ERP- its advantages and disadvantages

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Advantages and Disadvantages of ERP

What is ERP?

ERP is considered as Enterprise Resource Planning. It refers to systems and software that are responsible to manage as well as plan the manufacturing services, financial services and supply chain services within an organization. This information system can be used to simplify the individual activities and at last automate them across the organization of a business. This includes activities such as procurement, accounting, customer relationship management, project management, supply chain compliance and risk management.

Individual applications of Enterprise Resource Planning can offer software as a service whereas the complete set of enterprise resource planning applications include ERP systems. This ERP system can be utilized effectively in order to bring the processes of businesses together. This allows to manage the data between different applications with the use of common databases and on-premise cloud data sets.

Article Summary

Enterprise Resource Planning is certainly essential to be implemented logically in an organisation, It simply helps in the proper planning and management of an organisation’s working style. Alsio, it is an effective medium which helps in simplifying the communication process throughout the organisation. This article enlists the types, advantages and disadvantages of ERP with the help of detail writing.

Enterprise resource planning systems can connect each and every aspect of the enterprise that allows for better performance as well as the management of project budget. It can even accurately predict the financial health processes of the organization. The term ERP was first used in the year of 1990s by Gartner report but the system and software of enterprise resource planning have been used in the industry of manufacturer for hundred years. In the year of 2000, the Enterprise Resource Planning system expanded to include business intelligence that has the ability to handle complex functions. This included e-Commerce marketing automation and sales force automation. After 5 years, there was the inclusion of cloud-based ERP system solutions that started providing the internet in label products as well as alternatives to the traditional client service models.

Today software-as-a-service provides several delivery models for enterprise resource planning. There is also the provision of remote web-based access for the cloud Enterprise Resource Planning solution. This has the ability to include security, mobile solutions as well as the integration of changing industries with smart technologies such as Internet of everything and internet of things.

Now the main purpose of ERP is to increase the efficiency of a particular organization with improved management as well as proper utilisation of organizational resources. With the use of Enterprise Resource Planning systems of software, the organizations can easily improve as well as reduce the required number of resources. It can be done without any degradation of performance and qualities that have a direct impact on profitability and business growth.

There is a difference in the aspects of ERP systems, with respect to different business operations. It includes an integrated system, real-time operation, common database, user interface, on premise cloud database, software as a service deployment and real-time operation. The software of ERP has the ability to compare and contrast the metrics across different departments. This is done in order to provide different reports to the user on the basis of user preferences and roles.

The collected data can be helpful to make findings and reporting can be done as well. It can also provide a complete overview on the business performance along with resources spent.

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Advantages of ERP

Enterprise Resource Planning systems offer varied benefits, the most significant of which is high productivity. It provides automated and streamlined core business processes. These features are helpful for business organizations to perform better even with a smaller number of resources. This further leads to an increase in the productivity of the organization.

  • Focused IT costs

    Although the investment of ERP software is considered large, it can unify the cost of IT in order to improve its efficiency. Instead of sending a large number of resources on multiple systems that are required by staff and supporting infrastructure, the organization can easily focus on the cost investment into one ERP system.

  • Total visibility

    Total visibility is considered as one of the most important benefits associated with the utilization of Enterprise Resource Planning software. With the use of ERP software committee, an organization can have complete access to each and every important process related to its business. Along with this, every department in the organization can easily access these services. Additionally, the presence of organizational information in the centralized location can increase the collaboration and streamline the task completion.

    The complete visibility also facilitates coherent workflow as well as inter departmental processes that can be tracked easily in order to maximize the efficiency. With this, the organization is able to make quick and confident decisions.

  • Improved planning and reporting

    Apart from the improved visibility, better insight is considered as one of the major benefits of ERP software. Also, implementation of ERP suite across all the departments means that the organization has a single and unified reporting system.

    With this, the organization can readily generate useful analytics and reports at any time when required. Moreover, it offers the facility to compare and analyze several functions across different departments. Also, it minimises the need of sending multiple emails and spreadsheets. One such report is a standard financial report which includes cash flow and income statements. It is generally a custom report that can be quickly generated without any intervention of IT.

  • Improved efficiency

    As the implementation of Enterprise Resource Planning can reduce training and IT cost, it also has the ability to reduce the effort and time which is put by the workforce in order to carry out smooth daily activities. Additionally, with the proper implementation of ERP solution, there can be absolute elimination of repetitive manual tasks. This allows the team members to focus on the revenue affecting task.

    Additionally, Enterprise Resource Planning can aid in the enforcement and adoption of industry related best practices along with the proper alignments of action across all the departments of enterprise. The utilization of cutting-edge technologies such as robotic process automation machine learning and artificial intelligence in ERP systems has the support for intelligent and automation suggestion capabilities that can provide the proper management business activities such as demand forecasting, manufacturing tracking products, and commercial operation of purchase orders.

