ERP Vs MRP: Definition, Differences, and How Important for Companies

In business operations, especially in the manufacturing industry, there are two systems commonly used by companies for daily business management. The two systems are Material Resource Planning (MRP) and Enterprise Resource Planning (ERP).

So, what are the definitions of MRP and ERP, the differences between them, and how important is the implementation of these two systems for companies?

Definition of MRP

MRP or Material Requirements Planning is a system used by companies to calculate the components and raw materials needed for the product manufacturing process. This system is needed to adjust product supply and demand with inventory capacity.

The MRP system is mainly used to manage the flow of raw materials into and out of inventory. As part of the supply chain management system, MRP helps companies schedule the production and distribution of goods efficiently, both in terms of time and cost.

In its implementation, there are three main questions that form the basis of MRP operations:

What is needed?

This question is to match production targets with the amount of raw materials needed.

How much is needed?

This question is to match production targets with the amount of raw materials needed.

When are raw materials needed?

The answer to this question is when the production process will be carried out and the time span needed to meet the target. For example, if the production target is 12,000 items while the production capacity is only 2,000 items per day, then it will take at least 6 days to meet the target. This means that the company must remove raw materials from inventory in stages over 6 days.

Understanding ERP

Enterprise Resource Planning (ERP) is a software that is used to help manage daily business activities. Activities that can be managed using ERP include—but are not limited to—bookkeeping, project management, and risk management and compliance.

Basically, ERP can be interpreted as the computerization of business operations using software. Therefore, this tool can be implemented by any company in any industry, whether large or small.

This system is the result of gradual development of MRP. The 1990s was the first time this system was embedded with features and functions that allowed companies to computerize other departments such as HR and finance. This development also allows this system to be implemented in other businesses outside the manufacturing industry.
ERP works using a database to monitor business operations that is updated continuously. The data overseen by ERP are the key resources of a business—capital, raw materials, and production capacity. This system also monitors everything related to orders, purchase orders, and employee salaries. The resulting data is then distributed to various company divisions.

MRP and ERP: Key Differences

Based on the definition of MRP and ERP above, the differences between these two systems are quite clear. MRP is an operational inventory management system, while ERP is a business operational program. This means that MRP only covers one part of business operations, while ERP covers business operations as a whole.

MRP was first developed as a system to assist inventory operations in the manufacturing industry. Therefore, its application is quite limited to this industry or to industries that require a regular inventory cycle.

On the other hand, ERP is indeed a development of MRP, but its application is much wider. Almost all companies from various industries can implement ERP.

Another difference is that MRP is ‘just’ a system, while ERP is software. This means that, although originally developed as a computer program, the principles of MRP can be executed and calculated manually.

Meanwhile, ERP was developed as software to help the company’s daily operations. Companies need an integrated computer system to implement ERP as a whole.

How important is the role of MRP and ERP for companies

As systems developed to help the company’s daily operations, both MRP and ERP have a very important role. How important its implementation is in companies varies from one another.

The Role of MRP for Companies

As previously explained, the implementation of MRP by companies plays a major role in production efficiency and inventory flow in and out. This efficiency will certainly have a positive impact on the company’s ability to meet consumer demand on time.

Proper implementation of MRP will replace manual processes with an integrated system. With this integrated system, it will be easier for companies to determine when and where the final product will be available.

The Role of ERP for Companies

At least, Implementing proper ERP will help companies with these three things:

  1. Drive optimal performance. The system will provide several options that companies can take based on calculations of data from aspects monitored by the system to improve the company’s operational performance.
  2. Accelerate operational impact. Employees will find it easier to take action and contribute to the company using data that is processed in an integrated manner between departments by the ERP system.
  3. Guarantee the company’s business prowess. ERP systems are designed to continue to grow with businesses and companies. Along the way, the system will adapt to the company’s needs based on trends, changes and threats to the market.


Both MRP and ERP are systems that have an important role in companies, especially those engaged in the manufacturing industry. Material Requirements Planning (MRP) plays an important role in optimising production flow. Meanwhile, Enterprise Resource Planning (ERP) helps companies operate and grow in general.

This is a brief explanation of the meaning of MRP and ERP and the importance of the role of these two systems for companies. Hope this helps!

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