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IEI-4B2 – Enterprise Resource Planning

HISTORY OF ERP

Ari Yanuar Ridwan

S1 Teknik Industri – Fakultas Rekayasa Industri

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HISTORY OF ERP APPLICATION (1)

History of ERP and Enterprise Applications

Source: Ray, Rajesh. Enterprise Resource Planning: Text & Cases. Tata McGraw Hill, 2011

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HISTORY OF ERP APPLICATION (2)

• Material Requirement Planning (MRP)

• Closed Loop MRP
• Manufacturing Resource Planning (MRP II)
• Enterprise Resource Planning (ERP)
• Enterprise Applications and Industry Specifi c ERPs

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Material Requirement Planning (MRP)

• Which finished products are needed to be manufactured?

• What is the quantity of raw materials/components needed to
make these finished products?
• How much of this are available in stock?
• How much to order?
• How much components/sub assemblies are to be
manufactured in-house?
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Closed Loop MRP

• The biggest challenge of MRP logic is that it goes by finished goods requirement
and not look at feasibility of the plan.
• For example, an automobile manufacturer’s forecasting for next year is 1000 cars,
MRP tells that it need to manufacture thousand gear boxes (assuming zero stock of
gear box) and buy four thousands tires to make 1000 cars.
• However, if the car manufacturer has capacity of producing only 800 gear boxes and
its suppliers can supply only 3000 tires, MRP does not bother about this reality. So,
an MRP plan always needs to be validated and compared with reality and checked
with its feasibility.
• Closed loop MRP made it possible where an ERP plan is always checked against
available capacity and alerts/triggers are provided to the planner, if the same is not
feasible.

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Closed Loop MRP

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Manufacturing Resource Planning (MRP II)

• MRP II extends beyond manufacturing and production and includes processes from
business planning, sales planning, forecasting, demand management, etc.
• The greatest strength of MRP II is its sales and operations planning (SOP) process,
i.e. it integrates business plan, financial plan, production plan, capacity plan and
material plan.
• Another big difference of MRP II applications with that of MRP was that these
applications were not only used for planning but also used to help in all supply
chain execution processes like creating purchase order, creating invoices and billing
document, inventory management, etc.

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Manufacturing Resource Planning (MRP II)

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Enterprise Resource Planning (ERP)

• ERP software started emerging in late 70s and early 80s. Whatever available as part of MRP and MRP II
applications were already part of ERP, and ERPs had much more process and functionality coverage
than MRP and MRP II.
• ERPs started offering functionalities in the areas of warehouse management, plant maintenance,
quality management, service management, human resource, etc. which were traditionally not covered
by MRP II.
• ERP applications also have capabilities of collaboration and integration with other advanced e-Business
applications like CRM, SRM, PLM, etc.
• Another important difference of ERP application with MRP and MRP II applications is that unlike others
it is not restricted only to manufacturing industry and can be equally used for service business,

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Enterprise Applications and Industry Specific ERPs

• ERP applications started moving into specialized spaces like supplier

relationship management (SRM), customer relationship
management (CRM), product life cycle management (PLM),
advanced planning and scheduling (APS), etc.
• These spaces used to be earlier occupied by specialized vendors like
Siebel, i2, Winchill, etc. ERP vendors started producing Enterprise
Business Suite and Industry-specific offerings.

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THANK YOU

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