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ERP systems have deep root in the manufacturing industry, but many manufacturers still have trouble understanding exactly what an ERP is and does. If that’s you, don’t worry, the ERP world can be a little confusing: it seems as if almost every provider of an ERP system has their own definition of exactly what an ERP is, and if you talk to other manufacturers that have one in place, you can get varying answers as to what their system does for them. Confused? These differences actually emphasize one of the key features that makes ERP systems such powerful business tools — their flexibility. An ERP system can increase your throughput and help grow your business by being precisely tailored to your business’s needs. And just like your business is different from your competitors, your ERP system should fit your business and be responsive to your unique needs. Read on to learn a bit more about ERPs and how they have evolved over the years to become such useful beneficial business tools.
Let’s start at the beginning. The term ERP is an acronym for Enterprise Resource Planning, but even the full name doesn’t really tell you what an ERP does. To truly unpack what Enterprise Resource Planning means take a minute to think of all of the departments and processes involved in running your business — inventory management, purchasing, accounting, engineering, sales, production, and your shop floor to name a few. At its most basic level an ERP connects and integrates all the different aspects of your business and lets you streamline your processes, and share accurate information across your company. The central feature of all ERP systems is a shared database that supports multiple functions used by all of your different departments. In real world terms this means that that employees from two different departments, for example purchasing and engineering, can both work off of the same set of data, and pull the relevant information from the system they need to do their jobs more efficiently and effectively. ERPs can eliminate entering the same data multiple times, provide a single source of truth for your organization, and allow information to flow more freely between departments.
An ERP allows you to better plan your enterprises resources. (See what we did there?) Because all of your various business functions are integrated with an ERP, you can better manage your business as a whole, collaborate easier between departments, and get orders out the door and into your customer’s hands faster.
The term ERP was first used in the 1990s by the Gartner Group, but ERPs actually have their roots deep in the manufacturing industry, and can trace their history back to the 1960s. At this time manufacturers needed a better way to manage, track, and control their inventory. Basic software systems, known as MRPs or Material Requirements Planning systems were developed to meet their needs. These systems helped manufacturers monitor inventory, reconcile balances, and included very basic manufacturing, purchasing, and delivery functions.
Through the 1970s more and more manufacturers started to adopt MRP systems and the systems themselves got more sophisticated. By the 1980s MRP systems evolved into what became known as MRP II or Manufacturing Resource Planning systems. More manufacturing processes were added into the systems, and they had expanded capabilities and were better able to handle scheduling and production processes.
In the 1990s the first ERP systems came into use. These systems further expanded beyond basic inventory control and manufacturing processes to include other departments and functions, such as accounting, finance, and sales. These systems set the stage for ERP systems as we've come to know them, by integrating multiple processes and departments into one system.
Today ERPs are fully integrated systems that can connect every department and all aspects of your business into one place. Modern ERPs are extremely flexible and vendors offer a variety of tools, designed to meet the unique needs and challenges of different industries. Today, ERPs provide a company with a powerful, real-time tool that runs a single, shared database of information that every department in an organization can access. Modern ERP solutions not only include manufacturing, supply chain, and financial and accounting capabilities, but they also can have advanced reporting and business intelligence, sales force and marketing automation, and CRM management functionalities.
And don’t let the word ‘enterprise’ scare you. If you are a small or medium-sized manufacturer, you may think that an ERP is not for you. Afterall the E in ERP stands for enterprise, and you’re not a huge corporation with thousands of employees. Today’s ERPs are tailored to businesses of all sizes and needs. You don’t need to be a huge company to get the benefits of an ERP. Find a vendor that specializes in your industry, and works with companies of your size and scale. These vendors will have solutions that are designed to fit businesses like you, and can give you the connectivity and integration to power your business forward.
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