The term ERP was first used in the 1990s by the Gartner Group, but enterprise resource planning systems actually have their roots deep in the manufacturing industry, and can trace their history back to the 1960s. At this time, manufacturers needed a better way to manage, track, and control their inventory. Basic software solutions, known as MRPs or Material Requirements Planning systems were developed to meet their needs. These systems helped manufacturers monitor inventory, reconcile balances, as well as included very basic manufacturing, purchasing, and delivery functions.

The term ERP is an acronym for Enterprise Resource Planning, but even the full name doesn’t really tell you what an  ERP is and what ERP software does. To truly unpack what Enterprise Resource Planning means, take a minute and think about all of the departments and processes involved in running your business—inventory management, purchasing, accounting, engineering, sales, production, and your shop floor to name a few.

It all started back in the 1960s when the birth of cloud computing took place. With the rise in factory production demand, the need for the management of products also increased. This was also in need to keep the right balance along with maintaining the customer demands. So in order to plan and manage the complete manufacturing process to production & delivery, Materials Requirement Planning (MRP) software was made. The whole process of only having to stock up the required inventory has enabled the companies to invest and utilize their resources better. And back in 1975, almost all firms were using MRP software to operate their manufacturing process. But the operation cost of it was only affordable for the large businesses only.

Now the ERP systems marked again with another big milestone in the 80s. This is when the MRP II software came into the picture. It was a more advanced and sophisticated solution than the last one. It supported the whole manufacturing process way beyond the inventory and procurement of raw materials. The latest MRP II software had more advanced production scheduling abilities. And it would be able to coordinate better with the various departments of the business. And all this was involved with the manufacturing of products.

Then in the 1990s, a more advanced & extended version of MRP & MRP II came. This was termed Enterprise Resource Planning (ERP). The system and functionalities of ERP include CRM, HRM, Project Management, Accounting, and Engineering.