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A look at the history of modern ERP systems

Once reserved for large multinational businesses with huge IT budgets and in-house IT expertise to match, Enterprise Resource Planning (ERP) solutions are now an integral part of the business landscape for organizations of all shapes and sizes. Their ability to streamline business processes while enabling the efficient management of operations has made ERP solutions a vital business tool. They often help to secure that all-important competitive advantage in an increasingly crowded and fast-moving marketplace. But what actually does an ERP solution do and how have they evolved to become as effective as they are today? Find out as we delve into the history of the humble ERP system.

Manufacturing beginnings of ERP

The ERP solutions we’re familiar with today can trace their roots back to the 1960s. The rapid increase in modern factory production meant businesses needed to find new and effective ways to manage production and balance it with customer demand. This happened to coincide with the spread of computing across the business world. The product of this was Materials Requirements Planning (MRP) systems, which helped plan manufacturing, purchasing and delivery, keeping stock levels down and minimizing the amount of money tied-up in inventory. Initially, and through the 1970s, MRP solutions were only really affordable for larger businesses. This would change however, as IT in general developed and became more accessible.

The 1980s saw the development of MRP II. This updated system had the addition of more manufacturing processes and increased capabilities. But it wasn’t until the 1990s that Gartner first used the term ‘ERP’ to describe the next stage in MRP’s evolution. MRP solutions were extending to encompass other business functions - typically those regarded as ‘back office’ processes such as finance and accounting, HR, project management and engineering. This lead Gartner to use the term ‘Enterprise Resource Planning’, as these solutions had more of a general appeal and now looked after so much more than manufacturing.

By the mid-90s, ERP solutions were available from major suppliers, helping businesses to manage core business functions. But, again it was typically only larger organizations that were investing in such solutions. This all changed with the looming threat of the Y2K bug, with many businesses taking the opportunity to update legacy systems with a view to mitigating against potential Y2K chaos by replacing their incumbent systems completely. For many businesses, this meant investing in ERP systems, thus helping to secure ERP’s wider presence in businesses across the world.

ERP evolution

The evolution of ERP definitely hasn't stood still, with suppliers continually developing their ERP offerings to meet the ever-changing demands of a global economy. The 2000s saw the emergence of what Gartner describes as ERP II, with the internet at their very heart providing real-time ERP access right across the business. ERP systems began to extend outside of individual businesses, with increased functionality that enabled the solutions to integrate with external systems, increasing ERP’s supply chain management and CRM capabilities considerably.

The ERP solutions of today are even more advanced, with web-based remote access via a plethora of mobile devices now standard practice. The availability of cloud-based, SaaS model solutions have increased the uptake of ERP further still, fueling the growth of the ERP sector by increasing both the affordability and accessibility of available solutions. This means that there really is an ERP solution for everyone.

Benefitting from intelligent ERP

Modern ERP systems are flexible, powerful and scalable - providing a real-time tool that runs a single, shared database of information for the entire organization. By addressing manufacturing, supply chain, financial management, marketing automation, and CRM, (to name just a few core business functions) current ERP solutions integrate processes right across the business. They streamline these processes and break down barriers between business units. The addition of advanced reporting and Business Intelligence (BI) has made ERP systems more powerful than ever before. Not only providing instant access to vital business-wide data, but now furnishing the entire business with in-depth business insight. Insight that underpins rapid, robust decision-making for the ultimate in business agility.

At their most basic level, ERP solutions unite the various processes that are essential for running a business. But they are actually so much more than this. Today, the right ERP solution can mean the difference between success and failure, optimizing business efficiency and laying the solid foundations for successful business growth in our fast-paced digital economy.

For more information on how an intelligent ERP system could make the difference to your business, get in touch with Sapphire Systems.

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