utilize MRP II to forecast demand for raw materials and production capacity before the firm launched a marketing campaign for a new product.

7ERP vs. MRP: Which is Right for Your Manufacturing Business?

However, during the 1980s, the hardware and IT infrastructure necessary to fully streamline business operations hadn’t yet been developed. Eventually, advancements in networking technology and the growth of the Internet made the all-inclusive software suites MRP systems were intended to be a reality.

ERP

Gartner coined the term “ERP” in 1990. This described a newer suite of software that would not only encapsulate all the manufacturing processes contained within MRP software, but would also integrate applications for other business-critical operations, such as:

Accounting

Human resources

Supply chain management

Enterprise asset management

Customer relationship management

To be clear: ERP did not replace MRP software. It’s true that ERP software often covers the major functional areas of MRP. But many manufacturing firms still choose to implement a stand-alone, industry-specific MRP system that integrates, to some degree, with a separate ERP suite.

8ERP vs. MRP: Which is Right for Your Manufacturing Business?

Core Functionality of MRP and ERP Software

9ERP vs. MRP: Which is Right for Your Manufacturing Business?

And that bring us to the dilemma commonly faced by manufacturers looking to overhaul their software systems. Manufacturers in this position often ask themselves the following types of questions:

To best answer these questions, let’s take a look at the pros and cons of ERP and MRP systems.

“Should we replace our older MRP system with a modern ERP system that has the MRP features we need?”

“Do we replace our older ERP system with a modern ERP system, in addition to a separate MRP system with more functionality?”

“Should we replace our older ERP system with a modern MRP system, and take a ‘postmodern’ approach to covering other essential application areas?”

10ERP vs. MRP: Which is Right for Your Manufacturing Business?

Advantages and Disadvantages of MRP and ERP SystemsBelow is a chart that will provide a brief overview of the basic advantages and disadvantages of MRP and ERP systems, as it pertains to manufacturing processes.

ERP

MRP

Advantages Disdvantages

Cover all (or most) of your departmental needs and application requirements in one all-inclusive suite.

Only one vendor to deal with.

Can more easily scale with your business.

Manufacturing applications might lack certain features critical to some industries or niches.

Can be difficult (and costly) to customize.

Might be overkill for some smaller manufacturers.

Greater functionality for manufacturing processes.

More likely to meet requirements for specific industries.

Customization can be less costly.

Might have integration issues with administrative applications (e.g., human resources or customer relationship management); an ERP system may still be necessary to cover administrative functions.

11ERP vs. MRP: Which is Right for Your Manufacturing Business?

What Kind of Buyer Are You?

Of course, there is no “one-size-fits-all” solution. Every organization will have its own specific needs and goals to achieve with new software. However, here are some general recommendations for different types of manufacturers to consider:

Larger, More Niche Manufacturers Have Greater Functional Needs

A midsize, discrete manufacturer that produces simple consumer products will have much different needs than a large manufacturer that produces industrial chemicals.

In general:

Larger manufacturers with industry-specific needs will need a more advanced, full-featured MRP system to supplement existing software

Smaller manufacturers that don’t have industry-specific requirements can often be served by a lighter MRP system, or an ERP system that fulfills most of their manufacturing needs.

Now, let’s dig a bit deeper into some considerations that are specific to certain types of organizations ...

12ERP vs. MRP: Which is Right for Your Manufacturing Business?

Your Current Methods May Influence Future Purchases

The system(s) you’re currently using can impact your software-selection process. The chart below outlines some considerations different size businesses may want to weigh:

Size of Manufacturer

Manufacturer’s Current Methods

Key Considerations

Large manufacturer

• Older MRP or ERP system.

• Data migration between old and new system can be complicated and lengthy. It can be harder to migrate to some systems over others.

• May be easier to train employees on a new system if the user interface and software functions are similar to those of the old system.

Small manufacturer

• No formal MRP or ERP system.

• Software with “light” MRP or ERP functionality.

• Disparate software systems or manual methods.

• Fewer headaches when it comes to migrating data.

• The new system will “set the tone” for how manufacturing processes are handled; you may have to adapt your processes to it.

• Critical to ensure employees are properly trained if they have limited experience with a formal MRP or ERP system.

13ERP vs. MRP: Which is Right for Your Manufacturing Business?

Regardless of the size of your business, there can be headaches during the implementation process of any new system. It’s critical to consider what obstacles you might face and plan accordingly to avoid them.

Choose a System That Can Grow With Your Company

If your business is growing rapidly, think about how well a given system will scale with your company when evaluating options. Also consider how easy it will be to migrate from that system if you need to replace it in five or 10 years.

