In recent years, especially following the globalization of businesses and increased competition, companies have developed efficient structures and software to execute various operational functions tersely. One of the most recent advancements in business management is the development of the Enterprise Resource Planning (ERP) system – a structure specifically designed to integrate the main business processes (Almajali, 2016). Typically, an ERP is a business management application that integrates several applications – including supply management, human resources, customer relationship management, financial management, business intelligence, and many others. An organization can essentially use this integrated ERP software to collect, manage, update, share, interpret, and share core business processes – such as accounting, sales, purchasing, manufacturing, and many others. It can help in tracking business resources (for example, production capacity, raw materials, cash) and the status of organizational commitments (such as payroll, purchase orders, and delivery or request orders). Even though ERP software has transitioned into a multi-billion dollar sector, very few people understand the factors that prompted its development, the latest additions and features, and what the future holds for this coveted software. Therefore, it is fundamental to explore the history that brought about the creation of ERP systems, the events that led to the strong adoption of these systems between the 1990s and 2000s, and the advances that have taken place, as well as those expected to occur in the future.
History of ERP systems
- The history, early software manufacturers, and adaptors of ERP systems
The term Enterprise Resource Planning, often shortened as ERP, was officially coined by the Gartner Group, an IT consultancy firm based in Connecticut, in the 1990s. However, the origin of ERP systems can be traced back to the 1960s and was largely part of what was then called manufacturing resource planning (MRP) software (Radley, 2018). These initial MRP systems included functions primarily found in today’s PLM (product lifecycle management) systems. MRP software and programs were first designed as proprietary, in-house systems by defense contractors, large automobile companies, and many others. Similarly, the 1990s version of ERP software developed by Gartner Group was used by large manufacturers utilizing computerized manufacturing and production.
Therefore, during this early period in the development of ERPs, software designers primarily integrated the capabilities of the MRP, and in the latter days, MRP II and computer-integrated manufacturing. However, not all the enterprise resource planning applications were designed from a manufacturing principle or perspective; various ERP vendors or software manufacturers (such as Oracle Corp., SynQuest Inc., and SAP AG) started integrating human resource components and finance and accounting functions. ERP systems had fundamentally incorporated all core enterprise capabilities by the mid-1990s. In the late 1990s, non-profit organizations and government institutions also started using ERP applications. Companies like Procter & Gamble, Hon Industries Inc., and many others were the early adopters of these ERP programs (Harreld, 2001).
- Failure of the ERP systems
The ERP systems (which were supported by MRP capabilities) failed in the 2000s – in what is largely termed the Year 2000 problem (or the millennium bug, or Y2K problem, or Y2K bug). Initial ERP systems focused primarily on automating the so-called ‘back office’ functions that never directly affected the public and consumers. However, the vendors failed to automate front-office e-business functions, including supplier relationship management (SRM) or e-finance, e-telecom, e-government, e-commerce, and so on. These were integrated after 2000 during the ERP II era.
Factors in acceptance and growth of use
The acceptance and growth of ERPs expanded in the mid-1990s but skyrocketed in the early 2000s, especially following the introduction of the ERP II packages. The term ERP II was first described in 2000 by Gartner to denote web-based applications that grant employees, suppliers, and clients real-time access to ERP systems. The first factor that propelled the widespread acceptance and application of ERP systems is the ability to provide real-time data access (Almajali, 2016). For example, one of the early adopters of the ERP technology was Hon Industries Inc., a leading officer furniture developer in Muscatine, Iowa, which used ERP to estimate the performance of its branches countrywide. Hon Industries rolled out an SCM system supplied by SynQuest Inc., one of the leading supply chain planning solutions providers, in the early 2000s. At the time, Hon Industries had six distribution centers and 18 production facilities strewn across the country. In mid-2001, just three months after implementing the ERP software, the Iowa-based firm recorded a 10 percent improvement in on-time performance (Harreld, 2001).
The second reason is the expanded functions of the new ERP package. Rather than just the traditional ERP functions of transaction processing and resource optimization, the ERP II leveraged or took advantage of the information in its database to help the company connect and interact with other entities. ERP II – which is in use today – is regarded as a more flexible program compared to the early version with more advanced functions. It extends beyond the traditional systems that restrict the ERP functions within the walls of the company by interacting with other systems.
The third reason is that the newly expanded ERP system allowed all other systems to leverage information stored in one database. The ERP II systems developed in the 2000s were typically designed to permit collaboration, communication, and interaction among various initiatives or systems within an enterprise, such as business intelligence, customer relationship management, supply chain management, and many others. All these integrated functions gave businesses an upper edge over their competitors that did not use ERP II software.
Besides, the new ERP systems could be hosted both on-premise or cloud-based, improving security and access, and collaboration between the company employees, clients, and suppliers. Cloud-based operations meant that firms, clients, and suppliers could access ERP-enabled functions through the internet, irrespective of the distance. Procter & Gamble was one of the early companies that leveraged the integrated ERP II systems to improve the firm’s supply chain in the early 2000s, allowing the firm to make critical decisions relating to production schedules and inventory levels. Before implementing the SCM program (an ERP-based package) developed by SAP, Procter & Gamble depended on employees to manually feed data to examine its inventory figures. As noted by Kesley Lee, the internal IT director at Procter & Gamble, on August 27, 2001, the new ERP package provided a consistent platform that webified the firm’s operations and enabled consumer-driven, virtual supply chains (Harreld, 2001).
