2. Reasons for Recommending an ERP System
3. Disadvantages of ERP systems
4. Risks Associated with ERP Systems
An Enterprise Resource Planning, ERP, is a type of system that consolidates all management information and handling the flow of data within an organization. It mostly kits a common enterprise data besides application elements to enhance
This paper explores the valuable decision that a company can consider in adopting an ERP system. It further discusses some reasons why a company cannot opt for
Many reasons arise as to why a company may implement an ERP system. It ties business data and processes that would on the other hand disparage, aiding managers to have comprehensive business acumen. Besides integrating business processes, ERP assist companies in merging processes from all departments within the company and consolidate it in a central database. This is achieved without incurring more costs and time hence making it easy for accessibility and smooth flow of work. Merging is achieved by building a database repository that allows integration with a variety of application software hence presenting business statistics and other information to various departments within the organization. To have an ideal ERP system, the system should have an ERP structure which is made up of
One reason why I would recommend my company to implement an ERP solution is to improve information accuracy and decision making. Modern business has created a competitive environment hence for any similar business to stay relevant it needs to have accurate managed information. According to Cruz-Cunha (2009, p.123), managing the company’s future entails accuracy in managing information. ERP solution is important in strengthening both internal and external information needs of a company. Hence linking information from various sources enhances continues flow of information thus aiding in decision making. In other words, if a process starts within the manufacturing department and ends at sales department or marketing with stops in-between, an ERP solution can facilitate a smooth transition from the beginning to the end (Cruz-Cunha, 2009, p.102).
Besides, an ERP system functions in real time. This implies that if someone in an accounting department for examples captures certain information in the system, it would immediately be available to anyone who accesses the system. The solution is normally implemented with a comparable feel and look in all departments, and, by this, consistency is factored to enhance efficiency in the company.
Secondly, ERP improves the relationship and performance of the company and its suppliers. The quality of raw materials and the ability of dealers to supply on time are important for any successful company. Cruz-Cunha (2009, p116) suggests
Thirdly, ERP increases the flexibility of a company. Competition is alive in modern business environments, hence businesses which learn to respond to a customer’s wish besides market changes stay ahead of the game. An ERP system plays an important role in aiding companies to accurately forecast the future and lay strategies to ensure it succeeds. According to Malaga (2005, p.78), ERP encompasses forecasting tools to issues such as customer preferences, sales projections, financial statements and feedback, besides many tools. A company can rely on these tools to strategically plan and execute new ideas and strategies to remain competitive in the business environment. Flexibility will ensure timely formulation of strategy and adjust to the prevailing market condition.
Finance and accounting
The treasury capability allows ERP applications to interlink endlessly with treasury activities which result in more effective control and management. It leads to integration with the ERP software general ledgers to guarantee adherent to policies and regulatory involvement in reporting financial standards (Glenn, 2008, p.83). Financial chain management is a feature which is useful in ERPs. It allows most companies to easily resolve disputes arising from invoices and significantly reduces their collections via electronic billings and other applications. Moreover, seamless merging within ERPs allows current information and accuracy reporting of information. The seamless capability of ERP helps to minimize costs whereas improving the net flow of cash in organizations. The feature of financial and management capability is quite beneficial in most organizations because it provides a cornerstone of accounting. This facility allows accuracy in accounts reporting major large companies with distributed networks (Grant, 2003, p.90). The solution when integrated with the general ledger enables achievement of accuracy in balances and reporting.
Fifthly, human resource management is better managed by the ERP system. Human resource is a valuable asset in a successful business enterprise. Adoption of an ERP system ensures a continuous flow of Information related to
Human resource managers handle huge loads of information. In big organizations, unless technology is adopted, it is very difficult to keep up to date data on all employees (Grant, 2003, p.68). ERP Solution is a
Moreover, the operative functions are assumed and tailored automatically hence relieving the department personnel of work load. ERP provides an integrated solution to all the different activities and functions in the human resource department. These activities and functions of the human resource department include the administration of payroll and manpower related, employee professional growth and development and the general administration in the organization (Grant, 2003, p.111).
