Evolution ERP systems have passed through: complete guide

As resource management systems have been evolving, the need to optimize production management for manufacturing businesses has become essential. To resolve this problem, American Society for Production and Inventory Control developed a general methodology for operating enterprise production resources. This system is called MRP (Material Resource Planning, or Manufacturing Resource Planning). Its history began in early 1970s, but it was still a basic solution, as it didn’t take into account such vital aspects of enterprise resource planning, such as production capacities utilization, workforce planning, and so on, which led to development of MRP II, the second generation of solutions which uses MRP methodology. 

The main purpose of new gen solutions was to provide easy management and planning for production activities, and also effective financial management. MRP II didn’t become a full-fledged production resource planning solution, but it was its predecessor. This made the development of modern ERP (Enterprise Resource Planning) solutions possible, which became a single databases which contain all information about enterprise activities, both internal and external, including supply chain management, production planning, manufacturing processes, inventory management, financial operations, data analytics and human resources. Evolution ERP system became the main solution for enterprises in manufacturing industry, providing deep insights into material requirements, business intelligence, basic inventory control, production processes, real-time data monitoring, project management, improved data accuracy, and overall control over business activities. 

Evolution ERP system: a corporate standard for information systems

History of ERP system as a successor of MRP systems and one of modern business applocations began in 1990s, when MRP II class systems were integrated with FRP (Financial Requirements Planning) systems, providing a new type of solution that is more universal and has broader capabilities than its both predecessors. Thus, ERP as a business management software was introduced, and it became an industry standard solution even though it is still a kind of solution that has not as long history as some of other fundamental business systems. ERP solution eliminates the main issue of its legacy competitors – there is no more need to transfer data between different systems, and it also makes data available for every responsible employee in the organization. There are two types of ERP software – inbox and cloud-based. They differ by the type of infrastructure solution – there are on-premises systems and cloud business software systems, not by functionality, but yet some cloud solutions offer more features. 

The main objective of ERP software is to make decision-making easier and data-driven, optimize business processes, and make resource utilization more efficient. ERP systems covers numerous business processes – if not all – including customer relationship management, finances, supplies, workforce management, manufacturing, inventory management, and so on.

Here is the list of main criteria you have to look at when choosing such a solution:

  • Compliance of the solution with your current business requirements, including the wide range of critical business functions it helps to optimize;
  • Terms and costs of the setup, especially for on-premises solution;
  • Access management, and also the ease of use for employees, adaptability and user-friendly interface;
  • Integrations and customization options, Artificial Intelligence integrations;
  • Scalability and its costs;
  • Information security;
  • Customer support conditions.

ERP II resource management system

As the time passed by, developers made a huge effort to improve existing ERP software solutions and this began the new chapter of the history – ERP II. As world is changing towards simplification of interactions, data accessibility and total automation, new solutions aimed at providing these options for enterprises to ensure flexibility and ability to quickly adapt to market changes.

In other words, ERP II integrates functionality of SCM (Supply Chain Management) and CRM (Customer Relationship Management) software in it, providing also numerous options for employees to access internal data – through knowledge bases and other features.

ERP II has its goal to automate most internal and external business processes and operations, easing the cooperation between departments inside and outside the organization, supply chains, and clients. ERP II also has functionality to enhance financial management, accounting, prodcution, inventory management, workforce planning, scheduling, logistics, and so on.

Evolution of ERP Towards Cloud Solutions

The contemporary landscape of cloud technology reflects a burgeoning preference for ERP solutions in the cloud, with these systems consolidating their foothold significantly.

Traditional on-premises ERP solutions are characterized by workstation licensing, involving the purchase and deployment of software onto the company’s servers. Additionally, a per-employee fee is levied. This approach suits large organizations capable of autonomously managing their infrastructure and software, overseeing equipment performance, networks, and providing comprehensive services. While it ensures minimal risk of information leakage, it also poses a challenge during regulatory inspections as all data is confined to the enterprise, potentially accessible by government agencies.

In contrast, cloud-based ERP solutions operate on remote servers, either in a distant location or even in another country. This liberates companies from unnecessary concerns related to maintenance and security.

Locally installed ERP programs at the enterprise level demand substantial upfront investments for equipment purchase and infrastructure deployment. Furthermore, such solutions entail ongoing operational costs. In cases where a company lacks an adept team of programmers and system administrators, additional funds must be allocated for hiring or training new personnel to manage these business operations, ensuring the stability of core business functions.

For ERP programs utilizing cloud technology, the initial costs are considerably lower as there is no need to invest in proprietary hardware. Instead, the focus shifts to configuring the software and establishing network-based operations. Server hardware maintenance and performance become the responsibility of the cloud service provider, leading to significant cost reductions. This approach presents an ideal solution for diverse business models, allowing companies to redirect resources towards business development and growth.

History Enterprise Resource Planning solutions have isn’t long, but it is bright, and we can conclude that the future is on the side of cloud ERP solutions.