The last reason why people continued to use the ERP software is that the new systems were more updated following the Millennium bug scare. The Y2K bug, or the Year 2000 Problem, played a fundamental role in transforming the ERP programs, enabling vendors to implement extensive changes to the existing computer programs and software. The Y2K was the extensive programming shortcut vendors and experts feared could wreak havoc on companies as the year jumped from 1999 to 2000. Most computer programs at the time only allowed two digits (for example, 99) rather than the full four digits of the year (such as in 1999). There was fear that computers would cease to operate during the turn of the millennium because the date would have switched from “99” to “00” (Carrington, 2000).
The Future of ERP Systems
Over the years, ERP systems have undergone a tremendous revolution, incorporating more new functions. Today, ERPs are more integrated than ever before. For example, various ERP software developers and vendors are striving to integrate ERP technologies into mobile devices. There is also an extensive effort into things like supply chains, networking, applications, and hardware. Besides the traditional areas (such as customer relationship management, supply chain management, order procession, manufacturing, and management accounting), today’s ERP tends to lay more emphasis on creating additional roles and functions, such as transparency, standardization, stakeholder relationships, globalization, and so on (Shaul & Tauber, 2013). Furthermore, new extensions or third-party software have been developed that permit the extension of ERP systems, usually through vendor-supplied interfaces (Bendoly & Jacobs, 2005). These new extensions provide additional features like e-procurement, data mining, customer relations management, product lifecycle management, and product data management (Leon, 2008). New ERP systems also enable data migration – or restructuring, copying, and moving of data from a computer or existing system to the ERP application (Vidacic, Pihir, & Fabac, 2010).
With new technologies increasingly defining future business operations, it is more likely that more IoT-enabled ERPs will be developed in the future. As noted by Genius Solutions, ERP can potentially facilitate a whole new level of collaboration and interconnectedness between external data, business processes, third-party software, and IoT (Internet of Things) devices. For example, in the manufacturing sectors, IoT-enabled ERPs can easily synchronize and connect an office and the floor in real time (Genius Solutions, n.d.).
From this discussion, it is clear that ERPs have transitioned from mere computerized manufacturing programs developed in-house in the early 1990s into fundamental applications that define and synchronize all other functions in an organization, from customer relationship management, project management, supply chain management, human resources, management accounting, to financial accounting. Some of the factors that drove the use of ERPs in the mid-90s and early 2000s include their ability to operate in real-time, their integrated structure, use of a common database, flexibility, and later reforms in the 2000s. However, today’s ERP apps tend to lay more emphasis on creating additional roles and functions, such as transparency, standardization, stakeholder relationships, globalization, and so on. There is a potential for future technologies leveraging IoT technologies by creating more integrated systems in the workplace.
Almajali, D. (2016). Antecedents of ERP systems implementation success: a study on the Jordanian healthcare sector. Journal of Enterprise Information Management, 29(4), 549–565. doi:10.1108/JEIM-03-2015-0024
Shaul, L., & Tauber, D. (2013). Critical success factors in Enterprise Resource Planning Systems: Review of the last decade. ACM Computing Surveys, 45(4),1–39. doi:10.1145/2501654.2501669
Carrington, D. (2000, January 4). Was Y2K bug a boost?” BBC News, https://web.archive.org/web/20040422221434/http://news.bbc.co.uk/2/hi/science/nature/590932.stm
Leon, A. (2008). ERP Demystified. Tata McGraw-Hill Education.
Genius Solutions. (n.d.). 5 predictions for the future of ERP software. Retrieved from https://www.geniuserp.com/blog/5-predictions-for-the-future-of-erp-software
Bendoly, E., & Jacobs, F. R. (2005). Strategic ERP extension and use. Stanford University Press.
Harreld, H. (2001, August 27). Extended ERP technology is reborn in B2B. Computer World, https://www.computerworld.com/article/2583660/extended-erp-technology-reborn-in-b2b.html
Radley, D. (2018, March). Brief ERP history: Origins and evolution. TEC, https://www3.technologyevaluation.com/research/article/erp-history-origins-and-evolution.html
Vidacic, S., Pihir, I., & Fabac, R. (2010). Method of data migration from one ERP system to another in real-time. Conference: Proceedings of the 21st Central European Conferences on Information and Intelligent Systems. https://www.researchgate.net/publication/259045846_Method_of_data_migration_from_one_ERP_system_to_another_in_real_time
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Paper 1: Factors that led to the ERP Evolution
Write a research paper which explores the history that brought about the creation of ERP systems. Then the strong adoption of these systems between 1990’s and 2000’s. Lastly cover what’s new to ERP. What advances have occurred or are expected to happen? Assume the audience for your paper is for the most part non-technical and unfamiliar with these concepts. Your goal is to educate the reader on each.
Format of paper
- 5-10 pages in length
- Normal 12 point font and double space
- Cover page & running header
- Introduction – purpose of paper
- The three sections are clearly labeled (History, Factors, Future)
- APA format with minimum of 20 references
- No Abstract is required
History of ERP systems
- Where and when did they start?
- Who were the major software players?
- Who were the early adapters?
- When did they fail?
Factors in acceptance and growth of use
- How did they create a business advantage?
- What is the significance of the year 2000?
- What were the top five to ten factors that encouraged companies to use them? Make sure you do at least a paragraph on each of these.
- What are the latest features or additions to ERP systems?
- What are some of the future expectations of ERP systems or enhancements?
- Are there any disruptors?
- Research and describe the offering from three companies. Select 3 modules commonly used and describe function and benefits of use for each company. See https://www.netsuite.com/portal/resource/articles/erp/erp-modules.shtml for module examples. *Note, these are vendor specific modules, additional research is required.
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