Enterprise Resource Planning: the usefulness, benefits and problems
Nowadays when businesses are operating in a highly automated business environment they have to adopt any newly formed technologies in order to remain competitive (Al-Mashari, 2000). Enterprise Resource Planning systems (ERP) form part of these new technologies that businesses need to adopt. The nature of ERP systems, their benefits and the problems associated with them will be explained through the answers in the questions that follow.
What is Enterprise Resource Planning system and which functional areas of business does it typically support?
Enterprise Resource Planning system is an enterprise-wide information system designed to coordinate all the resources, and information needed to complete business activities such as stock updating, order fulfillment and/or billing. An ERP system is characterized by supporting a variety of business functions such as manufacturing and supply chain management. Supply chain management is the management of a network of interconnected businesses involved in the ultimate provision of products and services required by customers (Harlant 1996). Supply chain management spans all movement and storage of stock levels such as raw materials, work in progress and finished goods from the supplier to the consumer. An ERP system is based on a common database and a modular software design. The common database can allow every department of an organization to store and retrieve information in real time and whenever this information is needed without having to ask each department for the relevant information. The information should be reliable, accessible and easily shared. The modular software design should result in the ability of businesses to choose the modules they need, mix and match these modules so that they can improve their performance. Ideally the data for the various business functions are integrated. In practice the ERP system may comprise a set of discrete applications, each maintaining a discrete data store within one physical database. The initials ERP originated as an extension of Materials Requirements Planning (MRP) which is a software based production planning and inventory control system used to manage manufacturing processes, as well as the Computer Integrated Manufacturing (CIM) . CIM was introduced by research and analysis firm Gartner in 1990. ERP systems now try to cover all basic functions of an enterprise, regardless of the organization’s nature. ERP systems can now be found in non-manufacturing businesses such as retail stores, non-profit organizations and governments. In order for a system to be considered an ERP system, a software package must provide the function of at least two systems. For instance, a software package that provides both payroll and accounting functions. Some examples of modules in an ERP which in other cases would have been individual applications include manufacturing, supply chain, financials, Customer relationship management (CRM), human resources, warehouse management and decision support system. Because of the wide range of application within a business, ERP software systems are typically complex and usually bring changes on staff work practices. In order to implement ERP software, is usually not a task that can be done by existing employees or the managers. That is why even smaller projects are more cost effective if specialist ERP implementation consultants are employed. For this reason, to implement ERP systems companies often seek the help of an ERP vendor or of third-party consulting companies. These firms typically provide three areas of services which include consulting, customization and support. The client firm/organization has also the choice to employ independent program management, business analysis, change management and VAT specialists to ensure their business requirements remain a priority during implementation.
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