With the development of resource management systems, there was a need to optimize production management. For this purpose, the American Society for Production and Inventory Control introduced a general scheme for managing enterprise resources. This system is called MRP (Material Requirements Planning), which means planning for material requirements. The first stage of the development of software solutions of this class began in the 1970s, when the introduction of systems based on this methodology gradually began, which allowed to establish production, management and inventory planning at a new level. The disadvantage of this system was that they did not take into account the utilization of production capacities, human labor resources, their utilization, and the cost of labor, and therefore a new concept, MRP II, emerged and gradually developed.
Therefore, in the 80s, the MRP system evolved as a production resource planning system and was named MRP II. The main goal of the new generation of the system was to ensure planning of production activities in kind, planning of financial indicators based on enterprise data. MRP II was the next step towards a full-fledged production resource planning system. This concept preceded the modern understanding of ERP (Enterprise Resource Planning) systems, which is based on the principle of creating a single database containing all information about the company’s activities. In MRP II, all the data held by the organization becomes simultaneously available to all employees with the appropriate authority. Effective management of all the resources of a manufacturing enterprise, forecasting, planning and production control in MRP II are carried out on an ongoing basis. Starting from the purchase of raw materials and ending with the shipment of products to the consumer.
ERP systems as a corporate standard for information systems
The history of ERP systems started in the 90s, MRPII class systems began to be integrated with the FRP (financial requirements planning) module, which received the modern name – ERP. Even though the history enterprise resource planning is short, the ERP standard has become a corporate standard for information systems for managing business processes and manufacturing processes. With an ERP solution, there is no need to transfer data between different accounting systems, all information is available from a single source – it is extremely useful for making right business decisions in such important aspects of enterprise work, as manufacturing resource planning and supply chain management. There exist twop types of Enterprise Resource Planning systems – on-premises systems and cloud-based systems. They share most critical business functions and features, including manual tasks automation, production schedules, basic inventory control, production processes control, and so on – some of them even provide option of mobile access.
At the same time, the desired result of implementing an ERP program is declared to be to make the company more flexible, quickly adaptable to market needs and balance the company’s resources.
The ERP methodology will allow to combine different areas of the enterprise into one system. These areas include order management, production, supply, finance, customer relations, etc.
The following criteria are the main ones for choosing software solutions of this class:
- Compliance of the program with the functional and technical requirements of the enterprise;
- Implementation costs pay off in the short term;
- Clear and simplified user interface, different levels of access to the system;
- Specificity of the implementation segment;
- The number of staff;
- Availability of additional built-in modules, integration of third-party programs;
- Information security;
- Further support.
ERP II resource management system
The second generation emerged as a result of the evolution of computer technology and software in the field of automation. Simplification of the availability of technologies for the interaction of the enterprise with contractors and customers has contributed to the rapid growth of software solutions that are tailored to the control and interaction of data exchange chains. At the same time, the company’s management information is not only used for internal purposes, but also serves to develop relationships and cooperation with other organizations. In simple words, ERP II is an evolutionary ERP system that integrates the SCM (supplier relationship management) and CRM (customer relationship management) classes, with the integration of a corporate Internet portal through which company employees can receive all information according to the level of access and promptly resolve problems with partners and customers.
The principles of ERP II are aimed at automating both external and internal enterprise virtualization, which reflects the interaction of all departments of the company, supply chains, partners and customers. All these mechanisms work autonomously and are integrated into a single enterprise network. The ERP II system also has the ability to control finances, accounting, management and planning of sales and purchases, human resources, production, inventory management, which allows you to improve customer relations, supply chains, and trade via the Internet.
Evolution of ERP towards cloud solutions
Modern cloud trends show the growing popularity of ERP solutions in the cloud. ERP systems based on cloud technology are seriously strengthening their positions.
On-premises ERP solutions are implemented through workstation licensing, when software is purchased and uploaded to the company’s servers and an additional fee is required for each individual employee. This method can be used by a large organization that independently monitors its infrastructure and software: it controls the performance of equipment, networks and provides comprehensive services. At the same time, all information is closed within the enterprise. This is both a plus and a minus. On the plus side, there is minimal risk of information leakage. On the downside, during inspections by regulatory authorities, all information is locked on your server, which means that government agencies can access it.
Cloud technologies mean that you use a remote server located remotely or in another country altogether. This frees the company from unnecessary problems with both maintenance and security.
ERP programs installed locally at the enterprise level imply significant monetary investments at the initial stage to purchase equipment and deploy infrastructure. Moreover, such solutions imply subsequent operating costs.
And if the company does not have an experienced team of programmers and system administrators, then the management will have to allocate additional funds to hire or train new staff for managing these business operations to ensure stability of business functions.
For ERP programs based on cloud technology – not on-premises solution, the initial costs are much lower, since you don’t have to buy your own hardware – you just need to configure the software and set up work with it over the network. Maintenance of server hardware and its performance is no longer your problem. The location of your data and its safe operation now takes place on a remote server, which is maintained by a contractor at a much lower cost – this is a perfect solution for all business models. This approach allows you to free up company resources and direct them to business development and growth.