Accounting Information Systems: The Processes and Controls, 2nd Edition

HISTORY OF ERP SYSTEMS (STUDY OBJECTIVE 2)

ERP systems can be traced back to software that was developed during the 1960s and 1970s to track inventory in manufacturing companies. The first generation of this software was called materials requirements planning (MRP) software. MRP software of the 1970s allowed plant managers to coordinate the planning of production and raw material requirements. MRP software determined order size and timing of raw materials on the basis of sales forecasts, factoring in lead times for order and delivery of materials.

The typical computer hardware and software of the 1970s that were used to enable an MRP system were mainframe computers, sequential file processing, and electronic data interchange (EDI). The EDI allowed up-to-date information about inventories and status of orders to be processed quickly. As mainframe computers improved in speed and power during the 1980s, MRP software evolved into manufacturing resource planning (MRP II) systems. MRP II was much broader and more encompassing than MRP software. MRP software was intended to provide for the purchase of raw materials to support manufacturing needs. The purpose of MRP II was to integrate manufacturing, engineering, marketing, and finance units to run on the same information system and to use a single database for all of these functions.

As MRP and MRP II systems became more popular in large manufacturing companies, early pioneers of ERP systems were working on a broader concept of information ...