I am always intrigued when I see comments about “ERP” on LinkedIn. Vendors and vendor partners post their thoughts, customers share their experiences with implementations (both good and bad), and consultants offer insights. However, it’s clear that the term ERP is often misunderstood and widely misused.
I encounter this misunderstanding frequently when working with vendors, partners, or customers discussing ERP replacements. Often, what they really mean is the replacement of a finance system or a supply chain system, but when I dig deeper, it becomes apparent that they are not talking about a comprehensive ERP solution.
Let me explain. My career has spanned the evolution from MRP (Materials Requirements Planning) to MRP II (Manufacturing Resource Planning) and then to ERP. MRP was initially developed to enable time-phased inventory calculations for organizations, primarily in manufacturing, as the volume of data became too large for manual processing. Once MRP was adopted and computing resources became more accessible, the next logical step was to incorporate manufacturing planning—previously disconnected from materials planning—into a unified system. This led to the creation of MRP II, aimed at providing realistic demand and supply calculations to enhance both inventory and manufacturing planning.
With the rise of this new technology (remember, this was all before the internet!), the goal evolved to deliver a single application capable of managing all enterprise functions—finance, CRM, service, HR, warehousing, and more—providing a comprehensive solution that everyone in the organization could use, all relying on a single source of data. Thus, ERP—Enterprise Resource Planning—was born.
Since then, we have seen iterations of ERP, such as Postmodern ERP or ERP II, which incorporate web capabilities, cloud solutions, and more recently, AI enhancements. However, when we refer to ERP in its original sense, we are talking about a monolithic application that handles everything, eliminating the need for other line-of-business applications.
The reality is that true ERP is quite generic. No matter how robust it is, it cannot cater to every industry or even every sub-industry. For instance, inventory management for textiles involves vastly different parameters than inventory management for automotive parts, and food manufacturing is distinctly different from appliance manufacturing. This has led to the emergence of best-of-breed applications tailored to specific industries or sub-industries, which can then be integrated with core applications within an organization.
So, when you use the term ERP, what are you really referring to?