Describe the relationship between MRP and ERP

Managing inventory and scheduling works are very important for manufacturing companies. Firms that make products need to know clearly the amount of their inventory on hands, which materials do they need for the productions and in what amount from time to time before they can accept customer orders. Many firms fail or delay to deliver their products to their customers due to their inability to keep track of their inventory, set up appropriate schedules for their works, and/or order inadequate amount of materials for productions. Thanks to the development of technology, organizations now can do a better job at managing their inventory and scheduling their works with the use of enterprise resource planning (ERP) and material requirements planning (MRP). In this essay, I will explain what are ERP and MRP and the relationship between them.

            Enterprise resource planning (ERP) is business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources (Beal). It provides three main benefits for business (Stevenson & Chuong, 2014). First of all, ERP integrates financial data of a company into a single version, which makes it easy for the company’s manager to evaluate the performance of his/her firm. Second, ERP standardizes manufacturing processes and integrates computer systems into a single system, which helps to save time, increase productivity, and reduce headcount. Third, a company can standardize its human resource information by undertaking ERP. In this way, ERP helps to unify method for monitoring employee-working hours and align communication between employees and employers. Working will be difficult when data is scatter across the organization; ERP makes all the data of a company such as sales, services, supply chain management, human resource, and finance accessible in a single software solution. This joined-up system massively reduces errors and data duplication. Material requirements planning (MRP) is a subset of ERP for manufacturing needs that uses integrated production planning and inventory (Rouse). ERP consists of MRP and customer relationship management. MRP provides information about the production schedule, work orders, the amount of time and materials needed for productions and purchasing to ERP. ERP integrates all the information provided by MRP into a single database and shares it with other departments within the firm such as finance department, customer relationship department, and human resource department. Customer service representative uses the information provided by MRP to take orders from customers, while human resource employee processes the information from MRP to calculate employee-working hours or payroll. For finance department, it takes the information from MRP to calculate the amount of account receivable and the cost of the productions in order to determine the price of the firm’s product.

In conclusion, ERP and MRP have transformed modern manufacturing by increasing their efficiency in controlling inventory and scheduling works. ERP enables a company to coordinate and control every part of its business, while MRP ensures that materials and resources are available for products and production. MRP is a subsystem of ERP that provides useful information about work orders, inventory levels, material requirements and time needed to complete the production. ERP condenses data from MRP into a single database and shares it with customer service department, finance department, and human resource department. Not only do ERP and MRP increase organizational efficiency, but they also help to reduce the cost of production by increasing organizational productivity, decreasing production time and reducing headcount.

References

Beal, V. Webopedia. Retrieved 01 19, 2015, from Webopedia Web site:

http://www.webopedia.com/TERM/E/ERP.html

Stevenson, W. J., & Chuong, S. C. (2014). Operations Management. Singapore: McGraw-

Hill Education.

Rouse, M. TachTarget . Retrieved 01 19, 2015, from TechTarget Web site:

http://searchmanufacturingerp.techtarget.com/definition/Material-requirements-

planning-MRP