  • Enhanced Customer service

    The clients of any of the organization can also receive the benefits of enterprise resource planning. As the information of clients is streamlined and centralized, the sales team can focus on maintaining and building the customer relationships apart from just taking care of the spreadsheets. With the use of end to end tracking provided by the ERP system, better customer interaction can be provided for marketing automation. This can be done by employing late phase customer service. Most of the up-to-date ERP solutions also have the support for the integration of eCommerce. This means that businesses are able to handle the web-based order processing as well as interactions of clients.

Disadvantages of ERP

  • The cost of implementing Enterprise Resource Planning is considered to be high because of involvement of various processes including software development, customization, configuration, testing, planning and implementation.

  • The deployment of Enterprise Resource Planning is believed to be time consuming because one project can take one to three years for completion and to start functioning properly.

  • If there is very less customization, it cannot be integrated with the business processes. Even too much configuration can also slow down the project which will become difficult to upgrade.

  • For the successful implementation of ERP related projects, participation of each and every user is important. Therefore, provision of simple user interface along with exhaustive user training is imperative as ERP systems are difficult to learn.

  • It is difficult to migrate the existing data to the new ERP system and it is also difficult to integrate it with the stand-alone software. This is because these types of activities call for consumption of more time, resources and money.

  • In decentralized organizations, the implementation of ERP systems is considered difficult to achieve because of the involvement of desperate systems and business processes.

  • Once there is an implementation of the ERP system, it becomes single vendor lock-in for customizations and upgrades. With this, organizations are generally not able to easily negotiate for their services.

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Types of ERP

Enterprise Resource Planning is the technique of integrating the data of organization and processes into one single system. The type of system suitable largely depends upon the size of business as well as the functions performed by it. Following are some of the types of ERP systems.

Types of ERP
  • Cloud ERP

    In cloud ERP systems, the software is present on the cloud computing platform of the provider. The maintenance of the system is also handled by the particular cloud service provider. However, there is a choice of utilizing the private or public cloud. This particular type is gaining popularity due to its low upfront cost.

  • On-premise ERP

    On-premise Enterprise Resource Planning is considered a traditional type of model in which the software services are deployed for controlling everything. This software can be installed in data centers at different locations of individual choices. Here, the maintenance and installation of hardware and software is the responsibility of staff.

  • Hybrid ERP

    Hybrid Enterprise Resource Planning system is utilized for the organizations which want a mix of cloud and on-premise ERP. In this type of ERP software, some of the applications are present in the cloud and some of the applications are on-premise.

  • SAP R/3 and B1

    SAP is considered as the best known supplier of ERP software that offers two solutions. The first solution is R/3 suite and the second solution is B1 suite which is also known as business one. The small and medium sized enterprises are the main target of B1 that provides pre-built modules for warehousing, finance, e-commerce, customer relationship management, reporting, and purchasing. On the other hand, R/3 is the integrated system software that has the support for very small to very large organizations. It is customizable and can meet the specific requirements of business. Additionally, it uses client server architecture that runs on a number of platforms including windows server, OS/400, and Unix. Furthermore, it can be implemented with the use of several database packages including DB2, Oracle, and SQL Server.

  • LN/Baan

    Baan ERP software was created originally by the Baan Corporation and was purchased by Infor Global Solutions in the year of 2003. It is designed for the industries of manufacturing that are working on the complex products. It is brought into action by using complex supply chains utilising different types of methodologies.

  • Microsoft Dynamics NAV and AX 2009

    This software offers two ERP packages of software; Microsoft NAV and AX. The main target of Microsoft NAV is the small as well as medium sized enterprises. It also provides a number of modules for customer relationship management, manufacturing, finance, and e-commerce. Microsoft AX 2009 has the support for medium as well as large sized organizations and includes useful functions for the improvement of productivity. This software is considered to suit well for the service organizations, wholesalers, manufacturing organizations along with retail-oriented organizations.

    The developments in the field of management and IT are important to adopt for the smooth functioning of the organisation. Therefore, every company has to ensure the execution of a perfect software system to smoothen its functioning. ERP is one advancement which aids in the process and allows the companies to organise its working system. Though there are disadvantages to this system, a company should take advantage of its usefulness and upgrade the system accordingly.

Article By:

Micheal Brown

A financial management expert with a relative degree from the University of Melbourne, he is an expert in conceptualising and drafting assignments of management students. Alongside, he invests his valuable time working as a consultant for management firms.

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What is ERP and how does it work?

ERP stands for Enterprise Resource Management. It is the process of collecting and managing the business information with the help of an integrated software suite.

What are the advantages of ERP?

Among the varied benefits of ERP include improved efficiency, flexible modularity, total visibility, focussed IT costs, high end scalability, a standard business process and superior customer service.

What are the Advantages and Disadvantages of ERP System

ERP Systems come with both advantages and disadvantages. The advantages include improved efficiency, great customer service, flexible modularity, whereas the disadvantages include high-end costs, customised process and complex working.

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