What is ERP?
Enterprise Resource Planning is an integrated system that assists in the flow of information in an organization. The system supports functions such as, accounting, distribution, logistics, inventory, and manufacturing. The newer versions of an ERP integrate the Customer Relationship Management functionality, thereby making it easy for an organization to deal with its customers. The system combines and organizes operations and information, encouraging optimum use of the resources (Moon and Young 235). Enterprise resource planning assures using one application, database, and user interface.
The Evolution of ERP
The ever-advancing business environment has a lot of demand, including cost control, flexibility to change, changes in ways of doing business, cost and revenue analysis, and accurate information for decision-making. Therefore, a more stable and simple system is needed to carry out these functions. In fact, ERP was developed from a Manufacturing Requirement Planning system, which was an integration of information between the client, vendor, and manufacturer using the internet, LAN, and WAN.
The MRP had some shortcomings. Firstly, it could not integrate the different functions to share the resources efficiently. Secondly, the old application systems, which most organizations employ, treat the transactions separately. Thirdly, they are only built for specific functions they are meant to cater for; hence, making it difficult to integrate (Moon and Young 235). The development of an ERP ended most of these problems and stopped treating each transaction separately but as a stand-alone activity. The ERP considers them part of the inter-linked process that completes a business. However, the ERP has many benefits because it ensures maximum use of all the resources in an organization, maximizing profit.
Characteristics of an ERP
For a system to qualify to be an Enterprise Resource Planning system, it has to possess given characteristics. Firstly, the system has to be flexible; this means that it has to respond to the ever-changing needs of an enterprise. Secondly, the system should be open and modular, that is, it should have an open architecture system where a module can be attached or detached when the need arises without affecting other modules. The system should also support multiple hardware for organizations with diverse system collections. Thirdly, the system should help other business entities that are beyond the company; hence, it should not be confined to the organization’s boundaries. Fourthly, it should be the best for business practice, having the best business processes. Lastly, the system should be comprehensive and have the ability to support the various organizational functions. Therefore, it should be suitable for a broad range of business organizations.
Features of an ERP
There are various features of an ERP in business. Indeed, ERP offers multi-functions where it can carry out a number of functions simultaneously. It carries out activities that improve the corporate image, thus an increase in customer confidence. The ERP supports strategic business planning, operational and execution of activities (Moon and Young 244). ERP allows the use of latest technologies, such as the Electronic Data Interchange, Electronic Fund Transfer Video Conferencing and Internet, thereby simplifying the organization’s operations. The use of an ERP bridges the information gap in an organization, making it easier for the management to manage different departments in an organization. In essence, ERP performs a very significant role that provides critical business tools such a data mining and decision support system for better decision-making.
Benefits of ERP System
The Enterprise Resource Planning system has many benefits to an organization. Since the system has integrated all the functions of an organization, the information is easily accessible. In fact, ERP offers integrated financial information where the financial reporting is on the same system. The system also stores the customer information, making it easy for the organization to manage its clients. The use of ERP system reduces inventory, a situation that improves a company’s manufacturing process and order fulfillment process. The system also standardizes the human resource information, which is useful for organizations with several business divisions (Moon and Young 245). In fact, when using an ERP, the human resource will not have a hard time tracking the employees and their performance, and the system will make it easier for them to communicate.
ERP System Disadvantages
An ERP system, with its advantages it, also has shortcomings. A single point of failure may cause the whole system to stop functioning, therefore, bring delays and poor deliveries. The system also brings job role change once it has been implemented. The system also changes management since there is a need to manage the new system to ensure maximum benefits and results. This is done since changing into a different system is usually difficult once you have used one system for a long time. The system users are required to have a computing experience (Moon and Young 245). Inadequate experience in computing may prove to be a significant challenge in implementing and using the system effectively.
Moon, Young B. “Enterprise Resource Planning (ERP): a review of the literature.” International Journal of Management and Enterprise Development 4.3 (2007): 235-264.