History and Evolution of ERP
2005-03-08
ERP (Enterprise Resource Planning) is the evolution of Manufacturing Manufacturing Requirements Planning (MRP) II. From business perspective, ERP has expanded from coordination of manufacturing processes to the integration of enterprise-wide backend processes. From technological aspect, ERP has evolved from legacy implementation to more flexible tiered client-server architecture. The following table summarizes the evolution of ERP from 1960s to 1990s. Timeline
System
Description
1960s
Inventory Management & Control
Inventory Management and control is the combination of information technology and 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, and reporting inventory status.
1970s
Material Requirement Planning (MRP)
Materials Requirement Planning (MRP) utilizes software applications for scheduling production processes. MRP generates schedules for the operations and raw material purchases based on the production requirements of finished goods, the structure of the production system, the current inventories levels and the lot sizing procedure for each operation.
1980s
Manufacturing Requirements Planning (MRP II)
Manufacturing Requirements Planning or MRP utilizes software applications for coordinating manufacturing processes, from product planning, parts purchasing, inventory control to product distribution.
1990s
Enterprise Resource Planning (ERP)
Enterprise Resource Planning or ERP uses multi-module application software for improving the performance of the internal business processes. ERP systems often integrates business activities across functional departments, from product planning, parts purchasing, inventory control, product distribution, fulfillment, to order tracking. ERP software systems may include application modules for supporting marketing, finance, accounting and human resources.
http://www.sysoptima.com/erp/history_of_erp.php
History and Evolution of ERP ERP (Enterprise Resource Planning) is the evolution of Manufacturing Requirements Planning (MRP) II. From business perspective, ERP has expanded fro m coordination of manufacturing processes to the integration of enterprise-wide backend processes. From technological aspect, ERP has evolved from legacy implementation to more flexible tiered client-server architecture. The following table summarizes the evolution of ERP from 1960s to 1990s.
Timeline 1960s
System Inventory Management & Control
Description Inventory Management and control is the combination of information technology and 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, and reporting inventory status.
Timeline 1970s
System Material Requirement Planning (MRP)
Description Materials Requirement Planning (MRP) utilizes software applications f or scheduling production processes. MRP generates schedules for the operations and raw material purchases based on the production requirements of finished goods, the structure of the production system, the current inventories levels and the lot sizing procedure for each operation.
Timeline 1980s
System Manufacturing Requirements Planning (MRP II)
Description Manufacturing Requirements Planning or MRP utilizes software applications for coordinating manufacturing processes, from product planning, parts purchasing, inventory control to product distribution.
Timeline 1990s
System Enterprise Resource Planning (ERP)
Description Enterprise Resource Planning or ERP uses multi-module application software for improving the performance of the internal business processes. ERP systems often integrates business activities across functional departments, from
product planning, parts purchasing, inventory control, product distribution, fulfillment, to order tracking. ERP software systems may include application modules for supporting marketing, finance, accounting and human resources.
ERP History in Depth The evolution of the systems dates back to the year 1960 as per ERP history. The systems in the yesteryears were designed to assist the manufacturing process. The first software that was developed in this process happens to be MRP (material Resource Planning) in the year 1975.This was followed by another advanced version namely MRP2 which is the acronym for Manufacturing Resource planning. None of them yielded the benefit of ERP.
Drawback of MRP Systems These soft wares were helpful in manufacturing process. Their benefits did not extend to other Sectors. ERP was developed as multifaceted software that gradually stretched its limits into other areas like human resource, finance, marketing and so on. Moreover ERP offered operational convenience and large reduction in costs coupled with other benefits when compared with earlier soft wares. MRP solutions attained more fame. Infact it became a hallmark of the manufacturing setups. The MRP solutions did not render the expected results due to exorbitant costs and practical work problems.Inaddition it also called for a huge pool of technical expertise in terms of manpower and machines.
Advent of ERP ERP came into being with effect from 1990 though the fact remained that many people are of the opinion that ERP existed from the year 1960 in the form of MRP1 and MRP 2. IN Fact MRP II was more or less an ERP except for its inability to coordinate departments other than marketing. The whole period from the year 1960 is denoted as the age of ERP.The benefit of ERP was slowly felt from this stage onwards.
