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What is an ERP System?

Question:

Write an Essay that Explains what an ERP System is, the Process and Pitfalls of Switching to ERP, the Advantages and Disadvantages of Using an ERP System.

ERP (Enterprise Resource Planning) is a process through which the company manages and integrates the important parts of its business. In other words, it can be said that ERP helps the company to combine the business activities with the software (Leon, 2014). The ERP works as a central nervous system of the business, ERP module consists of the planning, inventory, distribution, control, finance, HR, and accounting. Nowadays, some of the medium and large organizations use ERP so that they can fulfill their Information system requirements. To implement the ERP there is set format that is used by the organization. These implementations of the process lead to the success or the failure of the process (pitfalls of switching to ERP) (Beal, 2017). The companies who are implementing the process they might find the advantages and the disadvantages of the ERP system in their organization. 

The ERP software assembles the information about the business activity and various divisions of the business and then makes the information available to the other parts of the business where the information can be effectively used by the company. The ERP is not only used by the local companies but it is also used by the international companies because there are various benefits of implementing the ERP system in the companies (Ganore, 2013). These companies make use of different ERP software such as Orcale+NetSuite, Dynamics, SAP, SAP ERP and much other software. Oracle+ NetSuite ERP provides the effective solution for the organizations. This Oracle ERP is used by the company Oracle Company and the company acquires the NetSuite officially (Oracle+ NetSuite, 2017).

The Microsoft Company is making use of the Dynamics ERP which helps the business to form the decisions with the confidence. This ERP helps the Microsoft for the business processes; the ERP product is ranging from Dynamics GP for SMBs to Dynamics 365. The SAP software is used by the business to manage the sales, Finance Accounting and the CRM. The SAP software of the ERP is used by the company UNEECOPS, this ERP helps the company to make the huge profit (Seethamraju, 2015). There is software SAP ERP which is designed for the middle and the large organization. The SAP ERP provides the support for the financial, human resources, operations and the corporate service. These are the some of the examples of the companies who are making use of the ERP in the business. Small companies like IOCL, GACL, IPCL, Reliance and many other companies are using the ERP software in their business (Magal, & Word, 2013).

Process of Switching to ERP


The successful implementation of the ERP solution is must for the company to avoid the pitfalls. To implement the ERP in the business company follows different steps such as:-

Identification of the problems- The ERP software provides the resolution to many issues faced by the company. The key performance indicators will help the company to analyze the need for the ERP software in the company.

Define scope/team- There are many objectives to bring the ERP, the cost of the ERP vary from the objective. According to the panorama study, 61.1% of the ERP implementation takes longer than expected and approximately 74.1% of ERP project exceed budget. Depending on budget and core necessity, the demand for the ERP list is formed which helps the company in achieving a smooth and hurdle less ERP implementation (Schniederjans, & Yadav, 2013).

Brainstorm/ Evaluate the options- Evaluation of the ERP options is very important for the company, the company will evaluate which ERP software is best for the company considering the needs of the company. The needs include the current as well as the future needs of the company. The company needs to brainstorm the ERP vendors or the consultants so that they can bring the best system in the company (Panayiotou, Gayialis, Evangelopoulos, & Katimertzoglou, 2015).

Data migration- Once the company identifies the ERP that the company is going to implement in the company. The next step for the company is identifying the important data which company is looking to transfer in the software. The company makes sure that they can retrieve the data whenever they need the data.

Check infrastructure- After the brainstorming among the management and the vendor, the requisite infrastructure is installed. The infrastructure on which the company is going to run the software should have the scope of scalability and the options to update the software.

Customization- ERP software is going to be designed according to the needs of the company. Implementing the ERP solution in the company is a big investment which involves the pooling of the resources (Nwankpa, & Roumani, 2014). The company continuously maintain the tabs on the ERP software.

Change management- The ERP software can bring the changes in the working style and also affects the operations of the company. Once the changes are accepted by the employees in the organization, the employee's work will be easier because ERP can provide the best result.

