The history of ERP dated 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 the coordination of manufacturing processes. It expanded to the integration of enterprise-wide backend processes.

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

Inventory Management & Control (the 1960s)

Inventory Management and control is a combination of information technology and business processes, business processes of maintaining the appropriate level of stock 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 Requirement Planning (MRP)(the 1970s)

Material requirement 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)

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

Enterprise Resource Planning (ERP) (the 1990s)

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,

  • Marketing.
  • Finance.
  • Accounting.
  • Human resources.

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

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 advancementAccessing information using internet web-browsers and mobile devices was made possible.

Technological advancement with Services Oriented Architecture (SOA) was adapted.

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 rest APIs. Android, iOS, and browser applications are developed for delivering ERP software in the SaaS model. It is helping businesses of all scales to start using ERP system since the upfront cost of cloud ERP systems are relatively less.

Most of the prominent vendors are delivering services with cloud ERP systems.

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 in implementing and customizing open source ERP solutions.

Future of ERP systems

In comparison with the history of ERP, the future of it is more dynamic due to the advancement in technology.

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

The advancement in technology 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.


Subscribe to our Email Newsletter