MRP and MRP II explained

In this article you will learn about how Material Resources Planning (MRP) developed into Manufacturing Resource Planning (MRP-II) and ERP. We make use of the summary article Enterprise resource planning (ERP) – A brief history written by Jacobs and Weston (see full reference below).

Random Access Memory (RAM) that became available in the 1970s allowed the execution of Material Requirements Planning (MRP) on computers. Before that, in the 1960s, calculating the requirements for a production process was a tedious effort. A lot of manual calculations were needed to take all required components, the available stock and lead times of orders into account.

In the mid 1970s systems began to appear that can be called precursors of current Enterprise Resource Planning (ERP) systems. MRP was a core process in these systems. In addition they would offer accounting, integrated to customer orders. These systems would also generate purchase orders. In the late 1970s more advanced functions were added like sales analysis, forecasting of demand, invoicing, payroll and inventory management. Large mainframe computers and later mini computers were needed to run these systems.

With the increasing power of hardware and the possibilities of software it became possible to add more functions. The development of database technology enabled such systems to start making use of a central relational database. The term Manufacturing Resource Planning (also called MRP-II) became used to identify these new possibilities. The integration to quality monitoring, detailed cost reporting, and due date scheduling of procurement were examples of features added. The normal mode of operation was still ‘batch’ where periodically jobs would run and extensive print-out reports would be generated.

In the 1970s and 1980s several pioneering vendors emerged that would further innovate MPR, MPR-II into ERP. IBM in 1978 had released a new and integrated suite of applications called Manufacturing, Accounting and Production Information and Control System (MAPICS). In 1978 SAP released the SAP R/2 system that used mainframe technology for ‘real time’ order tracking. JD Edwards developed software in the early 1980s that made used of new flexible disk drive technology to offer MRP-II systems for small and medium sized businesses. The company Baan developed a system on UNIX in the early 1980s making it more hardware independent and offering a flexible architecture. Standard relational databases as introduced by Oracle became a key part of the architecture. Peoplesoft released a human resource management system in the late 1980s that would innovate the human planning function.

These vendors would further develop these systems into an integrated cross functional packaged software system. These software was coined Enterprise Resource Planning (ERP) in the early 1990s (by Gartner group). A key aspect of ERP is that the software functions offer integration within and across business silos. Moreover, ERP offers support for core business functions such as sales, planning, procurement, production and distribution as well as supporting functions such as human resources, accounting and facilities management.

In the 1990s till today, the ERP market became highly innovative and dynamic. New vendors would emerge offering systems with unique features or tailored to specific markets. Existing vendors would merge or acquire software solutions and often attempt to integrate these into more comprehensive solutions. Today, an ERP systems is considered the backbone of a modern business. While you may often run into a legacy ERP, badly implemented ERP, or a lack of ERP altogether, ERP systems are required as key building blocks of Supply Chains. The current generation of ERP systems is much better suited to meet the needs of supply chain innovation.

Sources:

Jacobs, F. R. (2007). Enterprise resource planning (ERP)—A brief history. Journal of Operations Management, 25(2), 357-363.

Kumar, K., & van Hillegersberg, J. (2000). Enterprise resource planning: introduction. Communications of the ACM, 43(4), 22-26.