From the past two decades, the role of information system has gained importance manifold depending upon the kind of business and their needs. However, before one can perceive the importance of an information system, it is very important to understand what exactly it is. It is basically a planned blending of manpower, hardware, software, information resources, policies and programs which has the capacity to store, recover, convert and distribute data within an organization (Karim, 2011). Thus in a layman’s language it can be said to be a group of elements in an organization which are interconnected to each other. Thus in today’s scenario , every business house should incorporate a well knitted information system which would help to take control of the various activities undertaken by an organization starting from planning till the final delivery in case of manufacturing plant. It has become so prevalent in organizations irrespective of it being a big or a small organization, it has become an integral part of every organization as well as job seekers, thus they are expected to be well versed with technology (Paul, 2010).
The information systems are of various types depending upon the firms who are using it thus enabling them to give meaning to raw data. Basically every organisation needs support system to manage its operation and management. Some of the commonly used information systems are the Management Information System, Decision support system, transaction processing system, office automation system and information systems in organizations (Cornford, & Shaikh, 2013). All of these information system have there own speciality and functions which distinguishes each one from the other. One of the most important management information system is Enterprise Resource Planning (ERP) which is basically a procedure which enables an organization to supervise and amalgamate the crucial parts of its business enterprise. The essay narrates how an ERP system helps to manage and control the organization wide information streams successfully. It discusses about how the ERP enables to manage the basic back end function by combining and managing large data and produce such reports which are beneficial for the company. The advantages of the ERP software with regards the enhancement of the gathering, analysing and distribution capability of valuable information across various parts of the organization is also discussed in detail. Thus the advantages which an ERP system offers are manifold.
What Is An Information System?
As narrated above, an information system is an indispensable part of all organisations so much that it is now impossible for the banks and the financial institutions to process the payments and fund transfers, government is unable to collect taxes, hospitals are unable to treat the patients and the retail chain stores to stock their inventory well in advance if the information system is absent or not well knitted with the requirements of the organization. So the most probable query that arises in our minds is what is an information system? It can be defined with regards two perceptions- the first one in relation to its function and the second one to the structure. As from the first perception, an information system can be defined as a technically applied means which would help in recording, storing as well as circulating linguistic expressions. Whereas the second perception defines an IS as a collection of individuals, procedures, information, technology and partially formalised language thus forming an interconnected structure which helps to resolve some purpose of the entity. Hence it can be rightly called the oxygen for most of the organizations. Nowadays in almost every segment be it government, schools, hospitals, retail chains, IS plays an integral role (Boell, & Cecez-Kecmanovic, 2015).
Types Of Information System
In the 80’s the information system was basically a pyramid of systems that showed the hierarchy of an organization comprising of the transaction processing system at the lowest point of the pyramid, in the middle lies the decision support system and the management information system and the top is the executive information system. But with the changing environment of the organizations and the complexities, the pyramid is no more as simple as it seems to be. Various kinds of information systems are available and each plays a vital role in the business organization. Some of the widely used type of information system are as under:
- MANAGEMENT INFORMATION SYSTEM: It is an information system which helps the management to take sound and informed decisions. Thus it is an integration of the labour and machines which helps in providing data which helps to perform various operational activities. This system supports all levels of the organization specially the operations for each level. It is a tool in the hands of the managers which helps them to organize, evaluate and manage the various departments within a business organization. It analysis the various issues a business house faces and then tries to formulate solutions for the various problems (Laudon, & Laudon, 2014). The most widely used MIS is Enterprise resource planning software (ERP).
- DECISION SUPPORT SYSTEM: The support system helps the users of the system to get support while taking any decision via accessibility to valuable data. Thus this system helps to take decisions which are of high quality. It may produce graphical reports and it may even comprise of an artificial intelligence. The DSS is used mainly for making decisions during uncertain situations (Tripathi, 2015).
- TRANSACTION PROCESSING SYSTEM: This IS helps to provide the basic processing of transactions of an organization. It basically records the routine dealings which is vital for the survival of a business (Rahmatian, 2003). It is found at the base level of the IS hierarchy.
