ERP: Through the Decades. (2024)

An enterprise resource planning (ERP) system is the key to integrating critical businessfunctions across an organization. The widespread growth of ERP system adoption illustratesthe importance of ERP to successful businesses.

ERP has become part of the standard businesstechnology lexicon. The history of ERP systems is longer than you mightthink—they’ve beenaround for about 60 years. But there have been several generations and many names for ERPsystems over that stretch.

Brief History of ERP

ERP history started with material requirements planning (MRP)systems in the 1960s, when J.I. Case, a manufacturer of tractor and construction machinery,worked with IBM to develop what is believed to be the first MRP system. Thereafter, largemanufacturers built these MRP solutions themselves.

While they were expensive to create, required a team of experts to maintain and took up a lotof space, early MRP systems enabled businesses to track inventory and production. Thathelped manufacturers manage raw materials procurement and delivery of product to the factoryso they could better plan production runs.

Although adoption of MRP systems gained traction in the 1970s, the technology remainedlimited to large companies that had the budgets and resources for in-house development.Eventually several large software providers, including Oracle and JD Edwards, set out tomake this software accessible to more businesses.

History of ERP in manufacturing: The ‘80s marked a milestone in thehistoryof ERPsystems when the first manufacturing resource planning (MRP II) systems appeared.These more sophisticated solutions supported manufacturing processes beyond inventory andraw materials procurement. MRP II systems allowed the various departments involved inmanufacturing to coordinate, and they had more advanced production scheduling capabilities.

It wasn’t long until other industries realized that manufacturing firms were ontosomething.

Evolution of ERP Systems

By 1990, research firm Gartner coined the term “enterprise resource planning.”The new namerecognized that many businesses—not just manufacturing—were now using thistechnology toincrease the efficiency of their entire operations.

This is when ERP systemstook on their current identity: a unified database for information from across the company.ERP systems brought in other business functions, like accounting, sales, engineering andhuman resources (HR), to serve as a single source of accurate data for all employees.

ERP systems continued to evolve throughout the ’90s. One major breakthrough was theadvent ofcloud ERP, first offered by NetSuite in 1998. Withcloud ERP, widely seen as an improvement over on-premises systems, businesses could accesscritical business data through the web from any device with an internet connection. Cloudsolutions meant companies no longer needed to purchase and maintain hardware, reducing theneed for IT staffers and leading to easier implementations.

This cloud model made ERP systems, once limited to enterprises, accessible to smallercompanies that lacked the capital to launch and support a resource-intensive on-premisessolution. Small and midsize businesses across industries could enjoy the same benefits astheir larger counterparts, including automated processes, improved data accuracy and greaterefficiency.

In 2000, Gartner introduced the idea of ERP II to refer to internet-enabled systems thatcould pull data from other sources, including front-office applications, like customer relationshipmanagement (CRM), ecommerce and marketing automation, and back-end applications likesupply chain management (SCM) and human capital management (HCM).

This was a significant advance because the more information that feeds into the ERP system,the easier it is to identify and resolve issues and capitalize on opportunities forimprovement.

Today, leading ERP systems are vast repositories of information able to generate reports thatcan spotlight the performance of every aspect of the business, from sales and marketing toproduct development to HR and operations. There are countless applications available,designed for different industries, business models and challenges, and ERP acts as commandcentral for what can be a vast network of software.

Future of ERP

Major technology trends, like artificial intelligence (AI) and the internet of things (IoT),will shape the future of ERP systems. Nearer term, ERP solutions can take advantage ofmachine learning—a subset of AI where a system learns to identify patterns in data todrawconclusions—to eliminate manual tasks and predict future business trends. Machinelearningassimilates new data and feedback to become smarter and more effective over time.

Machine learning requires a large volume of data that is both granular and diverse, which anERP solution provides, and leading ERP providers already leverage this capability. When anERP system can mimic human behavior, it creates new opportunities for automated reporting,reconciliation and error detection.

The tremendous amount of data a machine can process and analyze generates a treasure trove ofnew insights. Think reviewing customer buying patterns to predict future shifts in demand orsuggesting optimization opportunities, like personalized emails or site experiences, thatwill increase conversion.

On the back end, an ERP with this capability can quickly detect anomalies that could signalfraudulent transactions or identify processes that are responsible for a disproportionateamount of damaged goods. In short, machine learning empowers businesses to make rapidadjustments that drive success.

Connected IoT devices like sensors, cameras, tracking systems and scanners have becomeanother key source of information for ERP systems. IoT has started to carve out a placeamong manufacturers and distributors because it helps businesses assemble a comprehensive,real-time picture of their supply chains. For example, IoT devices can monitor the statusand usage of industrial machinery to quickly alert managers to broken equipment so they canfix it before it becomes a bigger problem. An IoT scanner can automatically track productsas they enter or leave the warehouse. That not only ensures accurate inventory counts butcan trigger restocking by an employee or automatic reorders from suppliers.

ERP systems have come a long way, and machine learning, IoT and other innovations will leadto continued advancements and shape ERP history in the years to come—65% of CIOs anticipate integrating AI into theirERPs by 2022.

ERP History FAQ

Who invented ERP?

Tractor and construction machinery manufacturer J.I. Case worked with IBM to develop what isbelieved to be the first MRP system in the early 1960s.

What’s the difference between an MRP and ERP system?

MRP systems preceded ERP systems. Early MRP, or material resource planning, systems offeredbasic inventory control to help manage procurement and delivery of goods. ERP systems firstappeared in the ’90s and pulled in information from other parts of the business, likeaccounting, sales and HR.

What is manufacturing resource planning, a.k.a. MRP II?

Manufacturing resource planning (MRP II) systems arrived in the 1980s and were a significantstep up from first-generation MRP systems. They incorporated additional manufacturingprocesses and got other departments involved in manufacturing to improve productionefficiency and scheduling.

When did ERP systems become popular?

This software became more accessible and affordable in the ’80s and ’90s ascompanies likeOracle and JD Edwards developed and sold solutions. This meant businesses no longer had tobuild these systems themselves.

What is cloud ERP?

Cloud ERP is an ERP solution delivered through the internet that doesn’t requireon-premisesservers or other infrastructure. It first appeared in the late ’90s, gained tractionin themid-late 2000s and has become extremely popular in recent years.

What is ERP II?

ERP II refers to internet-enabled ERP systems, including cloud solutions, that use webconnections to send and receive information from various applications. Gartner came up withthe term “ERP II” in 2000 to christen a new generation of ERP systems.

How do ERP systems use machine learning?

Machine learning technology uses data and feedback to learn patterns and make judgments thatinform additional analytics and insights. In the context of ERP, machine learning canautomate reporting, reconciliation and the flagging of inconsistencies or errors.