Enterprise Resource Panning (ERP) System software unifies the data within an organization and standardizes it so that it can be used across the organization. It has been widely adopted by many organizations in order to increase their work efficiency by reducing the time wastage at a minimal cost. If ERP is used to enter customer order then certain benefits can be availed like the system can check customer's credit status, the order to be paced for inventory, notification of the product demand, get a print of the shipping documents, send invoice to the customers and feed everything into accounts. ERP increases the level of communication in the organization thereby leading to better efficiency of the work. It also increases productivity which wouldn't have been possible with a non-ERP firm where all the departments uses their own computer system and maintains their own database which is not accessible to other departments. But with ERP all the departments can work in harmony with each other. Today manager's task is made lot easier with the introduction of ERP software. There is no chance of any discrepancy in an organization where ERP is installed. For managers it enables high level decision making ability which they are able to make with ease and more clarity. The quality of work in the organization also increases. It also improves the customer experience and helps maintain good relationship with the customers.
This report talks about the pros and cons of installing ERP into the business organization. Why the organizations today need to plan ahead of time to stand out there in the competition. And then a brief comparison of different features of the ERP offered by different companies. Further ahead I found out the top vendors offering ERP and their market share and also the latest trends in the IT sector which will create a demand for this software throughout the industry and also outside it. The impact of ERP on business today has also bee discussed and also with the help of an example the implementation of this technology has been explained in good detail.
At the end of the report I have discussed why the managers today need to know about ERP and also provided the five key questions I found interesting during my research.
OFFICIAL DEFINITION OF ERP
Enterprise resource planning, informally known as ERP, is a distinction used to describe a comprehensive software system for automating the daily tasks and planning activities of an organization. The automation and integration of these tasks can result in substantially increased efficiencies for the organization.
Author: Scott Miller
Date of Publication: July 24, 2008
What an ERP system really does????
An ERP system is connected through its hardware and software units to the others departments in an organization where it gets all the information through the local area network (LAN). And the database collected through ERP is centralized to the entire organization.
IN OTHER WORDS...
Enterprise Resource Planning is software that integrates the information from various departments of an organization, like sales, customer service, human resource, finance etc to collectively automate the back office administration of the organization.
ERP software today is not only used in the IT industry but it can be found in many other industries like non-manufacturing, non-profit organizations and also in the government sector.
PROS AND CONS OF ERP:
ERP system has many beneficial features attached which the business organizations can take advantage of. The most important is that it centralizes the information in an organization and uses single software. Many of the organizations who don't have ERP system installed they don't have centralized database. In those organizations, different departments use different software compatible to their department but at the same time it would not be compatible with the software used by other organization. So the data flow would take a lot of time in such organizations.
A brief discussion of other advantages:
- By installing ERP into the organization, the communication level will improve in the organization. There will be efficient and effective communication between different departments in the organization.
- A detailed "TOP-DOWN" overview of the company can be seen through this software. So there is no chance of forging any number anywhere.
- All the information generated through ERP id consistent and reliable throughout the organization.
- Since there is single software used under the ERP system, so there is no need for the company to keep with the changes in the software.
- ERP makes it easy for the organization to track the orders right from placing the order until its final delivery.
- Eases the revenue management. Because again it simplifies the process of tracking when the invoice was issued and when the payment as actually received.
- It also provides security against any theft within the company.
- The risk that is always involved with the information loss is annihilated with this software.
Cons of ERP:
- Cost Involvement: ERP software is an expensive one. This requires a lot of investment on the company's part.
- ERP cannot be installed in every organization since it is not compatible with all kinds of business.
- Some of the departments in the organization may not be willing to share all types of information or may provide inaccurate information. This will affect all the results of the organization and can cause a disruption in the workflow.
- If the data is centralized then it may be difficult to find any one person accountable for any problem occurring with the data. Any problem pertaining to one department or area can be mistaken to the other department.
- ERP is a little complex to accommodate all the needs of the company.
Author: Jacobson, Jim Shepherd, Marianne D'Aquila, and Karen Carter
PDF: ERP Market Sizing Report 2006-2011
A recent IDC survey in Western Europe suggests that 2009 spending on ERP applications will be strongly impacted by the current economic crisis.
21% of the respondents believe that the ERP spending in the year 2009 would be much lower than that in 2008. Also enterprises with more than 2500 employees will be most vulnerable to the cutbacks in ERP spending. But at the same time, spending on the other software categories like systems software, databases, security software etc. will increase.
