Implementation of Enterprise Resource Planning (ERP) Systems can be very advantageous to large companies with complex business structure. An ERP system can help to enhance system integration, simplify database management and provide consistency across a platform. These systems are, however, expensive to install and may require the organization to change its structure or processing procedures to work with the ERP solution. It is important for an organization to use diligence while researching ERP systems to ensure one is selected that integrates well with business processes, existing systems and applications and meets the requirements to perform all necessary tasks.
Originally designed for the manufacturing industry to assist with efficient planning and processing, an Enterprise Resource Planning (ERP) System utilizes both software and business strategies and is designed to integrate information across an organization. These systems help various departments, from sales and service to accounting and HR to data processing and manufacturing, share and process data more efficiently. Repetitive business activities can be reduced or eliminated as tasks can be automated by the ERP system. Organizational performance can be increased substantially as ERP applications can assist with resource planning as well as management and operational control. In order to be effective across different departments, the majority of ERP systems are constructed of multiple software modules, each module is designed to support common business activities in specific categories.
An organization must devote resources towards preparation and research before installing and implementing an ERP system. First, an ERP is not suitable for all organizations. If there are many departments that function independently of one another it may be difficult to get them under a single, comprehensive, software system. ERP software is customized for each individual company, thus it is important that business processes and workflow are analyzed and mapped. If the people doing the planning are unfamiliar with the businesses processes it is likely the ERP will be unsuccessful. Understanding customization options is another important aspect as an easily configured ERP may not offer as many customization options limiting its versatility and ability to grow with the company.
On the other hand, a highly customizable ERP may require the organization to customize the software on its own and it may be difficult to implement future upgrades. Frequently businesses processes need to be changed or updated to fit into the scope of the ERP being implemented. As a result an organization should make sure to include employees in the process and make sure they are up to date on the status of the changes, what is taking place and why. An organization that does not take the time to properly scrutinize an ERP system may end up with a system that does not meet their needs, incurring additional expenses in the future to improve the system. Adding an ERP is an expensive and time consuming process, it should be implemented correctly the first time.
There are additional advantages to address in implementing an ERP system. Departments are able to act independently on materials they are trained for and can more easily disseminate the information company wide. Databases are consolidated eliminating unnecessary duplicate steps and reducing ambiguity across the company. Customer service can be more effective and efficient as an ERP reduces the need for physical paperwork and information can be processed more quickly. Some disadvantages have already been mentioned, but there are others to consider. There is no guarantee an ERP will successfully provide the anticipated benefits, something management must be concerned with since acquisition and implementation is extraordinarily expensive and time consuming. Costs and time also must be considered in regard to employee training and becoming accustomed to the new applications and layout. A company can also lose a competitive edge if the ERP requires changes to long-standing business processes.
There are many reasons an organization may consider an ERP. The potential benefits from such a system could lead to increased productivity, more efficient customer service, faster processing and a more integrated business. Introducing an ERP is cost and time prohibitive, so management must be certain it will meet the stated needs before moving forward. Businesses that do not commit to extensive research and understand the system will likely end up wasting time and money trying to get the insufficient system to perform the required tasks, or may have to throw it out altogether and find a new solution. While an ERP system may be important or useful for a particular organization, it is even more important the organization use due diligence during the decision making process to avoid any undue hardship.