ERP software systems have deep roots 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 software 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 solution should fit your business and be responsive to your unique needs.
Read on to learn more about ERPs, their history, and how they have evolved over the years to become such a useful business tool.
ERPs connect every aspect of your business
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 is and what ERP software does.
To truly unpack what Enterprise Resource Planning means, take a minute and think about 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 these 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 and that can be used by all of your different departments.
In real-world terms, this means that employees from two different departments, for example, purchasing and engineering, can both work off of the same set of accurate data and pull the relevant information from the system that they need to do their jobs more efficiently and effectively. ERPs let you eliminate entering the same data multiple times into multiple systems or spreadsheets, provide you with a single source of truth for your organization, and allow information to flow more freely between departments.
In a nutshell, an ERP allows you to better plan your enterprise’s resources. (See what we did there?) Because all your various business functions are integrated within an ERP, you can better manage your business as a whole, collaborate more easily between departments, and get orders out the door and into your customer’s hands faster.
A brief history of ERP
1960s: Early beginnings
The term ERP was first used in the 1990s by the Gartner Group, but enterprise resource planning systems 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 solutions, known as MRPs or Material Requirements Planning systems, were developed to meet their needs. These systems helped manufacturers monitor inventory and reconcile balances, as well as included very basic manufacturing, purchasing, and delivery functions.
1970s and 1980s: MRP systems
Through the 1970s, more and more manufacturers started to adopt MRP systems, and the systems themselves became 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 to the original MRP systems, and these MRP II systems had expanded capabilities and were better able to handle scheduling and production processes.
1990s and beyond: True ERPs
In the 1990s, the first true ERP systems came into use. These systems further expanded beyond previous iterations’ 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 solutions as we’ve come to know them today, by integrating multiple processes and departments into one system.
2020s: Big data and artificial intelligence
Over the next few decades, ERP systems became more advanced. In recent years, big data and AI have once again transformed ERP systems, making them more powerful and adaptive. Big data enables ERP systems to handle massive amounts of information, providing businesses with valuable insights into their operations. AI adds a layer of intelligence, allowing ERP systems to learn from data patterns and make informed predictions, and AI-driven automation streamlines repetitive tasks.
The integration of big data and AI in ERP systems has ushered in a new era of agility and intelligence, empowering manufacturers to navigate the complexities of the modern business landscape.
ERPs in the modern manufacturing world
Today’s ERPs are fully integrated systems that can connect every department and all aspects of your business in one place. Modern ERPs provide a company with a powerful, real-time tool that runs a single, shared database of information, which can be accessed by every department in an organization.
The ERPs of today are also highly flexible, and ERP vendors offer a variety of tools, features and functionalities designed to meet the unique needs and challenges of different industries.
Modern ERP solutions not only include manufacturing, supply chain management, and financial and accounting capabilities, but they also can have advanced reporting and business intelligence, sales force and marketing automation, CRM management, and project management functionalities.
Not just for large-scale enterprises
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. After all, the ‘E’ in ERP stands for enterprise, and you’re not a huge corporation with thousands of employees. But in today’s market, there are ERPs tailored to businesses of all sizes and needs.
You certainly 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 yours, and can give you the connectivity and integration to power your business forward.
As a small- to mid-sized manufacturer, you will realize the same advantages that large-scale organizations do, like one centralized and integrated system, automated business processes, real-time data, and increased throughput and efficiency. ERPs can help you transform your manufacturing shop, saving you time and money by reducing operational costs and increasing your efficiency. You will also have the added benefits of more safe and secure data as well as more accurate business forecasts.
ERPs are truly the workhorse of the manufacturing industry and can help you realize your goals and help you grow your business. Take advantage of the flexibility and tailored solutions that an ERP can offer you.
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