Information systems play a vital role in improving the competitiveness of a company. There are many types of enterprise information software packages which are available in the market since the year of 90s till today (Mandal & Gunasekaran, 2003). Enterprise Resource Planning (ERP) is one of them. Due to intense competition around the world, many of the manufacturing company had decided to implement ERP. It assures one application, one database and is possible to unified interface across the entire organization. Many companies had not abstained from investing a large amount of money on ERP system, though the ERP implementation had high failure rate and well publicized (Ehie & Madsen, 2005). This paper will discuss the role and purpose of Enterprise Resource Planning (ERP) systems. Specifically, the paper will discuss the reasons for companies who have chosen to implement ERP. Moreover, the paper will discuss the challenges faced by companies who implement ERP and lastly the impact of the implementation of the ERP to the overall Accounting Information System in a company.
“What do companies such as Microsoft, Coca-Cola, Eli Lilly, Alcoa, and Nokia have in common?” (O’Brien & Marakas, 2006:258). These companies have implemented the Enterprise Resource Planning (ERP) as a transactional backbone and their businesses today are running at a breakneck speed compare to those time when it used to operate on a 25-year-old back office systems. Companies are giving a major credit to the ERP system that have assisted companies to reduce inventories, lower costs, shorten cycle times and overall improve the company’s operations. ERP systems are used as a conceptual framework and catalyst for changing companies’ business processes since the era of 1990s where throughout the world most companies had started to implement ERP systems. ERP systems assist as a cross-functional enterprise backbone that incorporates and automates the daily function of the company by processing the information systems such as accounting, logistics, human resource, finance, manufacturing and many other internal business processes. Today, ERP is a vital tool for company to gain dynamic business environment from their responsiveness, efficiency and agility (O’Brien & Marakas, 2006).
There are some companies which choose ERP system and implement it in their companies, this is because ERP provides an infrastructure, opportunity and advanced technologies and it prepares an organization for future challenges by gaining competitive advantage and importantly to remain competitive. It also contributes to companies as an opportunity to grow and extend their businesses by developing new partnerships and new business strategies which results for the company to have an open system and the capability to operate worldwide. Companies will also satisfied with the customer service operation this is because ERP reduces customer service time and facilitating the process of worldwide data access and as a result customer responsiveness and data access will go through smoothly in the company without consuming a lot of time. It also allows organizations to do business in multiple-currencies and languages. ERP products are also well known across national borders and have helped in the progress towards globalization and global market development. Customer relationship management (CRM) application helps in distributing information about company, product and sales and it also helps in building economies of scale by cost leadership and shared service or streamlined processes (Ng et al, 2002).
Moreover, companies who have implemented ERP had faced lot of challenges during the implementation of ERP. Firstly, big bang versus phased-in implementation where it defines implementing an ERP system is more towards changing the style of an organization does its business rather than it does with technology....