- PROCESS CONTROL SYSTEM: As the name says, this IS helps to monitor and control the various industrial procedures. Thus this system is more prevalent in a process oriented industry such as petroleum and mining. Such as the petroleum refinery’s set up is such that it uses the electronic sensors which is related to the computers for monitoring of the chemical processes on a continuous basis and make real time adjustments as and when required so as to ensure that the refining process is performed in a control environment.
- OFFICE AUTOMATION SYSTEM: This IS is the most common one amongst all business houses as it supports the managers in controlling the flow of data across all departments. Its use is not restricted to only a specific group but caters to the entire organizational level (Al-Mamary, 2014).
What Is An Erp System?
As was stated above, the most commonly used management information system is ERP i.e. Enterprise Resource Planning. This section would discuss about how an ERP system plays a major role in management and controlling of information across the organization as a whole. The software helps to rationalize and reorganize the various operations and processes of an organization so as to synergize the various resources and elements of an organization such as manpower, material, machines and money. Thus it ensures to unify the various information systems of an organization into a single unit so that they can interact with each other successfully (Zykov, 2007). Therefore it can be rightly defined as a process of integration of various procedures and transactions undertaken by a corporate. It accepted by the industry itself as the only tool of integration.
Key Role Of An Erp System
An ERP system helps to integrate a communication thread between the human resource and the technology installed in an organization. It provides meaningful data which helps the users formulate strategies, helps in the operational activities and in taking vital decisions. Its implementation is of utmost use for those organizations whose wings are spread across various countries or cities within a country or a wide area. Further it does not only cater to the top management but all the levels of the organization. It plays an integral part in the function of managing of data, processing of the same and distribution of the processed information to the right person at the right time (Ismail, 2014).
The main aim of an ERP is to unify all the departments of a company with the help of a software package. Its main functions are integration of data, management of data, distribution of data, co-ordination of the various departments, automated updating of information and instant feedback. An ERP mainly contributed to the re-engineering of the supply chain to go beyond the vision of the company. A business enterprise aims to improve considerably if its supply chain management is well established. The main goal of a SCM is to amalgamate all the activities of a business so as to gain competitive advantage by improving the relationships among all the levels such as the supply network and the distribution channels as well. All this is achieved with the help of the ERP system. It is preferred to integrate these two systems simply because they help to create an integrated information system so as to transfer from one place to the other geographically (Adaileh,& Abu-alganam, 2010). The communication lines become more effective and tend to integrate operations successfully.
With a widespread database from ERP, the accounting does not call for duplicity of files and records. Such as product costing can be done successfully with the help of an ERP as it can be used for analysing the changes in the cost of raw materials, wages and other overheads (Matende, & Ogao, 2013). Variance calculations are available at a wink without much effort as data is already fed in. As and when the manufacturing data is fed, the financial implications are recorded immediately which aids in making decisions instantaneously as soon as any inconsistency is noted or signalled. Therefore the various decision making tools such as the spreadsheets can utilise the data maintained by the ERP successfully.
The product structure database offers engineering much greater control over product and process design, specifically with regards engineering change control. However, changes which are decided from the start can be implemented gradually but those that are to be done in an exigency has to be communicated to the required departments without wastage of time. The same is well offered by the ERP system. They have in them various analytical tools to offer to the engineers such as comparisons of the bills of the raw materials can be used for understanding if there has been any escalation in the cost etc (Leon, 2008). Further an ERP system plays a key role in the configuration of the conventional products. This helps to reduce the requirements of experts since the ERP works on the basis of certain set rules thus making it easy for even the customers to develop accurate configurations.
ERP system also has a very crucial role to play in the production process and the management of materials of a company. It helps set up pragmatic plans for production of a product or products and communicate priorities without any confusion so that the order to perform is known by all. Demand and supply are never constant and therefore ERP helps to recognize what impact these two variable have on the production and the purchase. ERP ensures that adequate controls are established basis the capacity, the tools and the materials so that any constraint with regards these variables are overcome on time. For any manufacturing concern, scheduling is the crux to success as it helps to shorten the set up time and optimise sequencing (Lecic & Kupusinac, 2013). Thus another key area where ERP is a boon is during elimination of a situation of crisis so that the managers can concentrate upon better planning.