Companies Sap ERP history contains detailed study of SAP's association with ERP.Global ERP leader SAP technologies were established in the year 1972 by five engineers. This was followed by i nvention of larson software which was a built in model. It was meant to replace the market practice of designing soft wares as per individual business needs. Some more companies namely Oracle and Baan Corporation were included in the fray in 1970 and 1980's.This was followed by the invention of People soft and their software on Human Resource Management in the years 1987 and 1988 respectively. Baan Corporation specialized in rendering financial and management consultation services. Oracle was the first ever company ever to offer commercial and rel ational database management systems.
Operating Systems The operating systems that were in vogue during the period are important in understanding the history of ERP. JD Edwards Co Founder of moniker (in the year 1977) made use of IBM Systems/38.Baan Corporation utilized UNIX.
Market Information on Companies
Sap holds the privilege of being the world's largest enterprise company. JD Edwards and Oracle enjoy a whooping customer base of 4700(in 100 countries) and 41000 customers around the globe. People soft controls more than a half of the human resource market and has offices in many nations.
Web friendly While ERP is a technological innovation in itself its efficiency is multiplied by several times with the help of latest inventions. Nowadays ERP is tuned to make use of the internet. This is to make sure that the buyers anywhere can have access to the database of the seller by a mouse click and that too by sitting anywhere in the world. This has become the mantra in the 21st century. The latest ERP tool which is becoming the order of the day is ERPII which is discussed in detail as separate links in the website. SAP Erp History and ERP history are vital in understanding the origin of the subject matter. (Source: www.sysoptima.com and www.erpwire.com)
History of Enterprise Resource Planning Before ERP was introduced, the departments within an institution would each have their own computer networks. For instance, the Human Resources department would have their own network of computers, while the Financial department might have a separate network. Ads Each computer system would be comprised of information that was directly related to that department. The personal information the employees might be listed, and this would generally be combined with a reporting structure. The Financial department would be responsible for storing information that was related to the payroll of the employees, and it would also deal with the financial aspects of the company. Each department would be dependent on specific information that would allow them to communicate with each other. A number of processes would have to take place in order for information to be transferred from one department to another. In most cases, one department may not have been interested in the various aspects of another department. While this may have seemed logical at first, it gave rise to a number of problems. If the two departments didn't work together on specific issues, it could lead to complications that could disrupt the operations of the company, thus leading to a loss in profits or the productivity of employees. The introduction of ERP solved a number of these problems. It did this by taking the
data from multiple applications, and once this data was collected, it could make the organization operate more efficiently. A standard was created. The number of software packages that a company used could be greatly reduced. In addition to making the company more efficient, it also allowed the company to save money on the cost of software and frequent updates. To fully understand Enterprise Resource Planning, it is first important to understand the concept of Best Practices. When an ERP system was utilized by a company, the company had to decide if the software would be customized or if they would simply modify that existing procedures. The next important part of ERP is called implementation. In order for an ERP system to function properly, it must have a great deal of software written for it. Adding a complex system such as ERP to a company takes considerable resources. In most cases, a company would need to use programmers, analysts, and end users in order to make sure it functioned correctly. While the introduction of the Internet has greatly sped up this process, it can still take time to set up. If professionals are not used to set up the ERP system, the process can become exceptionally expensive. The costs involved with ERP has only allowed it to be adopted mostly by multinational corporations. However, it is possible for medium sized business to use it. If a company uses the services of a professional, and ERP system can be implemented in about six months. There are a number of similarities between ERP systems and logistics automation and supply chain maintenance. In some cases, these elements can be used to extend the capabilities of ERP. The process of setting up ERP is very important. In most cases, a company will have to hire an ERP vendor. Consultants are commonly used as well. The consultation process of ERP will generally be comprised of three categories, and these are top level architecture, process consulting, and technical consulting. Ads
The systems architect is the individual who will be responsible for dealing with the flow of data. The business consultant will analyze the existing processes of the company, and they will compare them ERP processes. This will modify the ERP system in a way that makes it useful to the organization. The technical consulting will handle the programming. The software will need to be altered in a way that
