06 Jan The history of ERP systems- from the beginning
The history of ERP systems started from calculating machines in the 1940s. It has evolved into the highly capable solutions that we see today.
How it began
The advent of early ERP systems began with early attempts at using calculating machines for business in the 1940s. The focus on factory output increased and computing solutions were created in the 1960s. In the 1960s, applications that handled inventory management and control were introduced. Enterprise Resource Planning (ERP) systems were born in infancy in the early 1960s. It was a joint effort between J.I. Case, the manufacturer of tractors and other construction machinery, and their IT partner IBM. This further led to the creation of software known as Materials Requirements Planning (MRP). MRP in the 1970s helped plan raw material requirements for manufacturing, purchasing and delivery.
The Early Days in the history of ERP
By 1975, MRP software was running in hundreds of large companies though it was only affordable for the larger firms. The system ran on huge mainframe computers that were very expensive though their computing power was not comparable even to some of the portable computers of today.
In 1972, the firm SAP was started in Germany. The company initials stood for “Systems, Applications & Products”. SAP aimed to create business software that worked in real-time. This was path-breaking in an era of reel-to-reel tapes and punch cards. SAP launched its first financial accounting system in 1973.
In the 1980s, MRP evolved to what many termed MRP II or Manufacturing Resource Planning by adding more manufacturing processes and capabilities in order to manage as a one-stop production planning solution.
The term ERP system is first used
The term ERP – Enterprise Resource Planning was first used in the 1990s. It was able to deal with other business functions like engineering, finance and accounting, HR and project management etc. The approach was modular applications with advanced features. All the systems in the 1990s used a legacy on-premise model until Netsuite came into being in 1996. Netsuite created an ERP system that worked across the business functions of a company but was not on-premise and was delivered over the internet.
In 2000, the Gartner Group defined ERP II as internet-enabled software that gave real-time access to the ERP solution. It also provided functionalities outside of the business like supply chain management, customer relationship management (CRM) and business intelligence.
The Cloud appears in the history of ERP
After 2005 or so, the trend has turned towards cloud software systems and moved away from traditional client servers models. Cloud ERP systems provided comparable functionalities to on-premise ERP at a much lower cost. They were attractive especially for small and mid-sized businesses.
They now have remote, web-based access via advanced apps that run even on mobile devices. Today’s Cloud ERP systems cover every necessary aspect of business. They have advanced reporting, analytics, business intelligence tools and functionalities. Cloud ERP is also as secure, if not more so than legacy ERP solutions. The future will see the integration of Cloud ERP with IoT, IoE, social media and even greater security competence.
How Do ERP Systems Work?
There are a large number of available software solutions on the market for a wide range of processes. Whatever your business is, there’s likely already a software solution out there that meets the specific demands of your industry. One solution that companies of all sizes tend to purchase is ERP software. ERP stands for enterprise resource planning. But what exactly does this term mean, and how do ERP systems work? Read on to learn more about what exactly ERP entails, basic features of the software, installation and implementation.
What Exactly Does Enterprise Resource Planning Mean?
You should think of enterprise resource planning software as a tool that maintains a database of information related to business processes anywhere from human resources to customer relationship management. It’s a lot cooler than just a database though — many ERP solutions allow for the automation and integration of business processes, therefore reducing the amount of manual labour that your team has to perform.
For example, an ERP supply chain solution might receive a customer order and then automatically send that information to the distribution centre that is most efficiently positioned to complete the order promptly. If you’ve ever noticed that the return address on packages that you receive from the same vendor isn’t always the same, you have likely seen the result of this technology firsthand. Depending on the ERP solution that you select, your software may be able to look at inventory levels, shipment times and other factors to decide which distribution centre would be most productive and cost-effective in completing an order.
In general, ERP uses a centralized database for various business processes to reduce manual labour and to simplify existing business workflows. ERP systems typically contain dashboards where users can look at real-time data collected from all across the business to measure productivity and profitability.
Without ERP software, data is siloed by department and can be difficult to access across a company. By using an ERP, data from multiple departments can be easily shared and visualized across an organization. This wealth of information and simplification can assist in the development of business goals and reduce the amount of time that your employees spend on tasks that could be automated.