Enterprise Resource Planning and Lean Six Sigma

Background Of Enterprise Resource Planning

Enterprise Resource Planning systems are defined as integrated sets of comprehensive software. These sets usually include a set of mature business applications and tools for financial and cost accounting, sales and distribution, materials management, human resource, production planning and computer-integrated manufacturing (Bancroft, Seip, & Sprengel, 1996). With combinations of these fundamental software modules, companies are able to model a wide variety of business processes (ASAP, 1996). Over the last 20+ years a majority of large corporations have implemented ERP systems to automate and to manage their complete organization. These companies count on the ERP system to coordinate order management, support manufacturing operations, track customers, vendors and employees, improve customer service, increase inventory accuracy, track cash flow and financial transactions, etc. Further complicating this environment is the interfacing of ERP systems between companies where organizations are partnering to create “business to business” electronic commerce.

ERP systems date back to the 1970s. However, the name Enterprise Resource Planning was given to these types of systems in 1990 by the Gartner Group. The history of the ERP systems begins with Materials Requirements Planning (MRP) developed by Joseph Orlicky in 1964. MRP focused on production planning and inventory control. Oliver Wight expanded MRP into MRP II (Manufacturing Resource Planning) in 1983. Wight integrated master scheduling, rough-cut capacity planning, capacity requirements planning (CRP), and sales and operations planning (SOP) into the MRP II. Both MRP and MRP II were software-based systems. In the 1970s, several IBM software engineers stared playing with the idea of integrating more financial processes into the software. These engineers eventually formed the company SAP.