allows it to be useful for the company. A number of sources have stated that the most challenging part of ERP is customizing it to suit the needs of the organization that wishes to utilize it. Because of these challenges, it can be quite costly. A number of ERP systems available on the market today were not originally designed to be modified. This is why "best practices" must be used when the system is actually implemented. http://www.exforsys.com/tutorials/erp/history-of-enterprise-resource-planning.html Enterprise Resource Planning has evolved from Manufacturing Requirement Planning that was used to assist the manufacturing process. Manufacturing Requirement Planning or MRP was upgraded to MRP II and then came ERP. ERP offers more bene fits than both MRP and MRP II. The history and evolution of ERP came from the fact that the MRP software were not able to extend to other sectors. ERP was developed to cover areas like Marketing, Finance, Human Resource, et c. The MRP software had very high costs and required a lot of technical expertise. Thus ERP came into practice and could coordinate between the various departments of an o rganization other than only marketing. Many companies started their association with ERP like SAP, Oracle and Baan Corporation.
The history and evolution of ERP has increased its efficiency with the latest technologies. It has evolved from coordination of manufacturing processes to integration of enterprise wide back end processes. It has evolved from legacy implementation to more flexible tiered client server architecture. During the 1960s Inventory Management and Control system was used to maintain the level of stock in the warehouse by identifying inventory requirements, providing replenishment options and monitoring the usage.
During 1970s, Material Requirement Planning was used to generate operation schedules, structuring of production system and raw materials purchasing. Then came Manufacturing Requirement Planning II in the 1980s which was used for coordinating manufacturing processes. Enterprise Resource Planning or ERP came into usage in the 1990s which used the multi module application for enhancing the business' performance. It integrates different functional departments like product distribution, product planning, inventory control, etc in an organization.
The ERP system now provides customized services according to the requirement o f the customer. It has gone through a lot of evolution through the ye ars and has been modified to fit into the current mar ket trends. The popularity of ERP systems grew when t he big companies implemented the system and realized benefits. With the web based software now in the market, small and medium sized enterprises can also gain the benefits of the ERP system. It is cheaper now and more flexible than before allowing
many small companies to approach the ERP system. Also the time taken for implementing ERP has reduced and the implementation process has become easier than before.
The organizations are looking for need based applications and the latest tre nd of ERP is to be more flexible. The evolution of ERP can be seen from t he fact that it is using the latest technologies in the market. Web enabled technology aids the operations to be online for accessing from anywhere in the world. Wireless ERP has made it possible to share the data through the net. Open so urce ERP greatly decreases the costs of the heavy initial license fees and medication fees. The evolution of ERP has increased its scope from only big sized companies to small and medium sized companies too. It is more user friendly now and are looking to provide a complete solution to the company to achieve their goals. http://allnaturaltreatment.over-blog.com/article-history-and-evolution-of-erp-system-72279146.html
1.4 Evolution Of ERP ERP (Enterprise Resource Planning) is the evolution of Manufacturing Requirements Planning (MRP) II. From business perspective, ERP has expanded from coordination of manufacturing processes to the integration of enterprise-wide backend processes. From technological aspect, ERP has evolved from legacy implementation to more flexible tiered client-s erver architecture Table1.1 The Evolution Of ERP From 1960s To 1990s Timeline 1960s
1970s
1980s
2000s
System Inventory Management Control
Description Inventory Management and control is the combination of & information technology and 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, and reporting inventory status. Material Materials Requirement Planning (MRP) utilizes software Requirement applications for scheduling production processes. MRP Planning (MRP) generates schedules for the operations and raw material purchases based on the production requirements of finished goods, the structure of the production system, the current inventories levels and the lot sizing procedure for each operation. Manufacturing Manufacturing Requirements Planning or MRP utilizes software Requirements applications for coordinating manufacturing processes, from Planning (MRP II) product planning, parts purchasing, inventory control to product distribution. EnterpriseResource Enterprise Resource Planning or ERP uses multi-module Planning (ERP) application software for improving the performance of the internal business processes. ERP systems often integrates business activities across functional departments, from product
planning, parts purchasing, inventory control, product distribution, fulfillment, to order tracking. ERP software systems may include application modules for supporting marketing, finance, accounting and human resources http://www.fibre2fashion.com/industry-article/9/855/role-of-erp-in-textile-industries2.asp
Growth and Historical Evaluation of ERP
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Use of computer systems is a post second world war phenomenon. The first working computer was developed by two scientists at University of Manchester, UK. However, commercial applications of computer commenced during 1960s.
