Everything you need to know about ERP or MRP before you invest

ERP or MRP System - which is right for you?

If your business operates in manufacturing or production, you are likely to have heard of ERP or MRP. Similar in both name and concept, the range of options available can make it difficult to work through the differences and understand which one might work best for you.

In short, both MRP and ERP systems are pieces of software that help you to run your business better based on historical information, forecasting algorithms and your chosen business priorities. The key difference is the scope; MRP has a much narrower, manufacturing-centric focus than ERP, which provides business-wide benefits as well as supply chain management. To give you a better understanding of the components of each, and to help you to decide which one might be right for your company, we’ve set out some of the detail below.

What is ERP and what does it do?

An ERP (Enterprise Resource Planning) system is a piece of software that unifies all the information you require to run your business and provides you and your teams with the processing tools to operate at an optimum level in all areas. All departments are integrated into the one system, and therefore a customer’s journey through your company is completely transparent, providing you with real-time costs and status updates to run your business effectively, as well as providing customers with automated, real-time updates.

Every member of staff who is involved in a customer- or supplier-based process or takes part in the manufacture of components will come into contact with the system at some point in their working day. Any information that they enter or create is instantaneously accessible to users elsewhere in the system to ensure joined-up and effective management of every aspect of the manufacturing process.

The use of an ERP system reduces duplication between stand-alone software, streamlines workflow and allows intelligent planning. It gives your production supervisors the tools to ensure consistent, quality output across every manufacturing cell. They will have the tools to understand where bottlenecks and shortages are likely to occur in advance, alleviating pressure points and allowing for better planning. In turn, this provides your customer service teams with the confidence that delivery dates will be met and customers will be informed of any issues in advance.

Key features of Access’ UK ERP software system:

Marketing, estimating and sales:

• Customer relationship management: gives your sales reps instant access to customer information; because CRM is part of a cloud ERP system, all the information they need is available to them on the move, either via a browser or the Access Workspace app. CRM also allows your marketing team to manage data and analyse trends using every piece of data throughout the system; from the range of products a customer has purchased over time, to geographical hotspots for your business.
• Improved customer communication: from automated order confirmation, requests for feedback and delivery updates, you can set up email communications to be triggered at specific points in your customer journey, ensuring that you are the supplier renowned for keeping your customers informed.
• Estimates and quotes: using either actual costs or standardised costs, the estimating module will pull data from the stock record, where the real costs of purchasing and manufacturing can be rolled up. This provides you with total control over margins and pricing consistency, with additional facilities for special customer price lists or discounts, and approval settings for specific products or pricing outside of standard criteria.

Manufacturing and operations:

• Product configurator: a bill of materials and routing for every part will be created so that purchasing demands are accurate and scheduling is realistic. Resources (tools, skills, equipment) are specified so that they can be allocated during planning.
• Project management: to maintain control of costs, resources and to track allocated time, functionality designed specifically for capital projects is included. This is ideal for businesses that run longer-term high value projects, or to collate data for development work into a single bucket.
• Stock and warehouse management: this provides total control over stock locations (for both single and multiple sites), inventory, lots and batches and traceability through your own and your sub-contractors’ processes. Barcodes, RFID and voice capture devices integrate with this module for usability. Optimum stock levels can be maintained using real-time demand, forecasting and minimum safety levels, and can be managed in line with concepts such as JIT.
• Scheduling and production management: visual Gantt chart style software allows for intuitive scheduling around shift patterns, skillsets and equipment constraints, providing the most effective production plan and delivering a work-to list direct to workstations or individuals.
• Shop floor data collection and job costing: the amount of time spent on any production activity is logged through touchscreens at workstations for improved efficiency and accurate costing. Machine downtime, unproductive working hours and scrap levels can all be monitored to enable the measurement of OEE.
• Purchasing and supplier management: POs can be raised automatically, deliveries tracked and managed, and invoices matched with PO receipts for traceability. If your ultimate goal is effective supply chain management, ERP software is the right solution with which to do this.
• Traceability for QA: raw material can be tracked at individual lot level to ensure full traceability of every component throughout the manufacturing process, including who made, inspected and approved an individual product.

HR and accounts:

• Debtor management: automated invoicing and statements allow for close management of customer payments and credit control, with easy maintenance of credit terms and better control over your cash flow.
• Human resources: attendance and shift pattern set-ups allow closer people management and identification of issues as well as more accurate and immediate payroll information. The facility for scanning and uploading of receipts whilst on the road gives your staff control over their own expenses whilst ensuring information is captured, as well as giving you real-time visibility of costs.

Top-level and overall systems features:

• Integration with other systems: APIs can be used to integrate with your existing infrastructure such as e-commerce platforms and, for example, allows sales orders to be pulled in and automatically processed. You can also integrate with supplier and customer databases for total supply chain management; ERP software being the central hub of that process.
• Workflow management: email alerts to teams, task notifications, approval requests and bespoke process flows can be set up to ensure that the system works in the best interests of your business processes. You will have control over users and their access level as well as the facility to set up approval triggers through workflows.
• Business Intelligence: Dashboards and emailed reports are available to track KPIs for individuals, teams and for use at board level. Because Access can support you with a cloud ERP system, you can track your KPIs and run reports from anywhere in the world to enable real-time business decisions to be taken from any internet-enabled device. Real-time data facilitates immediate decisions to be made based on accurate, current information.
• Document management: a central storage location that can link documents to components, works orders, sales orders and accounts; it allows the right information to be available to the appropriate people at their workstation. Documents are controlled centrally with version histories available for full traceability.
  
