The origins of ERP

ERP has its origins in MRP, which has been in business practice from the 1970s. The driver from MRP to ERP has been the application of information technology which served to make MRP an essential manufacturing business tool, in turn leading to the development of MRPII in the 1980s.

During this period computer power was developed rapidly. MRPII built on MRP by allowing the development of „what if?‟ scenarios could be developed, allowing for better planning and responses if unplanned situations occurred. A foundation stone of ERP systems was the theory of relational data management, in which data held in tables which are linked to each other through the use of key fields unique to each table and used to identify each record in that table.

An example of this is a customer number that uniquely identifies that customer in every transaction. Using the customer number in a sales order, credit note, or other transaction eliminates the need to copy all of a customer’s information (such as name, address, and post code) to every transaction. This significantly reduces the amount of data stored in a database. As a result this data structure has facilitated very fast and powerful reporting capabilities allowing companies to quickly and easily analyze historical data. Relational databases were a huge advance in the field of data management and were a significant improvement over previous data storage techniques.

This concept unfolded from order inventory management of materials to plant and personnel planning and distribution planning, which in turn became MRP II. This incorporated financial accounting and human resources management functions, distribution management functions and management accounting functions and came to globally cover all areas of enterprise and eventually came to be called ERP.

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