Apart from providing the above-mentioned services to the organization, the ERP solution provides a platform to enable decision making and analysis so that it can aid in management control reporting. Communication and especially internal communication is paramount in the day to day operations in an organization (Leon, 2007, p.98). The ERP solution has been tailored to facilitate this function. Services such as opinion polls, news and appointment letters as daily communication examples have been proved effective for being incorporated in the solution. On management, the ERP features have tended to vary in regard
ERP solutions have enabled what is referred to as e-recruitment. The development of e-recruitment practice enabled
One disadvantage associated with an ERP system is Cost. ERP solutions are expensive and complicated to implement and manage. This is the case in larger companies (Bansal, 2009, p.96). Perhaps, established companies have many legacy systems with different configurations thus it demands
The second disadvantage is the impact it brings on the business process. ERP solutions are dictated by changes in business processes. The changes can sometimes be complex. In order to determine each individual element appropriate in an ERP structure, it is uncertain that specific procedures and policies can remain intact (Bansal, 2009, 114). Thus the application of ERP solution tends to mirror the architecture of a much broader business change project. These processes tend to be iterative. When outlining the range of ERP solution at initial stages, most of these deliberations will not come to light. ERP implementations tend to be viewed as projects that "compel” undesired changes on a company process (Bansal, 2009, p.69). When the ERP implementation is ongoing, often, no substitute is a solution but to alter business processes without starting from zero.
Also, lack of adaptability and flexibility is a problem linked to ERP systems. ERP architecture conforms well to established businesses which have distinct procedures and practices. When these processes are aptly on a place, ERP system will effectively support them. However, for companies that are in a process of altering their business processes, ERP tends to be inflexible. This is because an ERP system has a standardized architecture hence even a small change can cost a lot and complicate its implementation. Companies, constantly exploring changes in line with their business process will not accrue like benefits from the solution because it does not conform to business activities.
Further, matters relating to ongoing support can be a serious setback if not addressed. Most ERP systems are mostly supported by third-party dealers. This can lead to issues relating to service level agreements where the quality of support and response time is not in tandem with company requirements (Bansal, 2009, p. 79). Support and licensing fees can also surge the cost of the solution. Moreover, security of information stored in the ERP can be a major concern in case third-party dealers are the custodian, thus many companies utilizing ERP are always at the sympathy of dealers with no adequate control over information and availability of the system.
Lastly, the ERP system erodes with the type of business. The efficiency of an ERP depends on the type of business and processes to be executed to aid and sustain the architecture. According to Bansal (2009, p.79), companies that have less investment in efficient training of their employees
Without proper risks identification in selecting an ERP system, a lot of time, resources and knowledge can be wasted. Early risk identification ensures that success is achieved when a company is making a choice of implementing an
Lack of proper coordination between the company structure, strategy and processes and the choice of the ERP solutions also pose a severe risk. ERP alone cannot really improve the performance of the businesses (Harwood, 2003, p. 57). Companies or organization should reduce the risks by restructuring its operational processes and the implementation should be seen as a business initiative. Unless an organization fails to strategize its implementation goals, this risk can make it harder for quality implementation (Harwood, 2003, p.77).
Loss of Project control is also a major risk in an ERP project implementation. ERP project loses control in two major ways which
ERP also poses risk, operational ERP solution results in the responsibility of devolution and empowerment of lower or middle-level employees. If no proper controls are instituted, either within the ERP or in the process that organization deems best, then there will be a potential risk (Jutras, 2003, p.87).
The complexity of the project also poses a major risk in ERP project implementation. ERP systems involve the use of large expenditures which encompass software, hardware, consultation, implementation costs and training. This always takes more time to be completed (Leon, 2007, p.68). ERP projects have been known to take longer time than other ordinary information system management. The complexity of this ERP cause change of roles in the company and this pose a business risk in an organization.
Lack of important in-house skills in an organization also creates a risk
The ERP is designed to provide much-needed facility within and geographically dispersed businesses across a multi-platform with its functional units. This has been viewed as important to support itinerant management executives to have much needed details to support their decision making at the management level. For an effective choice of an ERP system, a company has to efficiently explore its usefulness, demerits and risks factors to have a clear understanding.
Bansal, S., 2009
Chorafas, D., N., 2004, Integrating ERP, CRM, supply chain management, and smart material, CRC Press, Boca Roda, FL
Cruz-Cunha, M., M., 2009
Glenn, G., 2008
Grant, G., G., 2003, ERP & Data Warehousing in Organizations: Issues and Challenges, Group Inc (IGI), New Jersey, NJ
Harwood, S., 2003, ERP: The Implementation Cycle, Butterworth-Heinemann, Amsterdam
Jutras, C., M., 2003, ERP Optimization: Using your Existing System to Support Profitable E-business Initiatives, CRC Press, Boca Raton
Leon, A., 2007
Malaga, R., A., 2005