Technology and knowledge transfer- The ERP implementation fail sometimes, this occurs because there is lack of customization for non-optimal software utilization. In the implementation of the ERP software, there is a need for the training. The information technology management of the company should ensure that the proper vendor detailing is done (Nwankpa, & Roumani, 2014). These all aspects are responsible for the successful implementation of the ERP system in the company.

Pitfalls of Switching to ERP

Project management and testing- After evaluating all the options, selecting the best-suited options and providing training to employees is the final aspect of the implementation of the ERP system. Testing is one of the important stages which take care of the system and the user acceptance testing.


Final touch and on-going support- The ERP software will go live, once the IT team of the company will check the ERP software implementation. Now the ERP software provides the help to the company to avoid the systematic glitches.

Implementing an ERP in the business is filled with the promise and danger for the company. The benefit of implementing the ERP in the business also brings the pitfalls. Some of the pitfalls of the ERP system contain the wrong motive for ERP; the choice of the ERP software is done by the company with the wrong motive. Many companies implement the ERP software in their organization because they want to clean up their disordered way of operations. This will end with the disaster and to avoid the pitfalls the company should remove the procedures to the reasonable standards so that they can think for an ERP (Panayiotou, Gayialis, Evangelopoulos, & Katimertzoglou, 2015).

Underestimating the efforts is another pitfall of the ERP, the implementation of the ERP in the company requires dealing with the complex procedure. The preparation of the implementation of the ERP consumes the time and work and the underestimation of the required efforts will lead to the failure of the implementation of the ERP system of the company. Underestimating the cost is considered as the pitfalls of the ERP; the offer given by the supplier of the ERP seems to be very clear but may cause conflict. The company should consider the cost components that might create an impact on the contract of the company. For instance- the company didn’t analysis the cost and later leads to the failure because of robust cost/ benefit analysis before selection and implementation.

Choosing the wrong ERP is one of the most crucial pitfalls that may lead tote problems for a company. The small and the medium-sized business should make sure that they avoid the use of big ERP system. Before selecting the ERP system for the company they should consider their requirement and the budget. For instance, a small sized company is working on project-oriented ERPs and production-line oriented ERPs (Khot, Mudur, Thorat, & Doulatramani, 2017). The company should make sure that they are choosing the system that forms the alignment with the type of business.

Advantages of Using an ERP System


The implementation of the ERPs system in the companies leads to certain benefits to the company. The ERP is used to meet their information system requirements. Each and every company is implementing the ERP system in their originations because they are getting some advantages with the implementation of the software. The main advantage that the company is getting includes the improvement in the productivity of the operations of the company. The proper implementation of the ERP software in the organization will help the company in reducing the wastage of the material and the time (Issar, & Navon, 2016). It provided the better organizational control in the large companies because these companies maintain the volume of information along with this, the system of the ERP avoid the duplication of the information that can affect the working of the company.

The company gets the advantages of the low cost; the implementation of ERP is lower to the cost of the IT. The Unified ERP system can help the companies to lower the IT expenses that include the management/administration staff, support, infrastructure needs, and the application licensing.  The use of the single system will reduce the cost of the training requirements to the end-users. The ERP implementation in the organization provide the visibility, ERP in business makes the data easily available and accessible for the different department and the manager in the organization (Duan, Faker, Fesak, & Stuart, 2013). This visibility offers the company more coherent workflows and allows inter-departmental processes that are easy for tracking the maximum efficiency of the company.


ERP leads to the improved reporting and planning system in the organization. Implementing the ERP in the organization shows that there is a presence of the unified reporting system for each process and departments. The single resource in the organization leads to the ready generation of the report and the analytics any time. The software can provide the help to the manager of the company in comparing the functions of the different departments without any hassle of the various spreadsheets and the e-mails (Kanellou, & Spathis, 2013). Every system in the organization leads to the advantages but along with the advantages certain time the company has to bear the disadvantage. The biggest disadvantage of the ERP system to the small and the medium organization is the cost of the implementation of ERP in an organisation. The cost is high because the implementation of the ERP in the organization includes the process of planning, testing, customizing the software and the configuring.

