Evolution of ERP
ERP as a concept has been around for approximately fifty years. Though the idea of integrating all the business units to improve productivity has always been a goal of management, the tools to achieve such integration were not available. With the increasing sophistication of software, the dream of integrating different functional units took shape in the form of software packages that allowed timely information-sharing. ERP's history can be traced back to 1972 when five IBM employees left IBM and established SAP (Systems, Application and Products in Data Processing) in Walldorf, Germany. SAP was the first company to develop and maintain ERP software. ERP as a concept has not changed over the years, but its implementation has changed due to the advances in software and hardware technologies.
The roots of ERP development can be traced back to the concepts of MRP and MRP II. MRP systems are used in manufacturing to automate the various aspects of inventory management and production processes, for instance, automating the ordering process, scheduling operations, etc. MRP II is an extension of MRP; it was conceived with the objective of automating all manufacturing functions and providing an interface with other functional domains. As a result, it is able to achieve a high degree of integration with other automated processes in organizations. ERP extends the functionality of MRP and MRP II systems to provide complete business solutions. Because of its wider scope, ERP is concerned not just with internal issues but also takes into account external factors like competition, demand, etc. The key aspect of ERP is its ability to integrate different business entities without being constrained by geographical and functional differences.
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