Question

What is MRP? What is ERP? How do they relate to one another?

Answer 1

Material requirement planning refers to the technique to calculate the requirements for materials and is used for multilevel planning. It has fixed lead times and the work is loaded into buckets of infinite size. These buckets are nothing but the time units and works are being loaded into these buckets without taking into consideration the capacity.

MRP system focus on meeting three objectives. They are: -

• to make sure material is available for production.
• to make sure products are available for delivery.
• focus on maintaining the lowest possible inventory.

The three main sources from where the information input comes into MRP system are: -

• A bill of material
• A master schedule
• An inventory records file.

The requirements of effective MRP include: -

• Computer and software program essential for computing and maintaining records.
• Master schedule, bill of requirement and inventory records.
• Data should be filed with fairness.

ERP (enterprise resource planning) is the software which helps in managing and connecting different department, processes or operations both internally and externally into a single computer which can give advantage to all the departments in a long run. The ERP system work efficiently by removing the errors made by human, eliminate the unnecessary cost etc.

The primary users of ERP system are: -

• Accounting - ERP helps the account department to find out who needs to pay how much.
• Finance - ERP provide information to finance department about how they can use finance activities of their company.
• Logistics - ERP helps in providing information about the location of goods
• Production - ERP helps in providing information to all the department about the quantity of goods produced and the cost.

MRP and ERP are related in following ways: -

• Both focus on minimizing bottlenecks in production due to shortage of material.
• focus on maintaining optimal level of inventory
• maintain minimum level of work in progress.
• Both focus on maintaining the right material in right place at right time and in optimal quantity.