MRP Software Or ERP Software, Which is Right For You?
You are the operator of a small to medium size manufacturing company. Your business has some maternity and you have systems in place and working. A business analysis reveals that your firm is facing some stagnation for the immediate future, so you begin to look for ways to optimize what you have. Software immediately comes to mind, as you currently use computers in your operation, but not necessarily in a cohesive and coordinated way.
As you begin your research, and begin contacting possible vendors, you notice some recurring buzz word-abbreviations; MRP, MRP II, and others. Lets explore some of these look at how you can determine if they are suitable for you. Lets begin with MRP, or Material Resource Planning. As the name implies, the function of this type of manufacturing software is to enable the business to have the materials on hand in a timely and efficient manner. This type of software can also be handily for a small to medium size company because the Bill of Material, the basic building block of MRP software can serve dual purpose as a shop router. Many systems include routers, but many less sophisticated companies, have managed with just the basics.
A major weakness of MRP software is that it did not function well or often at all for capacity planning. This led to the dynamic duo of the MRP system sheparded by a buyer/planner. While one of the main reasons for the purchase of Manufacturing Software was to realize labor reduction, MRP’s inherent weakness became a buyer/planners job security. This does however work well with some companies, so even though MRP software is not an all encompassing solution it may just work for you.
Next is MRP II, which grew out of MRP as an answer to the question of how to use MRP software to make other business decisions. These decisions included how to not only ensure materials were available on time, but how to capture manufacturing costs, how to account for the materials, and how to manage payment of materials. MRP II software was thus not materials focused software solution, but a big picture solution that piece by piece brought in the entire organization.
As can be expected, MRP II is also more labor and capital expensive to deploy. As with MRP software, there is still the basic core of setting up the Bill of Material, however, the bill of material and supporting systems require not only more labor hours to set up, but inputs from other disciplines as well. Accounting now gets a major piece of setting up financial systems. These are not limited to accounting, but also ties into manufacturing engineering on the floor, where accounting and manufacturing develop standard costs. These costs can then be used to drive cost improvements and it this synergy that justifies the increased costs of setting the MRP II software in place.