"For ERP vendors in Europe, 2009 will no doubt be a very hard year, particularly for those selling in the large enterprise segment," said Bo Lykkegaard, research director, European Software and Services, IDC. "Those ERP vendors that post positive growth during 2009 will increase their market share. It is interesting to see how CRM, which declined two years in a row after the recession at the beginning of the millennium, is looking much stronger during this crisis. We see many organizations investing in sales force automation, ecommerce, Internet-based marketing, loyalty management, and customer self-service during this crisis as a way to bring down the cost of doing business."
Source: As posted in Manufacturing & Logistics IT Magazine on 3/4/2009.
COMPARISONS AND CONTRASTS OF EXISTING PRODUCTS
In this segment I will be comparing the various features offered by five top selling ERP companies and analyzing which company is performing better than the other. Five companies chosen are:
- PeopleSoft Enterprise
All the five companies will be compared based on three factors:
- Maintainence, Support and Upgrades
- Application installation wizard
- Advanced configuration
- Process modeler
- Advanced data loading and moving
- Process-oriented integration
- Pre-packaged integration between vendor applications
- Built-in web services integrations
- Task-oriented navigation
- Navigation configurability
- Task-oriented dashboards
- Web client
- Integrated office productivity.
- Diagnostic and technical support
- Remote and online support
- Performance diagnostics and tuning
- Patch management
- Automated upgrade process and toolsets
- User-centric performance testing
- Data archiving.
- Software spending budget- Companies will be spending more on its software than last year. A forecast of 9% has been made which is slightly more than last year. Companies are expected to spend on licenses, operations and development but a lot has to be spent on maintainence as well.
- Need for implementation of long term application strategies- Today the companies are on a spree to integrate their applications for ease and reliability. So there is a greater scope for them to implement the ERP software. Service Oriented Architecture (SOA) Companies will take advantage and implement long term strategies for integration of their application.
- Packaged Applications: Because of the economic slowdown the companies have been looking at improving the operational efficiencies of their business. So the companies want to install ERP in their company. And also there will be major upgrades of ERP suites.
- Webs 2.0- These days the companies have been looking at new tools in order to improve the productivity and collaboration in their organization. Only area they are worried about is the security.
- Adoption of SOA- Companies have been adopting SOA to support the integration projects of an organization.
- Increases in SaaS adoption- Enterprises are adopting SaaS software and the demand for it has increased by 50% over the year 2008. Main reasons for adoption of this software are its price, ease of deployment and minimal involvement of IT.
- Software investment in collaboration and content management- Nowadays the enterprises are allowing the access of their data to its stakeholders such as suppliers, partners and customers.
- ERP improves information flow across sub-units through which the company gets more accurate and reliable information from other units of the organization.<1li>
- ERP enables standardization and integration which in turn facilitates communication and better coordination of activities within the organization
- ERP also enables centralization of administrative activities such as account payable and payroll, which has made the working in an organization very easy and simple.
- It also reduces IS maintenance costs and increases the ability to deploy new IS functionality, a perfect combination which leads to a delivery of efficient results at a low cost with just one time investment.
- ERP over the years has been instrumental in moving a firm away from inefficient business processes towards more accepted best of practice processes.
The implementation stage includes the initial installation of the software, its configuration and any other related work of the application to interface properly with the IT performance of the customer. Experts use seven criteria to compare the performance of vendors during this process:
The usability stage includes all the functions that are related to the usage of this software. It includes the time taken to perform a task with the minimum amount of errors, end user productivity and time taken to learn the usage of the software with minimal amount of training, ease with which the application terminology is used to customer related cases. Again experts use five criteria's to compare the performance of the vendors:
MAINTAINENCE, SUPPORT AND UPGRADES:
This stage includes all the post-implementation activities such as support, upgrading of the software, all the activities done by the administrators to ensure that the software is running in optimal conditions etc. Seven criteria are involved in comparing the vendor's performance:
Author: Elisabeth Rainier
Date of Publication: 23/5/2005
FORECASTS AND TRENDS FOR ERP:
Author: Sam Conforti
Date of Publication: February 23, 2008
IMPACT OF ERP ON BUSINESS:
Today the Enterprise Resource Planning (ERP) software system plays a great role in the working of a business and many companies have eased their way of operating after implementing the technology into the businesses. ERP integrates key business and management processes within and beyond a firm's boundary.
