Enterprise Resource Planning (ERP) - A Brief History

Enterprise Resource Planning (ERP) came into existence in 1990s. ERP is coined by Gartner group. MRP and MRP II are antecedent of ERP. The MRP was developed by J. I. Case in partnership with IBM in 1960s. Initial EPP software focuses only on the manufacturing sector. At the beginning of the twentieth century, manufacturing units were concentrated on bulk production and minimisation of cost which increases the complexity of the manufacturing unit. Inventory management was a major concern. To tackle this issue, technology was used. Softwares came into the picture to help manufacturers tackle this problem. ERP software was initiated by the development of an inventory control package in the 1960s that  was used to measure reorder point, minimum inventory level & economic order point. The complete evolution of ERP is discussed below:

  • Inventory Control Packages (IC packages) - 1960s

This software was designed to mainly calculate the inventory requirements of a manufacturing unit. IC packages were basically used for measuring Inventory reorder point and economic order quantity (EQO). There are many drawbacks to this system. Since this system is big and clumsy therefore it requires huge space. A large number of technical staffs are required to operate the mainframe computers. These factors make this system very costly. 

  • Material Requirements Planning (MRP) - 1970s

MRP was used basically for production planning. It ensures the minimum inventory level in the unit, on-time production and delivery of goods and plans all other manufacturing activities. This system also has many drawbacks. It is a time consuming & costly software. Since this system is complicated, therefore, it is very difficult to operate.

  • Manufacturing Resources Planning (MRP II) - 1980s

MRP II is the modified and advanced version of MRP. It was developed in the 1980s. MRP deals with inventory and production planning while MRP II adds accounting & finance, procurement, sales and HR management features to the existing MRP. This software comes with a bundle of functionalities. 

  • Enterprise Resource Planning (ERP) - 1990s

ERP is much more advanced than MRP II. ERP is designed for all kinds of organisations. The purpose behind developing ERP was to provide a business solution to all sort of businesses which was uncovered in the previous systems. ERP includes CRM, service and support, payroll management, supply chain management etc. Implementation of this software in enterprises is a major challenge. Experienced and expert staffs are needed to operate and run this software which was limited at the time when it was introduced.

  • Web-based ERP (Extended ERP) - 2000s

It is an ERP software which is delivered on the internet. ERP I runs on the desktop while web-based ERP runs on the web browser.

  • Cloud-based ERP (SAAS) - 2010s

Cloud-based ERP also called as the software as a service. This software runs on the vendor’s server and you can access it through any web browser. Such software is subscription-based which could be taken on monthly or yearly basis while premise-based ERP software is purchased by paying a one-time license fee. You just have to incur recurring cost on updates and support services.

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