Most of the companies or better to say the large companies need to use the integrated system so as to co-ordinate various information amongst their different departments. Having an integrated system would surely help organizations to have a competitive advantage in the world of business (Céu Alves and Matos 2013). Enterprise resource planning generally refers to the process which is used by several companies so as to manage and integrate different important parts of a business. Whereas, the ERP management system generally refers to the system which is associated with the integration of important areas like the planning, inventory, purchase, planning, and many more. Despite providing various benefits the business software’s are associated with bringing of various major implications whenever a firm decides to implement new software (Ziemba and Oblak 2013). This report mainly aims at critically evaluating the use of ERP or Enterprise Resource Planning system in a contemporary organization.
There exists several benefits as well as drawbacks of implementing an ERP system in an organization. But ERP plays a major role in an organization and has several purposes.
The major reason for the designing an Enterprise Resource Planning so as to assist the distributors, retailers, and professionals according to their needs. SAP Aktiengesellschaft is currently the market and technology leader which is associated with supplying of ERP systems.
The main reason for the implementation of the ERP system is to provide better and accurate information along with safe time, reduction in the cost of assets and financial cycles (Sadrzadehrafiei et al. 2013). Along with this system also aims at gaining more customer satisfaction, integration of information globally across various enterprise supply chains. The relational database technology is used by the ERP system so as to integrate the different unit’s information system in an organization. Which initially results in the integration of all the business processes as well as the subprocesses which are linked and unified into a single system. The ERM systems are designed focusing on four main areas in a company which includes the financial, human resource supply chain management and marketing.
ERP systems are essentially needed by almost every organization and this system can be implemented in almost every organization irrespective of their objectives, operating area, and size. The efficiency of any organization is surely to increase along with the economizing the existing work of the organization (Nwankpa 2015). It is almost impossible for any organization to run in the competitive market. And the major reason supporting this fact is that this system can be configured accordingly so as to accommodate a larger rate of different types of work processes. Due to this reason, this system is very much popular in large-sized organizations as well as mid-sized organizations and along with this, the system also provides the organizations with a seamless integration of their business. For example in the 1990s, almost 2000 companies globally spent a huge amount of money on their ERP systems.
The most attractive feature of the ERP system is that it promises about a centrally coordinating and controlling system for many aspects of the planning related to the corporate world.
One of the major benefits the ERP system is that helps the organizations in reducing their cost as well as cycle time along with increasing the productivity as well as the quality of the services the organization provides. The ERP system also helps in improving the customer services by making various operations basic and repetitive (Seo 2013). The ERP system is also associated with estimating the demand for a specific product and places order for the raw materials accordingly. After this, the ERP system also provides the working schedules for every team and after that, the system tracks down the whole inventory and allocates the cost and the historical customers are also kept. All the operations are repeated and all the information are kept in order to help the analyst of the organization to analyze the impact of the products over the product mix as well as the volumes in orders. This is done so as to maximize the margin of corporate profits. Along with this, the ERP systems are also associated with providing of informational benefits to the management of the contemporary organizations (Nwankpa and Roumani 2014). Better resource management is also achievement by the use of the ERP system for example, during the management of workforce there would be an improved rate of allocating the manpower or while managing the inventory there would be improved inventory turn and allocation of the stocks and many more. The process of decision making is also improved by making use of the ERP system by means of an increased rate of response in the market which initially results in gaining more profit and controlling the costs. Along with this, there also exists a flexible customer service as well as increased service adjustments and response to the demands of the customers.
Various new opportunities are brought by the Integrated Information System which is initially associated with directly supporting the tight link that exists between the customers and the organizations. The ERP systems are also associated with providing of E-business by making use of the capability of web integration which helps in getting much closer to the customers (Zeng and Skibniewski 2013). Along with this the ERP system also provides benefits for the business-to-business interactive customers as well, for example by taking of feedbacks directly from the customers and this would be responsible for an improved design of the product and the most important fact is that this would provide a real-time enquiry of the data which is much more reliable.
The ERP system also provides infrastructure support to the business along with the integrated and standard application architecture. This helps the business to become much more flexible regarding situations when there is a need for changes and this is done by responding to the various internal as well as external changes (Teittinen, Pellinen and Järvenpää 2013). This is associated with providing a wide range of options for reacting or reducing the cost of IT. This also helps in increases the capability of quick and economic implementation of the various new applications.
The major drawback of the implementation of the ERP system by the contemporary organization is that the cost of installing a fully operational ERP system is very expensive. The approximate cost of installing an ERP system is almost around US$100 million. In the year of 1999, the approximate cost of installing the ERP system was around US$90-180 billion. The charges of the consulting organizations are also very expensive with an average rate of US$150-$225 per hour (Zach Munkvold and Olsen 2014)
. Along with this the installation of the ERP system also requires a lot of time. According to Benjamin B. Bae, & Paul Ashcroft, 2004 the ERP system is a complicated system and it almost requires 12-18 months for installation of the total system and making it fully operative. Generally, more time is required because there is a need for detailed study and reviewing so as to match the business requirements (Ptak and Schragenheim 2016).