Pre ERP systems In the sixties, computers were bulky, noisy and without the facility of standard operating systems. The organizations used to develop computerized systems that were stand alone, t ailor made and without an integrated approach. The software development, in a sense was re-inventing wheel, as basic business process is similar for all organization in the same business sector. Due to this restrictive environment, Development, maintenance and modification cost became prohibitive. Deve loper ended up developing isolated and piece meal systems, even within an organization. Thus, a pay roll system, accounting system and inventory system were developed in isolation as per specific need of business units and were incompatible to each other.
MRP-Advent of ERP Stand alone systems, in vogue during sixties, were incapable of processing planning requirement of an enterprise encompassing production planning, procurement and inventory, which became an impediment in adopting Materials Requirement Planning (MRP). MRP was first adopted by IBM and J I Case (a tractor maker from USA) during late seventies, when integrated systems starte d taking shape. The basic idea of MRP was to assimilate planning and scheduling elements to the manufacturing process. The process of MRP was to plan and procure purchase requirements based on finished products, inventory on hand, allocated inventory and expected arrivals. Subsequently, it was
supplemented by Capacity Requirement planning (CRP) to create capacity plans of shop floors and sub=contractors.
There was continued development of MRP system during 1980s. The need moves beyond shop floor and MRP II was introduced incorporating planning element of distribution as well as forecasting requirement.
ERP Evolution ERP was introduced in late 1980 to integ rate other business functionalities not covered by MRP or MRP II. It is not confined to manufacturing only but covers all facets of organization such as:
Finance Human Resources Supply Chain warehouse management, and Project Management ERP development from software solution provider mainly emerged as a sequel of their MRP products. Some of the early solution providers are
SAP from Germany BaaN from Netherland JD Edwards from USA, and Lawson from USA Few vendors did not follow this course. Starting point of Oracle ERP was their accounting package whereas People-soft ERP evolved from their HR suite.
During 1990s, ERP products continued to evolve. Vendors added new functionalities, incorporated Graphic User/ Internet browser interface and brought o ut new versions of their products. Some solutions were found to be more suitable for a particular vertical such as discrete manufacturing, utility,
process industries, public sector and retail. Several vendors brought out reference models of their product, meaning that through pre-configuring basic and common data, a particular flavor of their product will be more compatible to the business need of a particular sector/ sub-sector.
Traditionally, the biggest purchaser of an ERP solution is fortune 500 companies. But, this market has since been saturated. Vendors are now looking to increase the ir presence in small and medium business sector. Due to fierce competition and financial crisis, there are also a number of takeover and mergers across ERP solution providers during early 2000 such as Oracle taking over People Soft, Infor taking over BaaN and Microsoft taking over Axapta.
Current trend ERP solutions, which were mostly, operating as a back end system, is now broadening its horizon. ERP vendors are extending their products to become Internet enabled. ERP extension products (mostly as an add on to their existing products) now provide solutions for Advanced Planning and Scheduling, Manufacturing Execution System, Advanced Business intelligence and Dashboards, Sales force automation, Product Lifecycle Management and Warehouse management.. Business to Businesses and Business to Commerce functionalities, as add on solution, is now getting seamlessly integrated with Back end, thus making it possible to bring e-commerce under the gambit of ERP. http://www.managementstudyguide.com/growth-and-historical-evaluation-of-erp.htm