  

What is MRP and what does it do?

An MRP (Material Requirements Planning) system allows the complete control and effective management of stock, work in progress, OEE, purchasing and manufacturing.

MRP focuses on the manufacturing cells of a business and is designed with users from these departments in mind. A manufacturing business would use an MRP system to manage its production planning, using it to forecast and order materials in the right volumes to arrive on the appropriate date. It can also integrate with suppliers’ databases via APIs, enabling supply chain management.

Key features of our MRP system:

• Shop floor data collection and job costing: the amount of time spent on any production activity is logged through touchscreens at workstations for improved efficiency and accurate costing. Machine downtime, unproductive working hours and scrap levels can all be monitored to enable the measurement of your OEE.
• Improved communication for production staff: product drawings, images and training information are available to staff and supervisors so that everything your team need to do their job is at hand.
• Purchasing and supplier management: POs can be raised automatically, deliveries tracked and managed, and invoices matched with PO receipts for traceability.
• Traceability for QA: raw material can be tracked at individual lot level to ensure full traceability of every component throughout the manufacturing process, including who made, inspected and approved an individual product.

Read our article 'What is a Material Requirement Planning (MRP) System?'

What are the key differences between ERP and MRP systems?

ERP systems integrate every piece of the complex jigsaw that makes up a manufacturing business. Data from one part of the business can accurately inform decisions taken elsewhere. This means that real costings taken from manufacturing and purchasing can be used to generate accurate quotes at chosen margins with realistic lead times, even running ‘what-if’ scenarios within the scheduling software to understand impact of new demand on the existing plan.

The accounts team can see a full breakdown of current and historic customer purchases and trends in receipt of cash, allowing for open discussions with customers using accurate information, as well as forecasting and effective management of creditors. Business leaders can use insights to drive strategic decisions; the data available from a full ERP system provides a holistic picture of the company’s – as well as its customers’ and suppliers’ - activities. If your objective is supply chain management, an ERP system will give you the tools to achieve absolute control across the whole process, from the supply of raw material to the logistics of delivery. An MRP module is a crucial component of ERP systems, but it is not the sole focus of the solution.

MRP, however, is a tool largely used by production and operations teams to manage the manufacturing and purchasing areas of the business for efficiency gains. It enables the manufacturing facility to meet customer demands whilst meeting stocking KPIs and purchasing economically. Customers benefit from your business’ visibility and control, whilst you will see an improvement in cash flow and a reduction in manufacturing delays. MRP is a stand-alone item of software, so that whilst other departments can use the data (for example, for accurate costing or for chasing invoices), the data will not be linked to their databases. Whilst MRP systems can often be integrated into other software through imports and exports of relevant data, it is a more difficult process than with ERP, which has been developed with total integration and data-flow in mind.

Which one is right for you?

Business size used to be a factor when deciding whether ERP or MRP was the right tool for a business. However, most ERP systems on the market now are modular, which means that you can select which areas (departmental workflows) to integrate and therefore which modules are required. Not only that but in working with Access, the implementation can be staged, with the core modules purchased and integrated first. For example, phase one could consist of order processing, purchasing and supplier management; phase two could include CRM and accounts; phase three would then cover finite scheduling and HR.

Some businesses simply don’t need every module. If you have existing processes that you are happy with, or the demands in some areas are not enough to necessitate a fully integrated ERP system, a partial ERP system (specific modules only) may be the right answer.

If you have, for example, a finance package in place that you are not willing to change, but lack all other departmental software (or are unhappy with existing solutions), then we may be able to look at the option of integrating the majority of our ERP suite with your existing finance package.

Finally, MRP may be the better option where either you don’t need or aren’t in the position to finance a full ERP system. For those business that already have software in place for customer-facing processes such as estimating, sales order processing and debtor management but lack supplier and stock management and production control, MRP would be the sensible choice. Equally, if you do not have the budget for a full (or partial) ERP system, but manufacturing control is a critical business requirement, then MRP may be the right solution for you.

ERP vs MRP at a glance:

Critical questions when deciding: an ERP or MRP system?

The best way of ensuring that you are choosing the right software for your business would be to talk to an expert, and Access has some of the most experienced, knowledgeable people from industry on our teams. Our UK ERP software consultants have worked with countless manufacturers to help to put them on track towards a more profitable (not to mention less stressful) future. However, it is always helpful to already have in your mind some of the things we are likely to ask you about. The key questions that we will need to understand to be in the best position to help you, are:

• Which business processes do you wish to automate and manage centrally?
• What software solutions do you currently have in place, and are you happy with them?
• What is your budget?