Another drawback of the implementation of the ERP system is that it is likely to affect the processes of the company or break the relation with the customers. Along with this, a long time would also be required so as to achieve the long-term financial goals (Nwankpa 2015). Besides this, there is also a requirement of new procedures so as to manage the whole system or for the purpose of providing training to the employees and also the managerial or the technical support. For this reason, the implementation of new ERP systems is very slow and for many companies, this is a painful process.
There are several types of challenges faced by the ERP systems along with providing benefits some of the problems have been briefly discussed in the following section. One of the major challenge which would be faced by the ERP solution includes the compatibility with the other information system. Which means that the new ERP system might or might not be compatible with the information system which are existing within the organization.in many cases it has also been seen that the employees of the company in which the ERP system has been implemented are not at all satisfied with the new system and this leads to various types of difficulties. Along with the employees the senior management might also not support the new ERP system which is a much bigger problem (Elkhani et al. 2014). Another challenge which might be faced after the implementation of the new system is the changes in the tools, attitudes, methods and the processes. Initially this leads to the restructuring of the organization which can be considered as the major problem or challenge faced during the implementation of the ERP system.
There are five major components of the ERP system in a contemporary organization. This components are wanted and should be considered while implementation by the contemporary organizations. The five major components are listed below:
Conclusion:
Most of the contemporary organizations face crunches related to resources which ultimately results in the adaptation of the innovative method for proper utilization of the resources. Due to the launch of various ERP systems the integration of all the functions of a contemporary organization is possible. This report also discusses about the various advantages and disadvantages of the ERP system in a contemporary organization. Along with this the report also discusses about the major components that needs to be considered before implementation of an ERP system. The report also helps in understanding the role ERP system plays in a contemporary organization along with understanding the purpose of the ERP system. So some of the major things that should be considered by a contemporary organization while selecting the ERP system includes the following: the ERP should fit with the organization, provide functionality related to the environment of the business, support for vendor implementation, good support after implementation and many more.
References:
Céu Alves, M.D. and Matos, S.I.A., 2013. ERP adoption by public and private organizations–a comparative analysis of successful implementations. Journal of Business Economics and Management, 14(3), pp.500-519.
Chou, H.W., Lin, Y.H., Lu, H.S., Chang, H.H. and Chou, S.B., 2014. Knowledge sharing and ERP system usage in post-implementation stage. Computers in Human Behavior, 33, pp.16-22.
Dietz, J., 2014, April. Why ERP systems will keep failing. In Evaluation of Novel Approaches to Software Engineering (ENASE), 2014 International Conference on (pp. 1-2). IEEE.
Elkhani, N., Soltani, S. and Nazir Ahmad, M., 2014. The effects of transformational leadership and ERP system self-efficacy on ERP system usage. Journal of Enterprise Information Management, 27(6), pp.759-785.
Maas, J.B., Fenema, P.C. and Soeters, J., 2014. ERP system usage: the role of control and empowerment. New Technology, Work and Employment, 29(1), pp.88-103.
Nwankpa, J. and Roumani, Y., 2014. Understanding the link between organizational learning capability and ERP system usage: An empirical examination. Computers in Human Behavior, 33, pp.224-234.
Nwankpa, J.K., 2015. ERP system usage and benefit: A model of antecedents and outcomes. Computers in Human Behavior, 45, pp.335-344.
Nwankpa, J.K., 2015. ERP system usage and benefit: A model of antecedents and outcomes. Computers in Human Behavior, 45, pp.335-344.
Ptak, C.A. and Schragenheim, E., 2016. ERP: tools, techniques, and applications for integrating the supply chain. Crc Press.
Sadrzadehrafiei, S., Chofreh, A.G., Hosseini, N.K. and Sulaiman, R., 2013. The benefits of enterprise resource planning (ERP) system implementation in dry food packaging industry. Procedia Technology, 11, pp.220-226.
Sadrzadehrafiei, S., Chofreh, A.G., Hosseini, N.K. and Sulaiman, R., 2013. The benefits of enterprise resource planning (ERP) system implementation in dry food packaging industry. Procedia Technology, 11, pp.220-226.
Seo, G., 2013. Challenges in implementing enterprise resource planning (ERP) system in large organizations: similarities and differences between corporate and university environment (Doctoral dissertation, Massachusetts Institute of Technology).
Teittinen, H., Pellinen, J. and Järvenpää, M., 2013. ERP in action—Challenges and benefits for management control in SME context. International Journal of Accounting Information Systems, 14(4), pp.278-296
Zach, O., Munkvold, B.E. and Olsen, D.H., 2014. ERP system implementation in SMEs: exploring the influences of the SME context. Enterprise Information Systems, 8(2), pp.309-335.
Zeng, Y. and Skibniewski, M.J., 2013. Risk assessment for enterprise resource planning (ERP) system implementations: a fault tree analysis approach. Enterprise Information Systems, 7(3), pp.332-353.
Ziemba, E. and Oblak, I., 2013, July. Critical success factors for ERP systems implementation in public administration. In Proceedings of the Informing Science and Information Technology Education Conference (pp. 1-19). Informing Science Institute.
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