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What is Enterprise Resource Planning (ERP)?
Enterprise Resource Planning (ERP) is the process by which companies manage, streamline, and control every aspect of their operations—forecasts and analytics, production and payroll, customer and vendor relationships, and beyond.
An ERP solution is foundational business management software that helps companies conduct smooth, accurate, straightforward enterprise resource planning. They combine, store, analyze, and protect all important business functions and data in one unified system.
ERP solutions are important because they ensure clear communication between all team members and seamless data flow across departments. As companies grow, they need a single platform. This platform should support operations, finance, human resources, and other functions.
Understanding ERP, ERP solutions, and their roles in modern business is essential for organizations seeking efficiency and growth.
Brief History of Enterprise Resource Planning
Beginnings
Enterprise resource planning, in its simplest paper form, goes back to the start of organized business. This includes the first joint stock companies from the tenth century and continues through the Industrial Revolution and beyond. Businesspeople have always worked to methodically manage their organizations.
But the history of ERP software begins in the manufacturing industry of the 1960s and 1970s. Manufacturers manually tracking inventory via inaccurate, error-prone, paper spreadsheets were embracing computers and automated inventory management. This led IBM to cooperate with J.I. Case, a tractor and construction machinery manufacturer, to create the world’s first material requirements planning (MRP) system.
Growth
Large companies quickly adopted this innovation. They saw how it could help them understand the large amounts of data needed. This data is important for buying raw materials, planning production, scheduling operations, and managing inventory.
By the 1980s, MRP II was the newest version used by businesses that could afford it. This system added finance, human resources, and marketing features.
In the early 1990s, MRP II expanded its abilities. It now included integrated business processes. These processes covered supply chain management, customer relationship management, and human resources management.
It also included finance, accounting, and sales. All of these functions were combined into one complete system. Gartner named it “enterprise resource planning” technology, effectively acknowledging its tremendous business-wide value.
The Democratization of ERP Software
In the early 2000s, the advancing availability and potential of the internet led to the advent of cloud computing. As Amazon Web Services puts it, “[c]loud computing is the on-demand delivery of IT-resources over the internet with pay-as-you-go pricing.” This development made ERP software available to small and midsized businesses. These businesses could not afford the expensive, hardware-heavy technology before.
What is the Purpose of Enterprise Resource Planning Software?
The purpose of enterprise resource planning software is to optimize businesses’ operational efficiency. An ERP solution is a central database that connects different systems. It provides permission-based access to data in one place. This improves workflows and increases transparency throughout the organization.
When businesses decide to use a modern ERP solution, they gain a complete tool. This tool helps them manage their resources well. It also allows them to make decisions based on data. This way, they can stay competitive in today’s digital world.
