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The History of ERP

Hard to imagine running a business with out a computer aiding you.  But that is exactly what businesses did, more than 40 years ago.  Some of the biggest companies today, started before computers came on the scene.  So, how did they manage things before computers?  Can a business succeed today without the use of software and computers?  The simple answer, yes.  Is that the smart choice?  Simple answer, no.

No Computer, No Problem?

In 1950 if you owned a business, and wanted to succeed, it was important to fill a need and at a reasonable price.  Just like today, you needed to save money by keeping your running costs down.  To do this effectively, you must be organized, very very organized, and disciplined.  This also means you have to record everything, on paper...remember, there isn’t a computer yet.  So you have books, books for inventory, books for accounting, books for orders, books...well you get the point.  The amount of paperwork to make sure you are profitable is enough to make my hands cramp up just thinking about it.  But this is just what was needed 70 years ago, even 40 years ago.  You can do this, even today, but consider the amount of time you will spend only managing the “books”.

ERP was originally MRP, Material Requirement Planning.  And it was only a method of business management that was meant to help manufacturing companies plan for production.  This required manual and medial tasks to ensure accuracy.  This has long since been changed to ERP (Enterprise Resource Planning), first coined by Gartner in the early 1990's when they developed the first computer software to help manufacturing and production companies plan their projects.  This was the first time a company could use software to run their Enterprise taking the human element for mistakes out of the equation.  But business owners had to put their trust in a machine, which wasn't easy at first.  After seeing the value of using software to manage assets, a company could see it's profits grow exponentially.

Benefits of ERP Software

To make this point its really not hard to imagine running a business the old fashion way, paper and pencil in hand.  But lets consider the problems with that method:
  • You need to be vigilant about writing EVERYTHING down
  • You need to take daily inventory of your assets
  • You need to constantly update your records (by hand) showing the on hand and allocated inventory
  • You have to calculate employee time cards
  • You have to balance the P&L
  • The only reports you can look at are the results of accounting calculations for income, expenditures, payroll, maintenance, and anything else that costs or makes money
There are many many other things that you could add to the list above, but you get the point.  There is a TON of work involved in making you business successful, and many hours can be spent on the list. So, why not get those hours back by using software that is designed to do all of those things for you automatically?

Does this mean you don't have to do anything?  Not at all.  You still need to enter the information, still need to take inventory, still need to review reports, and still need to review payroll, and do other administrative tasks.  But the amount of time necessary to complete those tasks is greatly reduced when all you have to do is enter the information.

Think about a simple example that anyone can relate to.  You have a list of customers, in an old rolodex.  One of those customers calls you and orders your product to be shipped to their premise.  You take some notes on a piece of paper, and then go make the product.  Now it is time to ship that item to the customer, so you thumb through your rolodex of hundreds of customers trying to find the one you spoke to.  Finally you find his card, scribbled out is 2 different addresses, and a couple addresses remain, and a phone number.  But the phone number is incorrect, because they revised it and you wrote it somewhere else, but forgot to update the card!  What a mess, and potentially lost revenue.

Using an ERP will avoid all of this heartache.  In seconds you can find the customer you spoke with, and can see the correct set of phone numbers, email addresses, site addresses, and other important information.  That is if you remember to enter it into the Software! 😉


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