The first development of what might be termed as the foundation of ERP systems dates back to over a century ago. Ford Whitman Harris, an engineer, realized the challenges people faced in the production scheduling and came up with a solution called the economic order quantity (EOQ) in 1913.
This system was paper-based since computers weren’t developed or accessible. EOQ was used until 1964 when Toolmaker Black and Decker came up with an improved system – the material requirements planning (MRP).
MRP technology basically integrated the concepts of Ford Whitman’s creation into a mainframe computer to leverage on the computer’s efficiency. It was aimed at scheduling tasks relating to materials acquisition and use on the manufacturing end.
The MRP programmes helped in planning the purchase and delivery of goods. To reduce the costs of warehousing, inventory control packages were deployed to facilitate the flow of goods.
In this era, over 700 companies had joined the MRP bandwagon. However, these were large companies that could afford mainframes at the time. MRP systems were used to plan the product or parts requirements based on a master production schedule.
This era saw the upgrade of MRP programmes to MRP II (1983), which were more robust. The latter could handle more manufacturing tasks at a go. The major improvement came with the use of modules. These technologies eased manufacturing processes such as purchasing, materials billing, task scheduling, and management of business contracts.
MRP II also ushered in the ability to incorporate several resource and enterprise data management tasks in a single system. Therefore, companies enjoyed a boost in operational efficiency characterized by fewer waste products, better production planning, and less inventory.
The Onset of the Modern ERP Systems
The ERP acronym was first coined in the 1990s by the Gartner Group to mean Enterprise Resource Planning. This was a departure from the initial MRP, even though they shared several aspects. In addition to the MRP duties of production scheduling, ERP encompassed engineering, accounting, human relations, and project management.
However, it is important to note that not all the ERP packages during this period stemmed from a manufacturing-oriented foundation. Independent vendors developed their own systems from the ground up to focus on finance, accounting, maintenance, and human resource elements.
The rapid development of the ERP was possible due to the breakthrough in computing, particularly in the hardware and software sector. More companies adopted ERP to improve their core enterprise processes, data visibility, consistency, and accessibility.
In the mid-1990s, ERP developers added more modules to the systems to support more functions. This led to the inception of the extended ERP. Some of the new provisions included more robust planning and scheduling, online business solutions, customer relationship management, and supply chain management.
By 2000, nearly all businesses had access to computers, servers, and internal networks. High-level software evolved providing better security and storage for organizational data and resources. However, the major challenges with the modern ERP systems were the high initial cost as well as other accruing operational costs.
The need to have customized or in-house developed system was imminent since different organizations had different organizational structures. The cost of acquiring hardware equipment up front was at an all-time high owing to technological advancements.
Coding expenses, consultant fees, and training expenses also compounded to the high costs associated with ERP implementation. In spite of all these drawbacks, more companies expressed a willingness to acquire the ERP software having witnessed its power.
The Present ERP Solutions
The ERP technology of today has evolved to harness the power of the internet. ERP vendors have had a growing interest in designing web-based ERP solutions to meet demand caused by the growth of e-businesses. Online systems have given businesses an edge especially in the integration with external systems that might influence a business’ success. Aspects such as business intelligence and decision making based on customer behaviour have all been enhanced.
ERP systems now provide better functionality such as business analytics, support for emerging technologies, and data security solutions. Mobile supported software have also emerged providing a better reach to clients and suppliers. In addition to the production management roles, modern ERP avails in-built sophisticated reporting tools. They also offer marketing automation and warranty management services.
The Future of ERP
ERP software vendors are tirelessly working on software as a service (SaaS) or cloud ERP solutions. The effort is geared towards helping small organizations enjoy the tremendous benefits of cloud in business management.
Cloud will ensure that SMEs can migrate their data seamlessly, expand easily, and access high-end architecture that they otherwise couldn’t afford up front. It will guarantee a reduction in operational costs by eliminating expenses related to training of staff, software update, and maintenance. Therefore, the staff will be able to focus on other critical organizational tasks.
From this history, it is clear that ERP has come a long way. From managing manufacturing and supply chain to providing a go-to solution for enterprise data and resource management, ERP systems are crucial tools for all organizations across the globe.
Thanks to the ERP software, business managers can now track and manage all aspects of their enterprises from one system. SMEs and multinationals can now implement ERP solutions. Moreover, they can access ERP software across all platforms, mobile and pc alike.