History: Inventory Control → MRP → MRP II → ERP → Cloud ERP

You need this history because the vocabulary of modern ERP is fossilised history. Terms like “MRP run”, “explosion”, “backflush”, “lot sizing”, and “shop floor control” all come from 1960s manufacturing, and they are still the exact words on the screens you will build.

1950s–60s — Inventory Control Packages (IC / ICS)

  • Mainframe programs that tracked stock quantities and reorder points.
  • Core idea: reorder point — when quantity drops below X, buy Y.
  • Weakness: reactive. Good for independent demand (things customers buy directly), useless for dependent demand (components you need because you’re building something).

Legacy terms you still see: reorder point, safety stock, EOQ (Economic Order Quantity), ABC analysis.

1960s–70s — MRP (Material Requirements Planning)

The breakthrough insight, credited to Joseph Orlicky (IBM) and popularised by Oliver Wight and George Plossl:

Demand for a component is not random. It is calculable from demand for the parent product.

MRP takes three inputs:

  1. MPS — Master Production Schedule (what finished goods, when, how many)
  2. BOM — Bill of Materials (what goes into what)
  3. Inventory records — what you already have and what’s already on order

…and produces planned orders: buy 400 bearings by March 3, make 120 gearboxes starting Feb 20.

The algorithm is BOM explosion + netting + lead-time offsetting. This is still the beating heart of every ERP’s planning module. See MRP and Planning.

Legacy terms: explosion, netting, time-phasing, lead time offset, planned order, firm planned order, pegging, low-level code, planning horizon.

1980s — MRP II (Manufacturing Resource Planning)

MRP only planned materials. MRP II added:

  • Capacity planning (CRP) — do we actually have the machine hours?
  • Shop floor control — track work as it moves through operations
  • Financial integration — the plan expressed in money, not just units
  • Closed loop — feedback from the shop floor adjusts the plan

Coined by Oliver Wight. The key phrase is “closed loop”: the plan is not fire-and-forget, actuals feed back.

Legacy terms: work centre, routing, operation, load, infinite/finite capacity, closed loop, rough-cut capacity planning (RCCP).

1990 — The term “ERP” is coined

Gartner Group coins Enterprise Resource Planning to describe suites that extended MRP II beyond the factory into finance, HR, sales, and procurement across the whole enterprise.

The 1990s were the boom:

  • SAP R/3 (1992) — client/server, the defining product of the era. R/2 was mainframe; R/3 made ERP mainstream.
  • Oracle Applications, PeopleSoft (HR-first), JD Edwards, Baan
  • Y2K was a massive accelerator — companies replaced legacy systems wholesale rather than remediate them.

2000s — ERP II, consolidation, and web

  • Gartner coins ERP II (2000): ERP opens up to partners, customers, and the web. Collaborative commerce, portals, e-procurement.
  • Massive vendor consolidation: Oracle buys PeopleSoft (2005, which had just bought JD Edwards), Siebel (2006), Hyperion, Agile, Retek. Infor rolls up dozens of products. Microsoft buys Great Plains, Navision, Axapta, Solomon → “Dynamics”.
  • Best-of-breed vs suite becomes the standing debate: one integrated suite, or specialist tools glued together?
  • SOA and web services arrive; ERPs sprout SOAP APIs and ESB integration.

2010s — Cloud, SaaS, and in-memory

Four things changed at once:

  1. True multi-tenant SaaS ERP — NetSuite (founded 1998, the pioneer), then Workday (HR/Fin), Acumatica, Odoo cloud, Dynamics 365.
  2. In-memory databases — SAP HANA (2011) collapsed the OLTP/OLAP split; you could report directly off the transactional tables and delete decades of aggregate tables.
  3. Two-tier ERP — big suite at corporate HQ, lighter ERP at subsidiaries, integrated.
  4. The “clean core” doctrine — stop modifying the core product; extend it via sanctioned side-by-side platforms so you can keep upgrading.

2020s — Composable, API-first, and AI

  • Composable ERP (Gartner) — treat ERP as a set of interchangeable, API-connected capabilities rather than a monolith. Practically: a core financial ledger plus best-of-breed satellites.
  • Headless / API-first ERP — the ERP is a backend; the UI may be your own.
  • Continuous compliance — real-time e-invoicing and government reporting mandates (Italy SdI, India IRP/GST, Brazil NF-e, Saudi ZATCA, EU ViDA) force ERPs to talk to tax authorities per transaction.
  • Forced migrations — SAP ECC mainstream maintenance ends 2027 (extended 2030), pushing the largest ERP migration wave in history to S/4HANA.
  • AI in ERP — demand forecasting, anomaly detection in postings, invoice extraction (OCR + LLM), natural-language reporting, agentic assistants for master data cleanup. Mostly assistive; the ledger stays deterministic.

Timeline at a glance 

1960s   Inventory control, reorder points
1970s   MRP — BOM explosion, netting, time-phasing
1980s   MRP II — capacity, shop floor, closed loop, finance
1990    "ERP" coined by Gartner
1992    SAP R/3 — client/server ERP goes mainstream
1998    NetSuite founded — first real cloud ERP
1999    Y2K replacement wave
2000    "ERP II" — opening to the web
2005-06 Oracle acquires PeopleSoft, JD Edwards, Siebel
2011    SAP HANA — in-memory, OLTP+OLAP together
2015    SAP S/4HANA released
2016    Oracle acquires NetSuite
2020s   Composable ERP, e-invoicing mandates, AI, S/4 migration wave
2027/30 SAP ECC maintenance ends

Why the fossils matter

When a functional consultant says “run MRP, check the pegging, then convert the planned orders and release to the shop floor”, they are speaking 1975. If you know the history, that sentence is a spec. If you don’t, it’s noise.

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