EVOLUTION OF ERP

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3 Inventory Management & Control – 1960’s

 Inventory Management and control is the combination of information technology

and business processes of maintaining the appropriate level of stock in a
warehouse.

 The activities of inventory management include identifying inventory requirements,

setting targets, providing replenishment techniques and options, monitoring item
usages, reconciling the inventory balances, and reporting inventory status.

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4 Material Requirement Planning (MRP) - 1970’s

 Materials Requirement Planning (MRP) utilizes software applications for

scheduling production processes.

 MRP generates schedules for the operations and raw material purchases based
on the production requirements of finished goods, the structure of the production
system, the current inventories levels and the lot sizing procedure for each
operation.

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5 History of MRP

 MRP was created initially to supply the Polaris program in 1964, as a response to
the Toyota Manufacturing Program, Joseph Orlicky developed material
requirements planning (MRP).

 The first company to use MRP was Black & Decker in 1964, with Dick Alban as
project leader.

 Orlicky's 1975 book Material Requirements Planning has the subtitle The New
Way of Life in Production and Inventory Management.

 By 1975, MRP was implemented in 700 companies. This number had grown to
about 8,000 by 1981.

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6 Advantages of MRP

 No over charging – Today, all the manufacturers print a tax inclusive price on all
the packaged goods. Thus, there are less number of complaints by the customers.

 Single rate - Because of a fixed MRP, the manufacturers produce a product with a
fixed rate and it is applicable all over the country.

 Purchasing power – MRP helps to create an awareness about the purchasing

power among the consumers. Purchasing power is the financial ability of the
consumer to buy a product or service.

 Less loss – The main merit of MRP is that the occurrence of tax loss is very less.

 Protects the rights of consumer – MRP is essential to protect the rights of the
consumers in the remote or rural areas. In such areas, the consumers do not have
the choice to go to various stores in search of the right price.
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7 Disadvantages of MRP
 Cost of transportation – Retailers in remote areas have to bear a high
transportation cost and they cannot pass it on to the end customer.

 Old stock – At times, the manufacturers increase the MRP and sell the old stock
on new price rates. When an explanation is demanded by the customers, the
manufacturer tells that the price has increased due to the changes in duties or
increase in cost of production.

 Complicity – MRP provides a focal point to the retailers. It becomes a genuine

uniform price and thus, creates retail price complicity. At the end, MRP turns out to
be hurting the customers.

 Consideration of other states – Before fixing the MRP rate of a product, the
manufacturer, takes into account the highest tax rate which is charged on the
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product by any state in India.
8 Manufacturing Requirements Planning (MRP II) – 1980’s

 Manufacturing resource planning (MRP II) is defined as a method for the

effective planning of all resources of a manufacturing company.

 Ideally, it addresses operational planning in units, financial planning, and has a

simulation capability to answer "what-if" questions and extension of closed-loop
MRP.

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9 History of MRP II

 In 1983, Oliver Wight developed MRP into manufacturing resource planning (MRP
II).

 In the 1980s, Joe Orlicky's MRP evolved into Oliver Wight's manufacturing
resource planning (MRP II) which brings master scheduling, rough-cut capacity
planning, capacity requirements planning,

 By 1989, about one third of the software industry started using MRP II software.

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11 Enterprise Resource Planning (ERP) – 1990’s

 Enterprise Resource Planning or ERP uses multi-module application software for

improving the performance of the internal business processes.

 ERP systems often integrates business activities across functional departments,

from product planning, parts purchasing, inventory control, product distribution,
fulfillment, to order tracking.

 ERP software systems may include application modules for supporting marketing,
finance, accounting and human resources.

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23 Extended ERP – 2000’S

 Extends the foundation ERP system’s functionalities such as finances, distribution,

manufacturing, human resources, and payroll to customer relationship
management, supply chain management, sales-force automation, and Internet-
enabled integrated e-commerce and e-business.

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26 ERP I, ERP II, & ERP III

 ERP applications integrate enterprise operations within and across enterprise legal
entities, or company codes.

 ERP ii (or ERP 2) applications extend supply functionality to external enterprises

(generally vendor-affiliated companies or enterprises) to reduce cost, improve
supply chain efficiency, and to perform collaborative innovation.

 ERP iii (or ERP 3) enterprises go to the next level of integrating the ERP and ERP
ii functionality to include customers and the sales side of the marketplace into
enterprise operations. Your customers become active participants in your
business.

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28 Next Generation ERP

 The next generation ERP is based on two fundamental shifts that have a sizable
impact on using the systems.

 The first is a shift to cloud based ERP. You no longer need to invest in having a
system of your own – instead, you can buy it as a service straight from the service
provider, safely and securely, while ensuring that the data is always kept in the
home country, if so desired.

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29 NEXT-GENERATION ERP PLATFORMS MUST REFLECT THE
REALITIES OF HYBRID IT

 CIOs recognize that a hybrid IT strategy, which melds on-premise solutions with
cloud-based services, is a powerful catalyst for change in the very near future.
However, most are less clear about how to develop a strategic roadmap and
optimal timeline for making a smooth transition to hybrid IT as part of a shift toward
a next-generation ERP platform.

 Next-generation ERP systems must mirror the broader strategy of hybrid IT.
Specifically, next generation ERP will involve the deconstruction of yesterday’s
monolithic ERP platform into loosely coupled applications that work in concert,
some running in the cloud and others on-premise. A core suite of business
applications will remain, supplemented by a collection of smaller-footprint, best-of-
breed applications.
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30  The vision for a next-generation ERP platform in the hybrid IT era is coexistence
and flexibility, with individual solutions based on functional need, ease of use, and
agility rather than allegiance to a single vendor strategy.

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STILL EVOLVING

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THANK YOU

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