Evolution of Erp Systems

Topics: Enterprise resource planning, Manufacturing resource planning, SAP AG Pages: 8 (2124 words) Published: February 5, 2012
The Evolution of ERP Systems 
Content Word Count: 1558

1. Introduction
This research paper aims to discuss the evolution of ERP systems, the major stages in the evolution process, as well as the structure and features of an ERP system. It will also briefly look at the major vendors in the ERP market and how technology has changed the way companies implement their ERP systems.

2. Legacy Systems
Legacy systems are generally thought of as older, highly modified computer systems or applications developed or purchased long ago. Many companies still use these non-ERP systems simply because they work and have been customized to suit their business needs. In the next section, we will look at the legacy systems such as MRP, Closed-loop MRP and MRP II.

3. Evolution of ERP systems
The evolution of ERP systems consist of 4 main steps, from legacy systems to current modularized ERP systems (Wallace & Kremzar 2001 ).

3.1 Step One – Material Requirements Planning Systems
(MRP, or MRP I)
Materials Requirements Planning Systems was launched in the 1970s. “It is a computer-based inventory ordering and time-phased scheduling technique, which uses bill of material, inventory data and the master production schedule to calculate requirements for material and determine when to release the material replenishment order.” (Torkzadeh and Sharma, 1991, p78)

Disadvantages of MRP systems
MRP is also sometimes referred to as a Push system. There are several disadvantages of MRP systems, such as;
1. They are often slow and unable to react to changes in the market place.

2. Products may become obsolete as consumer preferences and demand changes

for a certain product.

3. Higher costs and inefficient handling of inventory.

4. Does not take account manpower, machine or supplier capacity constraints.

3.2 Step Two – Closed-loop MRP systems
Closed-loop MRP System is often considered “a second-generation system which enhances the MRP system, by adding 2 features known as priority planning and capacity planning.”(Wallace and Kremzar 2001, p120).

Closed Loop MRPs synchronize the purchasing or materials procurement plans with the master production schedule, so that these plans can be adjusted according to capacity and other requirements. The system is called a closed loop MRP because of its feedback feature, which is also referred to as closing the loop.

3.3 Step Three – Manufacturing Resource Planning (MRP II) Systems
Manufacturing Resource Planning (MRP II) System is a direct successor of MRP, introduced in the 1980s.The main features in MRP II: purchasing, capacity planning and master scheduling, as well as inventory and production planning (Kessler, 1991). MRP assisted manufacturers by tracking all the raw materials and spare parts during the production phase. This allowed them to know when those parts needed to be replenished, as well as stock they needed to have on hand for production. MRP II is concerned with the coordination of the entire manufacturing production, including materials, finance, and human resource management.

The main objective of MRP II is to provide data to all those involved in the manufacturing process as the product moves through the production line.

3.4 Step Four – ERP Systems
ERP was developed in the 1990s and is an improvement of MRP II with additional capabilities, such as better graphical user interface, open system portability and offers a better integrated, modularized structure than MRP II. MRP systems are often standalone applications, whereas ERP supports multiple modules. In the next section, the structure and functions of an ERP system will be further elaborated.

4. Definition and structure of an ERP System
Enterprise Resource Planning (ERP) systems are module-based software packages that integrate and provide real-time information to users in any part of an enterprise. This allows everyone to access critical business...
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