Cloud-based systems with tiered pricing structures that allow you to easily purchase additional modules or add new users are the easiest to scale. Consider these types of systems if you expect considerable company growth in the near future.

Want to learn more about how to avoid ERP implementation failure?

Check out our guide.

14ERP vs. MRP: Which is Right for Your Manufacturing Business?

When an ERP System Will Do the Job—and When It Won’tWhile most modern ERP systems offer manufacturing applications, they might not be adequate for certain kinds of manufacturers.

One easy way to narrow your choices: outline your must-have functionality. For example, food manufacturers need their MRP systems to track expiration dates and have a robust quality assurance management feature set. MRP or ERP systems that do not have these features out of the box are often crossed off the list immediately by food manufacturers.

“We’re not using a major ERP suite. But my experience during our current ERP implementation is that the MRP module is not nearly specific enough for the food industry. I’m sure it would work fine for certain industries, but the MRP module does not have an answer for raw material shelf life and variable characteristics, such as fat content.”

—Adam Leija, director of communications at Leonard Holding Company, which owns a food manufacturing firm

15ERP vs. MRP: Which is Right for Your Manufacturing Business?

The chart below lists the major ERP vendors and the manufacturing niches they serve. Be sure to examine the specific capabilities of each to ensure they’re an appropriate fit for your organization’s needs.

ERP VendorBusiness

Sizes ServedIndustry Niches Served

Microsoft Small, Midsize, Large • General manufacturing

SAP Midsize, Large• General manufacturing• Consumer products• Heavy industry

• Oil and gas• Process manufacturing• Electronics

Oracle Midsize, Large• General manufacturing• Process manufacturing• Consumer products

Netsuite Midsize, Large• General manufacturing• Food and beverage• Electronics

• Consumer products• Heavy industry• Process manufacturing

Sage Small, Midsize, Large• General manufacturing• Food and beverage• Chemicals

• Industrial machinery and equipment

• Metal fabrication

16ERP vs. MRP: Which is Right for Your Manufacturing Business?

Niche MRP Vendors to Be Aware Of

If your organization only needs new manufacturing software (rather than an all-inclusive ERP suite), you won’t have to make too many trade-offs to meet your needs.

There are many vendors that offer highly specialized manufacturing systems for various industry niches, such as food and beverage or electronics.

In addition, there are plenty of vendors that offer less robust manufacturing software at lower price points.

Don’t be afraid of smaller, niche vendors. While there is always the chance they could be acquired or otherwise go under, this is often a misplaced concern. Many niche vendors, such as Epicor, are established and stable, albeit smaller than such titans as Oracle and Microsoft.

“Newer, smaller niche vendors are perceived to be riskier than larger enterprises. But many of us have plenty of capital, are nimble and are deeply entrenched with our customers,” says Marc Kalman, CEO of Bizslate, a cloud ERP provider.

17ERP vs. MRP: Which is Right for Your Manufacturing Business?

Below are some examples of vendors (listed in alphabetical order) that offer products geared toward particular types of manufacturers:

Type of Manufacturer Example Vendors Serving That Niche

Process manufacturer• Batchmaster

• Epicor

Discrete manufacturer• Aptean

• Epicor

Food manufacturer• Epicor

• JustFoodERP

Electronics manufacturer

• Fitrix

• MISys

• TGI

Small-business manufacturer

• DBA Manufacturing

• E2 Shop System

• Fishbowl Manufacturing

• IQMS

• SYSPRO

• SYSPRO

• TGI

• Plex

• Epicor

• Plex

18ERP vs. MRP: Which is Right for Your Manufacturing Business?

Conclusions

There may be a lot of software choices out there, but determining what is best for your organization has never been easier. Simply do the following:

• Evaluate your industry-specific needs

• Consider to the size of your business and whether you plan to scale

• Outline the functional areas your new system should cover

Remember, there is a solution out there to fit your needs—whether you need to overhaul your entire ERP/MRP system, or you just want to strengthen one functional area of your manufacturing operations.

Still not sure what is best for your organization? One 15-minute phone consultation with our Software Advisors can point you in the right direction and help you create a short list of suitable vendors. Call us toll-free at (855) 998-8505.

Created by:

Forrest BurnsonForrest Burnson is a Market Research Associate at Software Advice, where he covers the construction, enterprise resource planning (ERP), distribution and fleet management markets. His research has been cited by notable organizations and publications like Small Business Computing, The Institute for Supply Management, Supply Chain Digital, Auburn University and Michigan Live.

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forrest@softwareadvice.com

(512) 375-4832

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