Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

9.1 Software in the Area of ERP and SCM: An Introduction

Intended learning outcomes: Produce an overview on history and origin of ERP software. Disclose scope and range of ERP and SCM software.

9.1.1      History and Origin of ERP Software

Software as a technology first gained acceptance in the late 1950s, as soon as data could be stored on suitable media, rather than having to “plug in” the computer programs every time they were used. During this period, the computer world was dominated by a single company — IBM (International Business Machines).

IBM was founded by an American named Hollerith who had introduced a system to classify the data obtained from the American census in the second decade of the 20th century. This was based on light and electrical circuits (and subsequently electronic circuits). It was also the origin of the term “electronic data processing.” The medium used to store the data was the famous punched card. The way in which information was encoded on a punched card was a clever invention, as were the machines for punching and then reading the punched card. Essentially, every character (or “byte”), whether it was a letter, number, or special character, was assigned a unique sequence of six holes. The two states, “hole” or “no hole,” thus formed the smallest unit of information — a binary number (0 or 1) known as a “bit.” This sequence of 6 bits could be combined in 26 = 64 different ways, enabling 64 different characters to be represented (which had to include the control characters for processing). Figure shows an extract translated from Hollerith-Mitteilungen (Hollerith News), 1913 ([IBM83], translated by the author). The reference list shows that the system had also quickly gained wide acceptance in Europe because of its ability to perform logistics tasks within a company. The “Hollerith variations” show two possible applications. The second example also directly highlights implicitly an important problem associated with data processing, that is, data protection.

Right from the start, Hollerith’s idea was intended to process large quantities of data quickly and accurately. This saved an incredible amount of time, resulting in greater productivity and ultimately a new industrial revolution. The basic idea was perfected over the following decades. For example, the character code was extended from 6 to 7 or 8 bits, that is, 256 possible combinations per byte (ASCII[note 901] or EBCDIC[note 902] code) so that lowercase and special characters could be included. The hole in the card was gradually replaced by a two-digit state on a magnetic disk or tape, which resulted in the development of suitable searching and reading devices.

Since the introduction of data processing in the early years of this century, the quantity and the speed of the processed data have increased dramatically. However, the logical principle used to display and process information and the conditions for IT support of an informa­tion system (see the introduction of this chapter) have not changed at all.

These facts are important if we are to understand the possibilities and limitations of data processing. This ingenious idea combined with Hollerith’s business sense enabled IBM to hold the monopoly of the commercial use of this technology for many years. The early ERP software also originated from IBM. Copics (Communication-Oriented Production Information and Control System) was the most well-known standard software package of the 1960s, and for a long time was the standard for further developments in this field. See also [IBM81]. This software was designed, in particular, to meet the needs of the major industries of that period — mechanical engineering and automobile construction.

Fig.         Early software: use of the Hollerith system at operational level.

9.1.2      Scope and Range of ERP and SCM Software

ERP software was originally designed for modeling products and produc­tion processes, administering orders, and preparing accounts. These tasks were soon supplemented with planning functions for resource management (goods and capacity).

Between 1960 and 1980, many companies developed their own company-specific software that was precisely tailored to their needs. Data were then transferred from forms to punched cards and processed in batches at computer centers. The range of such software was ge­ne­rally just a few years. A new software generation came in the late 1970s, with the develop­ment of the computer monitor (character format with 24 rows * 80 characters). Relational databases that could handle large volumes of data first appeared at roughly the same time. These provided users with direct access to the data and to the programs that process this data (online or interactive techniques). The software from this period is sometimes still in use today, enhanced by the graphical user interface (GUI) introduced in the late 1980s.

ERP standard software was only seen in large companies up until the mid-1970s. The most common applications could be found in companies with logistics characterized by convergent product structures, batch production, and production with order repetitionand with high utilization of capacity as their entrepreneurial objective. The first generation of standard soft­ware, such as the Copics package, was also developed for this user profile. Since then, standard software gradually improved to also meet at least partially the needs of small- and medium-sized companies and their flexible forms of organization. Since the mid-1990s, software for SCM has also been available.

Current software challenges in the areas of ERP and SCM are due, for one thing, to technological developments. Mobile end user devices such as iPhone and iPad increase the demand for mobile applications, making it possible to use various ERP or SCM software functionalities independent of location. “Cloud com­puting” means that the data and programs are no longer stored on an individual computer. Large main storages allow “in-memory computing,” which means that the data no longer have to be read by a hard disk storage unit and instead are kept in the main storage.

In the organizational area, software is currently challenged by the globalization of firms. The software has to be able to be linked up globally, which is not easy owing to different languages, some of them not alphabetic, and local differences in the qualifications of personnel. In addition, there continues to be a demand for increased customization of functionality. Service-oriented architecture (SOA) has been developed to meet this demand. SOA is the concept of encapsulating functionalities in loosely coupled services, which can then be flexibly combined for new application functionalities.

ERP and SCM software is still surprisingly long-lasting. The typical life span is 10 years or more, and 20 years is not unusual.[note 903] What is the reason for this longevity? A change of hardware or software is both expensive and full of risks: for integrated packages, in particular, it would affect every operational order processing system — and thus a large number of users and a wide range of IT-supported processes. Any mistakes would immediately have a detrimental effect on the company’s ability to add value and thus to do business. In addition, the ERP and SCM software developers who enter the market take too little notice of the requirements of the users, with the result that packages created using the latest technology have inadequate data models and functionality.

Course sections and their intended learning outcomes

  • Course 9 – ERP and SCM Software

    Intended learning outcomes: Describe software used for logistics purposes. Explain contents of logistics software packages. Disclose factors for successful implementation of logistics software.

  • 9.1 Software in the Area of ERP and SCM: An Introduction

    .Intended learning outcomes: Produce an overview on history and origin of ERP software. Disclose scope and range of ERP and SCM software.

  • 9.2 Contents of ERP Software and SCM Software

    Intended learning outcomes: Describe classical MRP II / ERP software. Present software for customer order production, for the process industry, for transcorporate planning & control in a supply chain, and for Customer Relationship Management (CRM). Differentiate between standard and company-specific software.

  • 9.3 Factors for Successful Implementation of ERP and SCM Software

    Intended learning outcomes: Explain possibilities and limitations of the IT support of planning & control. Disclose factors that influence individual acceptance and the range of implementation of ERP software.

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