Disadvantages of Using an ERP System

Most of the companies are not able to implement the system of ERP in their organization because the cost of implementation is not affordable for the company. The cost of implementing the ERP system in the company is not the only cost that is faced by the company. The company has to spend the amount of manpower and time that is required to a successful implementation of the ERP system in the company. The company needs to provide the training to the employees so that they can implement the system easily. The ERP system will lead to the retentions of the employees or the resistance of the employees which leads to the disadvantage for the company. The evaluation of the ERP implementation needs to be done in the right manner if the step of the implementation is not done properly and technical that it may lead to the failure (Jain, & Sharma, 2016).

The paper shows the ERP system process and the ERP implementation in the organization. An ERP system is a useful tool for each and every company and the core procedures can be supported by software. There are important benefits to an implementing an ERP but there are some of the pitfalls that can be faced by the company. The company will get the benefits of implementing the ERP system but along with the benefits of the company have to face the disadvantages of the company.

References

Beal, V., (2017). ERP - enterprise resource planning. Viewed on 13th November 2017, https://www.webopedia.com/TERM/E/ERP.html

Duan, J., Faker, P., Fesak, A., & Stuart, T. (2013). Benefits and drawbacks of cloud-based versus traditional ERP systems. Proceedings of the 2012-13 course on Advanced Resource Planning.

Ganore. (2013). Basic Modules of ERP System. Viewed on 13th November 2017, https://www.esds.co.in/blog/basic-modules-of-erp-system/#sthash.IxU4daxB.wZCmSoHs.dpbs

Issar, G., & Navon, L. R. (2016). Enterprise Resource Planning (ERP). In Operational Excellence (pp. 33-36). Springer International Publishing.

Jain, D., & Sharma, Y. (2016). Cloud computing with ERP-A push business towards higher efficiency.

Kanellou, A., & Spathis, C. (2013). Accounting benefits and satisfaction in an ERP environment. International Journal of Accounting Information Systems, 14(3), 209-234.

Khot, N., Mudur, K., Thorat, O., & Doulatramani, Y. (2017). Information Intendance System on Cloud.

Leon, A. (2014). Enterprise resource planning. McGraw-Hill Education.

Lorenc, A., & Szkoda, M. (2015, May). Customer logistic service in the automotive industry with the use of the SAP ERP system. In Advanced Logistics and Transport (ICALT), 2015 4th International Conference on (pp. 18-23). IEEE.

Magal, S. R., & Word, J. B. (2013). Business Process Integration with SAP ERP. Epistemy Press LLC.

Ng, C., & Wang, E. (2014). An exploratory study of the emergent theory for enterprise resource planning upgrade decision. ACIS.

Nwankpa, J., & Roumani, Y. (2014). Understanding the link between organizational learning capability and ERP system usage: An empirical examination. Computers in Human Behavior, 33, 224-234.

Oracle+ NetSuite. (2017). The #1 Cloud ERP. Viewed on 13th November 2017, https://www.netsuite.com/portal/home.shtml

Panayiotou, N. A., Gayialis, S. P., Evangelopoulos, N. P., & Katimertzoglou, P. K. (2015). A business process modeling-enabled requirements engineering framework for ERP implementation. Business Process Management Journal, 21(3), 628-664.

Schniederjans, D., & Yadav, S. (2013). Successful ERP implementation: an integrative model. Business Process Management Journal, 19(2), 364-398.

Seethamraju, R. (2015). Adoption of software as a service (SaaS) enterprise resource planning (ERP) systems in small and medium sized enterprises (SMEs). Information systems frontiers, 17(3), 475-492.

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