What Is ERP? Where Does This Term Come From and Can It Help My Business?

The purpose of this article is to give the reader an understanding of what an ERP system is and a bit of history on how it has evolved. Nearly all successful Texas manufacturers and distributors have installed or are in the process of installing an Enterprise Resource Planning system.

Well, the first step is to understand the definition of ERP: “Enterprise Resource Planning comprises of a commercial software package that promises the seamless integration of all the information flowing through the company – financial, accounting, human resources, supply chain and customer information” (Davenport, 1998). While there are numerous definitions, this one seems to hit the mark best for all intents and purposes.

Now that we have a clear definition of what ERP means, let us take a second and reflect on how this term came to be in our vocabulary. Perhaps the best way is to do a quick historical run down of its family tree:

  • 1960’s - Inventory Control Packages
  • 1970’s - Material Requirements Planning (MRP)
  • 1980’s - Manufacturing Resources Planning (MRP II)
  • 1990’s - Enterprise Resource Planning (ERP)
  • 2000’s - Extended ERP’s

In the 1960’s fledgling computing systems used specific programming such as COBOL, ALGOL and FORTRAN to automate their inventory control mechanisms. In the 1970’s this was improved to Material Requirements Planning programs based around the master parts and product schedules. In the 1980’s, as computer systems were improving by leaps and bounds, MRP evolved into Manufacturing Resource Planning (MRP II) which focused on optimizing manufacturing processes by synchronizing the materials with production requirements. MRP II also started integrating the distribution, financials and human resources portions of business software into one system.

By 1990, ERP was busting onto the scene because of the incredible growth and improvements in computing hardware, software and the all-important addition of the internet. Now ERP systems could integrate manufacturing, distribution, accounting, financials, human resources, project management, inventory control and executive-level reporting across numerous departments and world-wide locations. Since then ERP has even evolved into adding advanced planning and scheduling (APS), e-business solutions, supply chain management (SCM) and customer relationship management (CRM) modules, thus creating Extended ERP.

Now that we have the general evolution of ERP down, let us take a look at why it has become the backbone of modern successful businesses. Successful implementation of an ERP system requires a significant investment of not just capital but also planning and human resources to really analyze a company’s business process. At the center of this implementation resides the relational database, and a functioning ERP will be able to manage and access this data from numerous departments to improve nearly all segments of a company’s needs. See diagram below:

ERP Software Diagram

This diagram is a great example of excellent business process data flow and communication. Some of the advantages that a model like this brings to any growing business are listed below for your review.

  • Improved Data Access - achieved through an excellent DBMS, database management system, providing more reliable reporting.
  • Less Redundancy in Data and Operational Tasks - achieved by using a central database without multiple inputs.
  • Cost Reduction - achieved with saving time and allowing an enterprise level analysis of how things get done.
  • Very Adaptable - Changes in your business processes are easily integrated into your information dataflow. Adding a CRM or a SCM can vastly improve distribution and customer relations management.
  • Industry Scalable - achieved by allowing industry specific “add-ons” which are adaptable and customizable.
  • Excellent Support Structure - achieved by procuring your ERP system from a proven vendor that has experience in your industry and numerous professional implementations.

Find out more about ERP systems, Microsoft Dynamics GP, Managed Services and additional software solutions for business:

Custom Information Services of the Dallas, Fort Worth and Mid-Cities area is a certified Microsoft Dynamics GP Partner and has been implementing successful ERP systems since 1989. We would be happy to discuss your business processes and evaluate if you are ready for Enterprise Resource Planning.  You can reach our certified team of consultants and sales professionals at 817-640-0016 or via email at info@customis.com. We have been helping business implement technology since 1989 and even offer a FREE trial version of Dynamics GP.

by Custom Information Services

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