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Enterprise Resource Planning (ERP) systems are software solutions that integrate and provide desired data in real-time to users in any part of a manufacturing enterprise allowing everyone to operate in sync and with less headaches. Typically, ERP systems encompass the major functions in the manufacturing environment: order management, production planning, production scheduling, production management, inventory management and distribution, and product costing. The enterprise database is critical to all the activities and is the nerve center of the ERP system.
An ERP system enables the company to focus on the five R's, which are essential for a profitable operation: producing the Right Product of the Right Quality in the Right Quantity at the Right Time and at the Right Price to the delight of the customer. While providing "asset visibility", the status of an order or product throughout the enterprise, an ERP system can serve as a valuable decision-making tool and help the company answer the following key questions:
- What product do we want to produce?
- What are our production time constraints?
- How do we produce the product?
- How much do we produce?
- How do we allocate resources for production?
- What is the target product quality?
- How much will it (and did it) cost to make the product?
- What is the degree of customer satisfaction?
A well-designed ERP system will have separate "modules" to answer questions related to each facet of an enterprise's operations while simultaneously providing an overall or integrated view of the entire enterprise.
From MRP to ERP - A Historical Overview
Manufacturing control systems have undergone a major transformation since the early introduction of Material Requirements Planning (MRP). The industry standard for computing support of MRP II implementations has been the traditional "closed-loop" material requirements planning (MRP) and Capacity Requirements Planning (CRP) system. In response to the problems of a previous generation of materials management practices, MRP emerged in the 1960s and came into widespread use. The output of the MRP process served as input for a CRP process.
These traditional MRP/CRP systems are still widely available today. They represented a major advance over the order point methods they replaced. Many companies have been significantly improved through their use.
Evolution of MRP II and ERP
Over the years, a family of management practices took shape, which accompanied these closed-loop MRP/CRP systems, and which also gained status as de facto standards. These practices came to be called Manufacturing Resource Planning, or MRP II. Material Requirements Planning came to be known as "little MRP", while Manufacturing Resource Planning became "big MRP" or "MRP II". Changes in customer requirements, as well as technology, however, caused manufacturers to redefine the role of their MRP II systems once again. As more time passed, and computing concepts and technology allowed, the scope of the business systems widened to become Enterprise Resource Planning or "ERP".
The "scope" of manufacturing planning systems has increased with each major generation change. The migration from MRP to MRP II heralded a change from solely a materials emphasis to a holistic view of the manufacturing environment. Enterprise resource planning continued this trend. In addition, ERP adds technology aspects to the overall system requirements. These include features such as a client/server distributed architecture and object-oriented programming (OOP) development practices. Both of these factors make the ERP system more scaleable. This scalability in turn lends itself to departmental applications that can more easily extend into customer and supplier environments. As manufacturers evolve to supply chain management operations, mutual access to both the customer's and supplier's planning systems is a logical extension of the enterprise.
The Full Potential of ERP
As ERP continues to evolve into a real-time planning tool, it will play a more strategic role in helping companies achieve their business objectives. Further, manufacturers can no longer operate in a vacuum, they must look at the bigger picture and create a new vision for their business. This vision will help manufacturers make the transition from an "order, launch and expedite" mentality to an integrated flow that links customers with manufacturing processes and suppliers. As companies implement supply chain operations, traditional MRP applications will not meet the changing requirements. These applications must evolve to play an integral supporting role in the creation of a "value chain", where users measure true value in terms of the ability to meet changing customer requirements.