This is Part 1 of a 9 Part Series on the History of ERP.
An Introduction to ERP
Like many of my readers, I’ve been involved in ERP for a long time and every once in awhile I ask myself what are the most important events in ERP history? Were they something that happened in the early days of the computer? Was it when Gartner first used the term ERP? Or was it the formation of SAP in 1972 or some other event?
The following series of articles (in my opinion), highlight the evolution of ERP software and some of the most crucial events in ERP history. Which one marks the birth of ERP software? I personally think it all starts with the conception of little known LAMP in 1966 by Gene Thomas but you be the judge.
IBM was without a doubt the company behind today’s ERP systems with dozens of employees working on the earliest of bill of material and material requirements planning systems. IBM employees and alumni include Gene Thomas who invested the concept of the first bill of material processor (BOMP), Josepeh Orlicky who is considered by many as the father of Material Requirements Planning (MRP) for his work on net change and passion to promote MRP to the masses, Oliver Wight who was there in the early days and worked tirelessly to advance MRP to Manufacturing Resources Planning (MRP II), Richard “Dick” Lilly who worked on early MRP systems at IBM including Production & Inventory Control System (PICS); and George Plossl who contributed immensely to material requirements planning from the early days in the 1960s and the coming decades where MRP truly become mainstream.
NOTE: THE FOLLOWING IS ACCURATE TO THE BEST OF OUR KNOWLEDGE. PLEASE NOTIFY US IF YOU HAVE MORE DETAILS OR BELIEVE ANY OF THE FOLLOWING TO BE INACCURATE.
But let’s start further back for a moment. The concept of MRP conceptually goes back to at least the 1940s if not earlier. The following appeared in “The early road to material requirements planning” published in the Journal of Operations Management by Vincent A. Mabert in 2006:
“Even during World War II, the basics of material planning systems were being used, but the medium was a manual punched card approach versus computers with random access memory (RAM) and disk drives that are in use today. For example, the Ford Motor Company plant at Willow Run (Michigan) produced ten different models of B-24 bombers during the war. Using a modular design of 24 major subassemblies and batch scheduling of fabricated major components, the production rate peaked at 25 planes per day coming off the assembly line. To manage the production flow on the shop floor, the material planning process used punched cards, tabulating machines, reproducers and sorters to determine requirements for the major items from the set of 30,000 components that were needed in the plane. The card’s punched data contained the order quantity, due date, department, work center, etc. for the order. Using pre-punched bills of materials, the keypunched order cards were processed through a series of steps as illustrated in Fig. 3. By collating, summarizing, gang punching and sorting the requirements cards, a material plan was developed for the production horizon for the different B-24 models. A slow and time-consuming function, normally requiring many data processing operators to handle tens-of-thousands of punched cards for a routine single update. While the approach was very labor intensive, the general logic is the heart of an MRP system.
In a simple sense, inventory optimization is what you get when you strike a balance between having enough inventory to satisfy your customer service standards while stocking as little inventory as possible. Customer service standards involve meeting demand—but not past the point that you have too much. But inventory optimization gets complicated when supply and
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