Enterprise Resource Planning (ERP) systems evolve from the “ancient” stand-alone Legacy systems to replace or reform them. American Production and Inventory Control Society (2001) defines ERP as an “accounting system” for “effective planning and controlling of all the resources needed to take, make, ship and account for customer orders in a manufacturing, distribution or service company”.
ERP system creates values for the enterprises because successful implementation enhances the overall functions of the enterprise, reduces resource wastages, saves time and cuts down on total cost. By having a system which models after some of the best practices in the industry and adheres readily to the laws and regulations, these enterprises gain competitive advantages over their industry rivals.
The purpose of this research paper provides discussion on how ERP systems evolve from the “ancient” Legacy systems, describes the features and structure of an ERP/ ERP II system and compares the top five ERP vendors’ most popular products. The last section concludes with the future outlook of ERP II systems.
Legacy systems are systems that “no longer support the current business objectives or are inhibiting future developments” (Kelly 2004).
The “ancient” Legacy systems mentioned here refer to the obsolete I.T systems during or before the mid 20th Century. They functioned within a department (silos of information) to fulfill narrow and limited job processes. At that time, departmental heads and staff seldom communicated among themselves (stovepipes). This led to inefficient and inaccurate data duplications. (O’leary 2000).
Evolution of the ERP Systems
“Ancient” Legacy systems of the 1960s used the mainframe technology to automate their inventory control (IC) systems with IC software packages implemented and customized in-house to suit the functional business concepts of information silos and stovepipes. The programming languages were COBOL, FORTRAN and ALGOL (Rashid, Hossain & Patrick 2002; Pairat 2005; Monk and Wagner 2009).
Back then, Bill of Material (BOM) calculated the inventory demands for all item parts required for product assemblies during manufacturing. By the 1970s, the manufacturing businesses were growing with more complexities. As BOM overlooked the planning process, Work Centre Routing existed as a production process planner.
BOM, Routing, Inventory Management and the Master Production Schedule (MPS) combined to form an automated system called Manufacturing Resource Planning (MRP) for controlling and optimizing inventory level, production planning, sales forecasting and scheduling of the major items on the shop floor. (Anderson 2001).
MRP II evolved from MRP as a response to Total Quality Management (TQM) in the 1980s. By integrating MRP with the other management functions of the enterprise such as Engineering, Project Management, Logistics, Finance, Sales, Marketing and Human Resources, feedbacks for production decision making processes became more efficient and resource optimizations were realized (Anderson 2001).
The advancements in Telecommunications devices, network architecture, Database Management System (DBMS), sophisticated software development and programming languages in UNIX and C paved the favourable way for an integrated information system (Monk and Wagner 2009).
Economic recession in the late 1980s urged companies to shift their focus into cross functional business processes. In addition, Hammer and Champy (1993) envisioned an enterprise-wide integration system for a Business Process Reengineering (BPE).
These factors prompted the I.T System Vendors to respond with a tightly knitted centralized ERP system (with a single database) which integrates all the functions of a world-wide organization to ensure operational excellence, automation of the internal system and the ability to handle multiple currencies and international languages...