Enterprise resource planning (ERP) solutions have revolutionized the way businesses operate because one integrated system can manage more than a few functions. It hasn't always been this sophisticated, though. The earlier models could only handle a limited number of business processes, but over time ERP emerged into the complex technology that enterprises rely on today.
An ERP system is solution-based software that facilitates a range of business processes. These include planning, business management, marketing, sales, manufacturing, distribution, inventory management, project management and more. The system is designed to facilitate the flow of information between different departments, increasing efficiency within an organization.
During the 1960s, many businesses started to develop and implement centralized computing systems that allowed them to automate inventory processes. These were known as legacy systems. They helped firms to keep track of all their materials, preventing stock shortages.
Material requirement planning (MRP) systems came a decade later. These systems were used for planning a specified product or the parts needed for its development. The second MRP system was constructed in the 1980s and was able to optimize manufacturing processes. The MRP 2 could help with business functions such as project management, shop floor and distribution management, human resource, finance, and engineering.
ERP systems appeared on the scene during the late 1980s. These systems had all the benefits of MRP and MRP 2, but this new system had integrated functions. These new solutions were now capable of centralizing a number of business processes, such as manufacturing, distribution, inventory management, project management, human resources, accounting, finance, service maintenance, and transportation. These new systems enabled organizations to manage their business operations better than ever before.
ERP technology developed further in the 1990s and 2000s when vendors developed add-ons, like advanced planning and scheduling (APS), supply chain management (SCM) and customer relationship management (CRM).
The software solutions organizations use nowadays are far more advanced than the legacy system, but if it weren't for that invention, ERP probably wouldn't have progressed like it has.