For example, In case of a manufacturing or refining firm, production can use the analysis and optimization tools while executing seamlessly with their ERP system's materials management and purchasing processes at the same time. As production planners create procurement plans for materials that optimize costs, plans can address what materials are needed, when they are needed and the best suppliers to keep the project on deadline and budget. And this makes the working in an organization easier and saves a lot of time.
BUSINESS IMPLEMENTATION OF ERP:
Let me explain this with the help of an example. Let me take a manufacturing firm for example. Now the question is where ERP will come into play in this type of a firm. So here is a start. From the sales department, a sales representative will book the order, whatever is required by that department for the production of goods and feed that into the system. Then the ERP system tracks the current status of raw materials and finished goods already available in the organization. After that the amount of new order to be placed is calculated along with the time required for the final delivery of good to the customers. Then this particular information will be used by various other departments in the firm. For example, the customer service department will use this information to tell to its customers when they can expect their order. In a similar fashion the information will be used by the manufacturing department to set its production schedules and also hire temporary staff if required in production. Logistics department uses the same information to gear up the goods for shipping. Customers can also check their shipping status online. Finance department uses this information to arrange for the money and also to collect the money form the previous customers and also pay back to its suppliers.
Now it can be seen that in the above example a lot of time and resource inefficiencies have been minimized with the help of ERP software. Right from the time sales department feeds the order into the system till the final shipment of the goods; every concerned department gets a track of all the information being shared within the organization, information about the order s well as the customer. The software it keeps a track of all the information travelling in the organization and anyone within the organization can track it and can also make any changes required. This software eases everything, from planning the inventory in a better and an organized manner and making a sync of the production plans according to the customer's demand. Any error that creeps into the data can be minimized with the help of this software and it also saves the time of the employees and they can concentrate on other areas rather than focusing what information went wrong and where. If ERP software is implemented properly in an organization then a lot of tome can be saved and work efficiency can be maximized.
I have tried to explain the same concept with the help of a figure below:
SUGGESTION TO MANAGERS:
Today the business is so fast paced that there can be no scope of slowing down anywhere otherwise it will give a room to business being killed. So the managers today have to realize that IT is an important part of every organization and without it the organization van barely survive. And with the changing nature of the business and advance globalization in to the economy, there is a lot of need to adopt the fastest tools in your organization to outstand the competitors. Here are a few suggestions to the managers of today why ERP is important to their organization:
- ERP system is company-wide and involves only one software system: Trough this all the information will be accumulated at one place and the manager will not have to bother or spend time fetching the similar information from the different department separately. This makes things so much easier for the managers.
- Effective communication between different areas: Flow of information is made easier within the organization with the help of this software. And this will also increase the flow of work in the organization.
- Proper Inventory Management: The entire inventory is tracked right from the start so managers can get a track that everything is in proper order.
- Tracks revenue cycle from the point when invoice is issued till the payment is received: Revenue cycled is also tracked which again provides timely information when to make the payment and from where all to receive the previous payments.
- Reduces the risk of loss of information: the software has all the information and the new information is also updated so there is absolutely no chance of information loss and managers can rely on this information.
- Security against theft: since everything within the organization is being tracked there is no chance of anything being lost. This makes managers more efficient and decreases their workload.
1) How does ERP manage inventory?
ERP software handles everything from ordering, physical inventory count, scheduling, shipping, receiving, purchasing, and supply chain planning. Any changes in inventory are automatically updated. It saves a lot of time. This helps inventory management employees to be able to see if an item is currently in stock.
2) Some of the disadvantages associated with ERP?
a. ERP software is expensive
b. Since it is a company-wide system where all the areas are connected, it is difficult to figure out accountability.
c. All departments would not be willing to share the information. Therefore, withholding of any information may cause disruption in the workflow.
3) Benefits of ERP in SME segment?
ERP was most commonly used only in large organizations. In this global competitive market companies need to upgrade themselves to the latest technologies to be able to stand in the competition. The major benefits to the SME's are:
- It provides data that is consistent and also reliable, which can be used across the organization.
- Makes transaction processing smoother both within and outside the organization.
- Does simple things just at the click of a button like it operation level reporting.
4) Does ERP address the service industries?
Yes, ERP these days supports almost all the industries. Amongst the service industries it supports ports, retail, airlines, educational institutions and courier companies. All these companies have been successful in implementing ERP.
5) What makes the end-users accept ERP?
ERP software is made in such a way that it speaks the end user language and makes things simple for them. Many organizations have been successful in implementing ERP for business related goals. The end-user can learn about the usage of ERP within a short span of time, it does not take very long to train the end users. All these features put together have generated substantial amount of user acceptance.