ERP evolution (*)

MRP i MRP II

Enterprise Resource Planning systems(ERPs) have evolved substantially over the past six decades. While the term ERP was coined by Gartner in the 1990s, the practice of manufacturing utilizing inventory control systems to ensure proper stock levels has its roots in the 1960s [1]. The software systems were built to track raw materials and notify manufacturing plant managers about when and how much to refill. These applications evolved into what are today known as Material Requirements Planning (MRP) systems during the 1970s.

In contrast to MRP, which ends when the products are received, MRP II continues to incorporate the value stream until the final goods are delivered to the client. This value stream includes production planning, machine capacity scheduling, and quality assurance [1].

ERP

Throughout the 1990s, MRP II evolved into its successor, ERP. Gartner coined the term ERP to underline that such systems could assist a wide range of enterprises, not only manufacturing, and could be used to improve the efficiency of all processes. ERP is described as the capacity to provide an integrated set of business applications. ERP tools use a common process and data model to support broad and deep operational end-to-end operations such as finance, human resources, distribution, manufacturing, service, and supply chain [2]. At that point, ERP systems became what they are today: a central repository for company data.

The introduction of cloud ERP was a significant step forward in ERP development. Because of the cloud computing approach, ERP technologies that were previously exclusively available to large organizations are now accessible to SMEs who lack the resources to build and maintain an on-premises solution. Automation of procedures, improved data accuracy, and increased productivity are all possible benefits for small and medium-sized businesses in various industries.

ERP II

Gartner coined the term ERP II in 2000 to characterize web-enabled systems capable of integrating data from a wide range of departments and functions across a business [8]. This encompasses both front-office programs like CRM, e-commerce, and marketing automation, as well as back-office activities like supply chain management (SCM) and human capital management (HCM).

Postmodern ERP

Gartner proposed the term “postmodern ERP” to describe the third phase of ERP, which began in the 2010s and highlighted ERP’s evolution into a strategy rather than a discrete technology. Postmodern ERP is a technology strategy that automates and connects administrative and operational business capabilities (such as finance, human resources, purchasing, manufacturing, and distribution) with appropriate levels of integration, balancing the benefits of vendor-delivered integration against business flexibility and agility [3].

Beginning with the third generation of ERP, postmodern ERP, the focus shifts from control to value (Figure 1). At least two linked developments have accelerated the shift toward a more value-oriented strategy. Most businesses, for example, must manage with declining funds while fulfilling expanding demand for a wider range and quantity of goods and services. In contrast, robotic process automation (RPA) and artificial intelligence (AI) are two examples of 21st-century digital advancements [4].

Figure 1. ERP evolution [5]

Composable ERP

RPA and AI were among the digital advancements that contributed to the fourth generation of ERP. Gartner coined the term “composable ERP” to define the next generation of ERP systems in the 2020s. The fourth generation of ERP marks a more fundamental shift, increasing ERP’s scope beyond internal business resources and planning to external ecosystems. Customers and vendors are simply two components of a larger ecosystem that includes partners, competitors, and other stakeholders.

(*) The text has been adapted from the paper:

Gašpar, D., Ćorić, I., Mabić, M. (2023). Composable ERP – New Generation of Intelligent ERP. In: Ademović, N., Kevrić, J., Akšamija, Z. (eds) Advanced Technologies, Systems, and Applications VIII. IAT 2023. Lecture Notes in Networks and Systems, vol 644. Springer, Cham. https://doi.org/10.1007/978-3-031-43056-5_26

References:

[1] Bradford, M.: Modern ERP: Select, Implement and Use Today’s Advanced Business Systems, Kindle Edition, (2020).

[2] Gartner Glossary: Eterprise Resource Planning, https://www.gartner.com/en/information-technology/glossary/enterprise-resource-planning-erp

[3] Gartner Glossary: Postmodern ERP, https://www.gartner.com/en/information-technology/glossary/postmodernerp

[4] Katuu, S.:Enterprise Resource Planning: Past, Present, and Future, New Review of Information Networking, 25(1), (2020).

[5] Howard, M.: The Future of Government Back Office Operations, https://www.accenture.com/_acnmedia/pdf-64/accenture-future-govt-back-office-slideshare.pdf