What is ERP and how does it work?
ERP can be a confusing and overwhelming subject, especially with the vast amount of enterprise resource planning information available on the web. However, to fully understand how ERP can transform your business it is important to understand what ERP is and how it works.
An ERP system refers to software that is integrated across multiple aspects of the processes of a business. The main aim of an enterprise resource planning system is to share information across all departments in a business, this is all done in real-time and the data is only captured once. This allows businesses to make more accurate and up to date decisions, as well as enabling employees to work more efficiently.
Below are a few areas of the business where ERP can be used:
- Inventory (Stock) Control
- Finance & Administration
- SRM(Supply chain management)
- Business Intelligence (BI)
The Start Of ERP
ERP can be traced all the way back to the 1960s. During the industrial revolution, people started to develop and make use of machinery to automate and build processes for mass production. Thus forcing organisations to develop simple software and hardware to increase the efficiency in different business departments. Tools were implemented such as mechanical calculators to minimise the difficulty of tasks, which lead to the development of enterprise resource planning software.
ERP has continued to evolve from the 1960s to today. This has allowed businesses to adapt, become more efficient, and solve business issues with speed.
1960 – Inventory Control Systems
In the ‘60s we saw the focus on factory output increase and computing solutions were made. Due to the evolvement of these systems applications that handled inventory management and control were introduced. Thus starting the growth and evolution of ERP.
1970 – Materials Requirements Planning
The Materials Requirements Planning(MRP) software was developed in the 1970s, this software was designed to help plan the manufacturing, purchasing, and delivery of raw materials. When these systems were built they ran on huge mainframes and were highly expensive, leaving only the large companies able to use the MRP software. This era also saw the first launch of a financial accounting system, allowing organisations to start improving their financial departments.
1980 – Manufacturing Resources Planning
In the 1980s there was a need for the MRP system to have more capabilities, thus creating the development of Manufacturing Resources Planning (MRP II). This system now included additional data, such as Financial and Employee needs. The MRP II system was designed to process and integrate data to allow businesses to start making effective decisions based on a variety of data. The Materials Requirement Planning and Manufacturing Resources Planning software were both predecessors to Enterprise Resource Planning(ERP) which was first used in 1990.
1990 – Enterprise Resource Planning
ERP that was used in the 1990s was able to deal with other business needs such as engineering, project management, finance, accounting, and HR. The approach for these ERP systems were modular applications with advanced features added, all ERP systems in the early 90’s worked on an on-premise module. In the late ‘90s, an ERP system was created that was not on-premise but delivered over the internet, that worked across the business functions.
2000 – Enhanced ERP Systems
In the 2000s ERP II was established as new internet software that gave real-time access to ERP solutions. With this new software came access to other functionality outside of the business, such as customer relationship management, supply chain management, and more. We also saw the evolution of cloud-based ERP, creating a solution for small businesses to start using Enterprise Resource Planning solutions as they have a lower upfront cost.
ERP systems continue to evolve and develop improvements to their functionality allowing businesses to continue to collect better data, integrate more data, and make more intelligent business decisions. We also continue to hear more talk of cloud ERP and the functionality it brings to small and large organisations.
What’s Next For ERP Systems
Heading into the next season, we can only but wait to see what the 2020’s hold for the ERP Systems. All we can say for certain is that ERP software solutions can increase efficiency, decrease costs, improve productivity and streamline the process for any business.