A Brief History of ERP – since 1960 and the future of ERP

Last updated on by Editorial Staff
History of ERP

This post explains the complete history of the ERP software system, the ERP evaluation path, and its future.

Even though understanding ERP is a little confusing, it is good to understand it for all businesses, especially manufacturing.

ERP software systems in manufacturing industries have proven effective and efficient.

The history of ERP dates back to 1960!

ERP (Enterprise Resource Planning) is the evolution of Manufacturing Resource Planning (MRP II).

Two aspects of the history of ERP

From a business perspective, ERP has expanded from coordinating manufacturing processes. In addition, it grew to the integration of enterprise-wide backend processes.

ERP has evolved from legacy implementation to a more flexible tiered client-server architecture from a technological aspect.

Evolution of ERP systems

Inventory Management & Control (the 1960s)

The history of ERP begins with inventory management and control.

In the 1960s, manufacturing industries found that they required a system that should manage, monitor, and control their inventory.

Inventory Management and control combine information technology and business processes to maintain the appropriate stock level in a warehouse.

The activities of inventory management include,

  • Identifying inventory requirements
  • Setting targets
  • Providing replenishment techniques and options
  • Monitoring item usages
  • Reconciling the inventory balances
  • Reporting inventory status

Material Requirements Planning (MRP)(the 1970s)

The next stage of the history of ERP is material requirements planning.

In the 1970s, material requirements planning evolved to meet the manufacturing industries’ needs.

Material requirements planning (MRP) utilizes software applications for scheduling production processes. MRP generates schedules for operations and raw material purchases.

Scheduling is based on,

  • Production requirements for finished goods
  • Structure of the production system
  • Current inventory levels
  • Lot-sizing procedure for each operation

Manufacturing Resource Planning (MRP II) (the 1980s)

The last stage of the history of ERP is manufacturing resource planning.

In the 1980s, vendors added more manufacturing processes to MRP to make the process easier and more accurate. And this new system is named manufacturing resource planning (MRP II).

Manufacturing Resource Planning or MRP II utilizes software applications, Applications for coordinating manufacturing processes. Processes from product planning, parts purchasing, and inventory control to product distribution.

Enterprise Resource Planning (ERP) (the 1990s)

History of ERP

For the first time in the 1990s, The Gartner Group used the term ERP.

Enterprise resource planning or ERP uses a multi-module application software system. Software for improving the performance of the internal business processes.

ERP systems often integrate business activities across functional departments.

Departments including,

  • Product planning.
  • Parts purchasing.
  • Inventory control.
  • Product distribution, fulfillment, to order tracking.

ERP software systems may include application modules for supporting,

During this period in the history of ERP, big corporations implemented it. However, most small and medium-scale businesses are left out due to the higher upfront costs.

History of ERP

Web Functionalities with Internet (ERP II) (the 2000s)

Interaction of ERP with other application suites is enabled in ERP II. An example is integrating with CRM systems.

Technological advancement accessing information using internet web-browsers and mobile devices was made possible.

ERP II adapted technological advancement with Services Oriented Architecture (SOA).

Cloud-based ERP (the 2010s)

Business applications are delivered as a Software as a Service (SaaS) model. Servers are deployed on the cloud and accessed with the rest APIs. Android, iOS, and browser applications are developed for delivering ERP software in the SaaS model.

It is helping businesses of all scales start using ERP systems since the upfront cost of cloud ERP systems is relatively minor.

Most of the prominent top ERP vendors are delivering services over the cloud.

Evolution of Open Source ERP solutions

Along with commercial vendors, open-source ERP systems are also evolved. These systems are mainly catering to the requirements of small and medium-scale businesses.

Since there is less upfront cost involved while implementing these systems, businesses with less budget could also afford it.

There is a surge in service providers who help implement and customize open source ERP solutions.

Difference between MRP and ERP

Difference between ERP and MRP

Here are some differences between MRP and ERP.

MRPERP
It means material requirement planningIt means enterprise resource planning
It is a solo softwareIt can integrate with other systems or software easily
You can integrate it with other software, but that is challenging. It combines with other software or modules without any difficulty.
It suits manufacturing industries.It suits all industries and huge enterprises because it can fulfill the requirements of all the departments of large industries with its modules.
Types of its users are minimum because only the manufacturing department uses it. Types of its users are maximum with extended users in different departments.
It is less expensive It is more expensive

What is the significant difference between open source ERP and commercial ERP?

The significant difference between open source ERP and commercial ERP is source code. In an open-source ERP system, source code is publicly accessible. But in a cloud system, you have to pay to get the source code license.

Open Source ERPCommercial ERP
You can customize the code, rewrite the code, and generate a new code version.You can not edit the code.
It suites industries with less required functionalitiesIt suits big sectors that need a wide variety of features.
It is entirely free. You need to pay only for services.Upfront costs and subscription charges are included.

Future of ERP systems

Compared with the history of ERP, its future ERP trends are more dynamic due to the advancement in technology.

  • Due to the reduction of computation and data storage costs, collecting every minute detail of business events is possible. In addition, it opens up the possibility of extensive data analysis and advanced reporting.
  • Machine learning can help suggest better business decisions based on previous data and industry benchmarks.
  • Automation of data-driven decision-making will take the front seat with the help of artificial intelligence.
  • For business transactions between multiple parties, they are establishing data integrity with blockchain technology.
  • To avoid frictions due to physical proximity, virtual reality for better interactions.
  • Jobsite management using 5 G-enabled smartphones
  • Internet of things (IoT) for better data exchange between human-to-machine and machine-to-machine

The advancement in technology has always accompanied the history of ERP. It continues to boost business growth.

With SaaS-based cloud ERP systems, more and more companies can start using enterprise resource planning solutions in their business operations.

Conclusion

ERP system evolved to fulfill the requirement of the manufacturing industry. It is vital for all types of business with its broad and flexible features.

Small, medium and enterprise industries require ERP software systems to get centralized, real-time data.