Integrated enterprise resource planning (ERP) software solutions became synonymous with competitive advantage, particularly throughout the 1990's. The idea behind ERP systems was to replace "islands of information" with a single, packaged software solution that integrates all traditional enterprise management functions like financials; accounting; payroll; human resource (HR) management; and manufacturing and distribution, and thereby ensure enterprise-wide transaction system coherency. Knowing the history and evolution of ERP within the broader enterprise applications concept is essential to understanding its current use and its future developments. The following is the genesis of enterprise applications by era.
By the time each functional area of a company had developed its integrated software program, the need for tightly integrating them became obvious. The next major shift during the late 1980s and early 1990s was that "time to market" was becoming increasingly short, as the shift from �Fordist' mass production to nowadays' prevailing mass-customization (see Glossary*) principles and mindset has irreversibly changed the society and economy standards. Lead times expected by the market continued to shorten and customers were no longer satisfied with the service level that was considered world class only a few years earlier. Also, by the 1980s, competition from Japanese manufacturers and their philosophy has caused US and West European enterprises to look for new efficiencies using information technology.
Namely, customers were demanding to have their products delivered when, where, and how they wanted them. Companies were therefore compelled to develop and embrace the philosophies of just in time (JIT) and closer supplier partnerships as a way to remain competitive. During the same time frame, the cost of goods sold (COGS) was shifting drastically from labor to purchased materials. Consequently, planners needed to know materials allocations or finished goods' available-to-promise (ATP) values, immediately after customer order entry. On the other hand, buyers needed to know the sales plan several months in advance in order to negotiate prices for individual materials. Empowerment of employees was needed to provide the agility that was required to compete in the market.
Hence, the need to develop a system with tightly integrated programs that would use data stored on one common database and would be used enterprise-wide (such as, actions in one department's program driving actions elsewhere), became the highest priority for IT professionals. No longer was it tolerable to submit a request to the IT department and wait several "man-months" of programming time to obtain this critical information. This common-database, company-wide integrated system was named enterprise resource planning (ERP), as companies realized the need to see the entire picture.
APICS still defines ERP as follows:
"1) An accounting-oriented information system for identifying and planning the enterprise-wide resources needed to take, make, ship, and account for customer orders. An ERP system differs from the typical MRPII system in technical requirements such as graphical user interface (GUI), relational database management system (RDBMS), use of fourth-generation language (4GL), and computer-aided software engineering (CASE) tools in development, client/server architecture, and open-system portability;
2) More generally, a method for the effective planning and control of all resources needed to take, make, ship, and account for customer orders in a manufacturing, distribution, or service company."
Given many new very recent functional and technological developments, which will be analyzed in other upcoming articles, many may rightly consider certain parts of the above definition as somewhat outdated or not all encompassing. In general, the second part of the definition holds true, given traditional ERP involves software packages that by and large automate and support the processes of the administrative, production, inventory, and product development aspects of an enterprise.
By the time each functional area of a company had developed its integrated software program, the need for tightly integrating them became obvious. The next major shift during the late 1980s and early 1990s was that "time to market" was becoming increasingly short, as the shift from �Fordist' mass production to nowadays' prevailing mass-customization (see Glossary*) principles and mindset has irreversibly changed the society and economy standards. Lead times expected by the market continued to shorten and customers were no longer satisfied with the service level that was considered world class only a few years earlier. Also, by the 1980s, competition from Japanese manufacturers and their philosophy has caused US and West European enterprises to look for new efficiencies using information technology.
Namely, customers were demanding to have their products delivered when, where, and how they wanted them. Companies were therefore compelled to develop and embrace the philosophies of just in time (JIT) and closer supplier partnerships as a way to remain competitive. During the same time frame, the cost of goods sold (COGS) was shifting drastically from labor to purchased materials. Consequently, planners needed to know materials allocations or finished goods' available-to-promise (ATP) values, immediately after customer order entry. On the other hand, buyers needed to know the sales plan several months in advance in order to negotiate prices for individual materials. Empowerment of employees was needed to provide the agility that was required to compete in the market.
Hence, the need to develop a system with tightly integrated programs that would use data stored on one common database and would be used enterprise-wide (such as, actions in one department's program driving actions elsewhere), became the highest priority for IT professionals. No longer was it tolerable to submit a request to the IT department and wait several "man-months" of programming time to obtain this critical information. This common-database, company-wide integrated system was named enterprise resource planning (ERP), as companies realized the need to see the entire picture.
APICS still defines ERP as follows:
"1) An accounting-oriented information system for identifying and planning the enterprise-wide resources needed to take, make, ship, and account for customer orders. An ERP system differs from the typical MRPII system in technical requirements such as graphical user interface (GUI), relational database management system (RDBMS), use of fourth-generation language (4GL), and computer-aided software engineering (CASE) tools in development, client/server architecture, and open-system portability;
2) More generally, a method for the effective planning and control of all resources needed to take, make, ship, and account for customer orders in a manufacturing, distribution, or service company."
Given many new very recent functional and technological developments, which will be analyzed in other upcoming articles, many may rightly consider certain parts of the above definition as somewhat outdated or not all encompassing. In general, the second part of the definition holds true, given traditional ERP involves software packages that by and large automate and support the processes of the administrative, production, inventory, and product development aspects of an enterprise.
No comments:
Post a Comment