The need for automated inventory management was highlighted in the 1960s by the high cost of inventory shortages in manufacturing operations with long, expensive set-up cycles – for example automotive manufacture. Computers were already used to schedule production and Material Requirements Planning (MRP) applications were developed to schedule materials using exploded Bills of Materials (BoM) and lead time information.
It was soon discovered however that this approach did not address excess inventory levels as materials sat waiting for a production line slot where there was insufficient capacity. Capacity Resource Planning (CRP) methods were incorporated to solve this and the applications became known as Manufacturing Resource Planning (MRPII) systems. Properly applied, MRPII resulted in lower inventory, shorter lead times, better utilisation and improved customer service.
Over time, these applications were extended to cover more management functions including order processing, financials, engineering, quality assurance and marketing and in the 1990s, were again re-labelled – this time as Enterprise Resource Planning (ERP) systems. By this time, the original MRPII-type functionality was often no longer the key element and systems were available for most modes of manufacturing. Crucially, the efficiencies to be gained from a successful ERP system implementation soon made them essential to maintain competitiveness.
The original applications were expensive and developed for large mainframe computers so take-up in the Small to Medium sized Enterprise (SME) market was initially low until personal computers became more widespread in the 1990s. During this decade, the technology continued to migrate downwards along with the proliferation of local area networks, the Graphical User Interface (GUI) and computer literacy. Implementation of accounting software was often a pre-cursor to the more extensive computerisation of manufacturing management through ERP.
During this downward migration of ERP technology it became apparent that software and implementation techniques designed for larger organisations were not necessarily appropriate for smaller ones. In the SME market, financial resources for both hardware and software investment were usually constrained and staff resources for implementation projects and system management were more likely to be scarce.
This has been addressed by the emergence of vendors dedicated to the smaller manufacturer, employing the latest technologies to minimise hardware requirements, reduce development costs, maximise ease of use and automate system management. Factor in the latest implementation methodologies, applied by experienced SME manufacturing consultants, and it is clear that the special requirements of the SME are no longer being ignored.
As a result, manufacturing ERP can now assist the SME in achieving manufacturing excellence and is rapidly becoming indispensable to maintain a competitive edge. Even organisations with only a handful of employees are now realising significant benefits in terms of increased efficiency by use of the latest systems. Future pressures on manufacturers, competitiveness in the marketplace and further developments in information technology are likely to accelerate this trend, leading to universal adoption of manufacturing ERP.