Even though understanding ERP is little confusing, but it is good to understand it for all the business especially for the manufacturing industry. Because ERP software system has a direct connection with the manufacturing industry.
The article explains the complete history of the ERP software system, its evaluation path, and its future.
The history of ERP dated back to 1960!
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)
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 is a combination of information technology and business processes and business processes of maintaining 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 Requirement Planning (MRP)(the 1970s)
The next stage of the history of ERP is material requirement planning.
In the 1970s material requirement planning is evolved to meet the manufacturing industries’ requirements.
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)
The last stage of the history of ERP is manufacturing resource planning.
In the 1980s some more manufacturing processes are added to MRP to make the process more easy and 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, inventory control to product distribution.
Enterprise Resource Planning (ERP) (the 1990s)
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.
- Product planning.
- Parts purchasing.
- Inventory control.
- Product distribution, fulfillment, to order tracking.
ERP software systems may include application modules for supporting,
- 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.
Difference between MRP and ERP
Here are some differences between MRP and ERP.
- MRP means material requirement planning ERP means enterprise resource planning
- MRP is a solo software but ERP software can integrate with other systems or software easily.
- You can integrate the MRP software with other software but it is very difficult. ERP systems combine with other software or modules without any difficulty.
- MRP suits manufacturing industries whereas ERP suits all types of industries, especially large enterprises because it can fulfill the requirements of all the departments of large industries with its modules.
- Types of MRP users are minimum because only one department that is the manufacturing department uses it. But types of ERP users are maximum with extended users in different departments.
- ERP is more expensive whereas MRP is less expensive.
Difference between open source ERP and cloud ERP
What is the major difference between open source ERP and cloud ERP?
The major difference between open source ERP and cloud 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 license of source code.
- In open source ERP, you can customize the code, rewrite the code, and generate a new version of the code. But in cloud ERP, you can not edit the code.
- Open source ERP suites industries with less required functionalities. Cloud ERP suits big industries that require a wide variety of features.
- Open source ERP is fully free and for cloud ERP subscription charges are there.
Future of ERP systems
In comparison with the history of ERP, its future is more dynamic due to the advancement in technology.
- Due to the reduction of computation cost and data storage cost, collecting every minute detail 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 5 G-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.
ERP system evolved to fulfill the requirement of the manufacturing industry. Now it is vital for all types of business with its broad and flexible features.
All types of industries like small, medium, and enterprises require ERP software systems to get centralized, real-time data.