Thus it is understood that a full function ERP solution helps to serve many purposes that some of the other information system packages fail to. They have numerous modules that adhere to various organizational needs ad requirements. They can be updated in accordance with the organization’s growth and has a toolset that enables customisation of various processes. The same is highly recommended for an organization which is dispersed across various locations simply because it offers consolidation of widely dispersed database. This consolidation promises various benefits to the organization such as it does not require synchronisation of changes amid systems. It consolidates various applications and domains thus ensuring better control over various cross-functional processes for manufacturing, finance, human resource, marketing and sales. Real time and online enterprise wide view of the company for a quicker and more efficient decision making is possible through a well integrated ERP (Zimmerman, & Simedley, 2006). Lastly it helps to reduce the production lead time and delivery time as well. The entire organization although is dispersed in various locations yet a good ERP helps to tie it all with a common vision.
The studies and the outcome of those studies make it even more recommendable amongst big organizations specially such as the Aberdeen Group derived the following quantifiable benefits from the implementation of the ERP. The operational cost got reduced by 22 percent, administrative costs by 20 percent, in case of its manufacturing and distributing segment a reduction of 17 percent in the inventory was noticed, the delivery time improvised by 19 percent and 17 percent improvement in the schedule compliance (fitrix.co., 2011).
Further with regards the benefits ERP offers in the supply chain, the companies will be able to compete successfully in the market. The re-engineering of the processes of the company is used for the improvement and also to increase the speed of all the mechanisms, procedures of the organization and business process. It helps to make a more conscious decision with regards supply chain. The biggest reason why implementation of an ERP system is recommended is the peace of mind which it offers to the business owners since they know that they have the adequate resources for fighting the day to day issues of execution of business strategy. Due to automation of the business procedures that comes along with the use of business productivity software ensure better and faster communication of the organizational goals, vision and strategies across all levels of the organization. ERP software will give the owners time to utilize it for resolving other issues. ERP software can also help to improvise upon the ease and efficiency that is coupled with the usage of e-commerce websites that are built on platforms such as Magento. These business owners would all the more are suggested to shift to ERP it gives them the ease to keep a vigilance over every phase of a project so as to compare the actual results with the estimated ones. Along with analysing the performance of the employees, it also ensures to provide various advanced reporting options and business analysis competencies that can entail the owners obtain a better over view of the performance of the business, the trends undergoing presently in the market and what the customers desire for. The analytical reports generated by an ERP software can help the owner along with the management to get away with the present strategies and formulate new ones which would help to support the business processes. Thus it can play a crucial role in inventory management, tying in conjunction with the important metrics across the organization.
However along with the said recommendation, it is equally important to note that ERP solution does not come in a “one size fits all” solution. It comes in many types that are formulated specifically to cater to specific functions or industries, thus the ERP software is function-specific or industry-specific. Functions include the accounting and customer relation management and industry includes manufacturing and health care. It is highly recommended to all business owners that before they plan to implement an ERP, a detailed research of the various options available along with the pros and cons it has on the organization should be interrogated. Further which functions are required to be addressed and how implementing ERP into those functions benefit the company against the cost incurred should also be analysed. For example SAP is a well known and the most widely used ERP as it helps to integrate the important business functions across the organization at all levels and geographies with ease (Rand, 2017). It helps to ensure that the damages of the business are kept under control and new opportunities for growth and innovation are generated thus ensuring the business to be at a competitive advantage in the market.
ERP systems are adopted by many organizations irrespective of their sizes simple because it entails to provide a stable base for the growth of various businesses across the globe amongst various segments be it dot come segment to manufacturers such as that of automobiles. The advantages and the role it has to play in the enhancement of data integration, processing as well as dissemination makes it a necessity for all organizations yet its implementation is a strategic decision which requires involvement of human and finance, evaluation of the same and adequate re-engineering as well. On a concluding note it can be said that an ERP provides a multi-platform, multi-facility, multi-mode manufacturing, multi-currency and multi-linguistic facilities. It entails optimisation of the overall demand and supply data and also integrates the other functions of an organization as well such as selling and distribution, marketing, payables, receivables, inventory etc. Lastly it can be said that due to the implementation of an ERP, an organisations’ image gets augmented as there is no gap in the communication lines and also any kind of introduction to latest technology gets implemented and blend automatically with the help of an ERP.
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