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Introduction to ERP in manufacturing

Today's ERP systems have evolved from the MRP systems of the past. In this introduction to ERP, you'll learn how ERP systems work in manufacturing.

This introduction to ERP in manufacturing covers the evolution and basics of modern manufacturing enterprise resource planning (ERP) software. These systems integrate all business operations of a manufacturing industry including design, quotation, sales order, material requisition plan, purchasing, production planning, manufacturing process control, inventory control, shipping and logistics.

ERP tutorial: a brief history

The first centralized software systems for companies grew out of MRP or materials requirements planning, said Dr. Mark Ferguson, director, technology and management program, Georgia Tech College of Management. In this way, the ERP systems also grew out of manufacturing applications.

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MRP systems were developed by IBM to automate the process of ordering components that mainframe computers used to assemble products. These original MRP systems ensured that all the components, from various sources, arrived at the same time, so that production met pre-set delivery dates.

Today, all of this information about material resources such as bill of materials (BOM), materials suppliers and vendors is maintained on a single system that is accessible and adaptable from initial design of a product through production and shipping.

In addition, a modern manufacturing ERP system lets companies share critical, real-time business information from production to customer sales, throughout the entire enterprise and assembly process. The system manages multi-location operations and subcontracting work, which is a common element in the manufacturing industry.

ERP systems also serve as a company's centralized global database so that every location uses the same system to track inventory.

"The part numbers are all the same (now); that wasn't always the case," Ferguson said, noting that in the past -- even within the same company -- various departments might have used different software applications or even different databases. According to Ferguson, this was always a significant challenge for integration and achieving economies of scale.

The most sophisticated manufacturing ERP systems offer even greater visibility into the supply chain -- all the way to suppliers.

"You can integrate your ERP system with your supplier's ERP system, so you know exactly where in the process your order is," Ferguson said. "If you need to expedite an order, it's much easier to do when you have integrated systems. That way, you know where everything is located in the manufacturing environment."

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About the author: Catherine LaCroix is a freelance writer based in Portland, Ore. She covers technology used in business, education and healthcare.

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