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Submitted By:

Roll No. 55,

5th Semester,
Department of IT


What do you understand by Enterprise

Resource Planning (ERP)?
Explain Material Requirement Planning (MRP)
and closed loop planning.

Definition of Enterprise Resource Planning

ERP is defined as an Integrated Computer based
planning technique used in Organizations and
Enterprises for management and resource planning.
Resources here mean both internal and external
resources of an organization. Various resources of an
organization can include financial resource, tangible
resource, human resource and also various material
requirements. ERP can also be defined as an application
and software architecture that facilitates Information
flows between various business functions inside and
outside of an organization. It consolidates business
environment into a uniform system environment.
Basically what ERP systems do is that it integrates and
automates processes within an entire organization
regardless of the organization’s behaviour.
A traditional definition of ERP as given by APICS –
The Educational Society for Resource Management is
given below-

‘ERP is a method for effective planning and control of

all resources needed to take, make, ship and account
for customer orders in a manufacturing, distribution or
service company.’

ERP are used in various Industries and organizations

like manufacturing, distribution, transportation,
education, healthcare, banking and others.
ERP delivers a single database that contains all data
for the various software modules. It typically addresses
areas such as:


Engineering, bills of materials, scheduling,

capacity, workflow management, quality control,

cost management, manufacturing process,
manufacturing projects and manufacturing flow.

Supply chain management:

Order to cash, inventory, order entry,

purchasing, product configuration, supply chain
planning, supplier scheduling, inspection of
goods, claim processing and commission


General ledger, cash management, accounts

payable, accounts receivable, fixed assets.

Project management:

Billing, time and expense, performance units,

activity management.

Human resources:

Human resources, payroll, training, time and

attendance, roistering, benefits.

Advantages of ERP:

1. Ease of Use.
2. General Purpose.
3. Totally Integrated System.
4. Readymade solutions for most of the Problems.
5. Integration of all functions already established.
6. Dependency on Human Resources eliminated.
7. Suppliers and customers can do online

Materials Requirement Planning

Management resource planning is basically

a planning tool, which is based on sales forecast used
in the production schedule. Whether production
schedule is based on historical past sales data or
market forecast, it takes into account the changes in
the demand for the end-products.
The idea of MRP is not entirely new. It was
developed in the 1970’s and used before for job-lot
production or custom – build order. However with the
advent of Computers and Information Technology the
availability of quick information and data processing is
now facilitated.
Basically MRP performs the following five

1. It keeps track of a computerised Inventory Control.

2. It manages an efficient Production Planning
3. Management Information system.
4. Manufacturing Control System.
5. Time-phasing of requirements using posted
average lead times.
The demand for the end-products is
independent as also some service parts and some
service parts and some other higher order assemblies
sold direct to customers. Other requirements of
materials, components and parts have dependent
demands based on end-products, which are
quantitatively expressed in the production schedule.
In MRP, safety stock at the item level
disappears and the ‘order quantity formula’ which
assumed a fairly constant demand, with some minor

fluctuations, need not be calculated for discrete
demands for most of the dependant demand inventory
The recognition of the fact that ‘time’ is a
more important element with respect to delivery and
materials availability as per schedule rather than
quantity, gives this planning tool a new meaning
eliminating carrying cost altogether.

Master Inventory
Product Structure Production master
File Schedule file

Materials requirement

Manufacturing Various
Orders Purchase Reports

Fig. - Overview of the MRP System

Advantages of Material Resource Planning:

1. It reduces inventory levels.

2. It reduces Component shortages.

3. Improves Shipping Performance and Customer
4. Productivity and Production levels increase.
5. Reduces Manufacturing Costs and Lead Times.
6. Simplified and accurate Scheduling.
7. Higher Production quality.
8. Communication Levels Increase.