So, what is an erp system? ERP stands for Enterprise Resource Planning. The term was first introduced in the mid-1990s by Gartner as a replacement for “Manufacturing Resource Planning” or MRPII, the former name for the software application suite that manufacturers use to manage information from throughout the company and its operations.
This software suite actually got its start in the 1950s and 1960s with the development of bill-of-material processors and programs to manage inventory and develop material requirements plans (the original MRP—interestingly, the core calculation that was MRP half a century ago is still included in a central module of today’s ERP software for manufacturers). These basic functions were the foundation upon which additional functions were added—production control and purchasing, master planning and forecasting, financials and costing—making up the MRPII cross-functional, integrated application suite that manufacturers rely on to consolidate and communicate information throughout the business. ERP is simply a new name that reflects the continued growth of MRP and MRPII into an even more all-encompassing set of integrated applications including such things as customer relationship management, field service and warranty tracking, distribution planning, shop floor data collection, supplier relationship management, web-based collaboration, e-commerce, and more.
Any ERP system definition would not be complete without at least mentioning that the system is built around a single relational database management system with analysis tools and an executive information system (dashboard). Today’s ERP is also delivered with a modern graphical user interface, role-based access control and security, and easy integration with common business tools like Microsoft Office (Word, Excel) and e-mail.
There are a number of developers / vendors that supply ERP systems. Examples include the top ERP system suppliers (by revenue and market share) SAP, Oracle, Microsoft and Infor as well as many more specialized offerings like Made2Manage from Consona aimed at small-to-medium sized companies.
It’s worth noting that the term ERP is being applied to application suites outside of the manufacturing market. Service providers, hospitals, general business offices and others can now license broad-ranging integrated software suites that are marketed as ERP solutions.
Many companies simply want to know: what is the best ERP system? There is no single or simple answer to that question. Although most ERP solutions for manufacturing companies contain very similar functionality, features and capabilities, they vary in depth, complexity, price, technology, and applicability to specific industries. Some ERP solutions are designed to be flexible and adaptable across a wide range of industry environments while others are targeted at specific niches—electronic assembly or food and beverage, for example. Selecting the best ERP system is an important undertaking and should be done with great care. Choose a system that fits well in your industry, meets any unique company needs, is comfortable for your users, is developed and supported by specialists that understand your business needs, and is from a company with a proven track record of success (in your industry) and the financial staying power to continue to support and enhance your system into the foreseeable future.