Evolution of ERP

How ERP developed over the decades

ERP did not appear suddenly. It grew, step by step, out of earlier attempts to use computers to manage manufacturing and business data. Understanding this evolution helps explain why ERP works the way it does.

1. Inventory management and control (1960s)

The earliest business computer systems were used simply to keep track of stock — how much of each item was in the store, and when to reorder. These systems handled inventory records but did little else, and each ran on its own.

2. Material Requirements Planning — MRP (1970s)

Manufacturers needed to answer a harder question: given the products we plan to make, what raw materials do we need, in what quantity, and by when? MRP software was developed to calculate material requirements from the production schedule and the 'bill of materials' (the list of parts that go into a product). It helped ensure that materials were available for production without holding too much stock.

3. Manufacturing Resource Planning — MRP II (1980s)

MRP II extended MRP beyond just materials to include other manufacturing resources — machine capacity, labour, and production scheduling — and began to link these with financial data such as costs. It gave a fuller picture of the whole manufacturing operation, not only the materials.

4. Enterprise Resource Planning — ERP (1990s)

In the 1990s, the idea was widened from manufacturing to the entire enterprise. ERP integrated not only production and materials but also finance, accounting, human resources, sales, and distribution into one unified system with a single database. The term 'ERP' itself came into common use in this decade. This is the classic form of ERP.

5. Extended and web-based ERP — 'ERP II' (2000s onward)

As the internet spread, ERP was extended beyond the four walls of the company to connect with customers and suppliers through web technologies. This 'extended ERP' added functions such as Customer Relationship Management (CRM) and Supply Chain Management (SCM), and made the system accessible online.

6. Cloud, mobile, and modern ERP (2010s onward)

More recently, ERP has moved to the cloud — hosted on the internet and paid for as a service, rather than installed on the company's own computers — making it affordable even for smaller businesses. Modern ERP is also mobile-friendly (usable on phones and tablets) and increasingly uses data analytics to support decision-making.

Summary of the evolution