Enterprise Resource Planning and Integration

Enterprise resource planning (ERP) is a state-of-the-art approach to running organizations with the help of comprehensive information systems, providing support for key business processes and more general, for electronic business (e-business). ERP has evolved from earlier approaches, in particular, materials requirement planning (MRP) and manufacturing resource planning (called MRP II) in the 1980s. The focus of MRP and MRP II was on manufacturing firms. The essential problem that MRP attacked was to determine suitable quantities of all parts and materials needed to produce a given master production schedule (also called a “production program”), plus the dates and times when those quantities had to be available. Application packages for MRP have been available from the 1960s on. In the beginning, they were mostly provided by hardware vendors like IBM, Honeywell Bull, Digital Equipment, Siemens, etc. MRP was later expanded to closed-loop MRP to include capacity planning, shop floor control, and purchasing, because as Oliver Wight (1884) puts it: “Knowing what material was needed was fine, but if the capacity wasn’t available, the proper material couldn’t be produced” (p. 48). The next step in the evolution was MRP II (manufacturing resource planning). According to the father of MRP II, Oliver Wight, top management involvement in the planning is indispensable. Therefore, MRP II expands closed-loop MRP “to include the financial numbers that management needs to run the business and a simulation capability” (Wight, 1984, p. 54). Enterprise resource planning (ERP) has its roots in the earlier MRP II concepts, but it extends those concepts substantially into two directions. ERP takes into account that other types of enterprises than those producing physical goods need comprehensive information system (IS) support as well, and even in the manufacturing industry, there are more areas than those directly related to the production of goods that are critical for the success of a business.