In the current market, most companies use ERP system to solve most of their management issues and also assist an organization in running efficiently. The ERP system is also well- known to be really simple and easy to work with for many organizations. In the following sections, this essay will discuss about the process and pitfalls of using an ERP system, the advantages and disadvantages of it and with these, it will conclude on the ERR system.
What is an Enterprise Resource Planning (ERP) System The Enterprise Resource Planning System or simply known as an ERP system, is primarily a professional application software that carries out standardized methods to streamline information among each and every division within an organization (Leonie, 2012). The ERP system coordinates information reliably all around whatever is left of the organization. ERP system incorporates a range of modules including financial, accounting, HARM, sales, distribution, manufacturing and logistics (Deer ret al, 2005).
This range of modules each has its own System which often possessed compatibility issues with each other. This is when an ERP system comes in handy whereby it joins all this incompatible modules together so as to be able them to communicate, share and impart information effectively. With the ERP system establishing communication among these incompatible oodles, there will not be a need to stir information from diverse framework, doing additional computations or interface with the sales results from a few months back or handling flow.
In conjunction with this framework, each person inside the organization would be able to retrieve the relevant information he/she require in order to perform their task effectively and efficiently. Table 1 below are some modules that use an ERR system (Leonie, 201 2): Table 1: Organizational Modules that utilizes ERP System Organizational Modules which Utilizes ERP System Account & Finance Sales & Distribution
Logistics Human Resource Production General Ledger Accounts Payable & Receivable Fixed Asset Sales Queries (Inquires & Quotations) Sales Orders Delivery / Shipment Invoice / Billing Purchasing, Tracking & Sales Shipment of Inventory Items Tracking of Product Lots & Serial Numbers Tracking of Product Quality Test Results Warehouse Capacity Management personnel management Organizational management Payroll Time management Personnel development Tracking the change of unrefined materials into finished items Track Labor, Overhead and other amassing costs Stipulate the full cost of creation
The Process and Pitfalls of Switching to ERP system With the ERP system being setup correctly, the whole system will become very sophisticated, incorporating decreases in administration procedures; enhanced benefits; less demanding expenses; and performance that is more dependable. Below are some points on the process and pitfalls of switching to an ERP system (Suddenly, 2011 Reduces Unnecessary Paperwork: An ERP system reduces majority of the paperwork, as all correspondence between departments are able to experience the same framework.
Using a sales department and production department for illustration purposes, whenever the Sales Department input a sales order into the ERP system, the Production Department personnel would be notified of the sales requests within a very short period and they can begin processing the sales request and issues preparation requests to the production team. In the event that there is a need to, workers can get a printout Of the processed sales request.
From the point where the Production Department began processing the sales request and eventually issuing the preparation request, no unnecessary paperwork were incurred but yet task could still be effectively performed in an efficient manner. Enhanced Productivity: Productivity will be enhanced if ERP system is applied correctly, as it will greatly improve on time and material usage. Intelligence and rules can also be programmed accordingly and applied. For example, similar production orders can be combined and produced concurrently, as this will allow more proficient utilization of staffs, machines, and resources.
Easier Costs: Less demanding expenditure (imparted as a rate of the revenue earned) might be fulfilled with the usage of an ERP system. For instance in the event whereby suppliers have gotten a full collaboration, the ERP system makes it keel to execute the buying arrangement without a moment to spare. This can cut down the expenses of final product stock keeping and set free capital for other purposes. Solid Performance: ERR system can often provides businesses with flawless and efficient operations, however this useful advantage is often neglected as it could not be justified as a source of income to the organization.
However, it is still important to note that this strong performance of ERR can provides organizations with flawless and efficient operation when information can be relayed to various departments in a fast, little or no error manner, using the name example mentioned earlier for reducing unnecessary paperwork. With the process being discussed, the ERP framework also contains a few pitfalls and they would be discussed below. Incorrect Rationale for using an ERP: A generally committed error, particularly when ERP-like frameworks initially showed up, is the decision for ERP with the incorrect rationale.
There had been numerous organizations who settled on ERP to massive clean-up on their chaotic operation methods, unfortunately this move practically ends up in a catastrophe. The old yet famous proverb suggested ‘garbage in – refuse UT’ always stands and should never be forgotten by any organizations. To keep away from these traps, it is highly important for organizations to enhance their methodology with more sensible requirement before establishing an ERP system. Underestimating the Time: Often, companies are too engrossed in implementing the ERP system such that they underestimated the time spent.
Arrangement of the usage requires much unforeseen and excess work and time spent. Understatement of the obliged attempts could deliver extreme results. Underestimating the Cost: Quite often, certain ERP system provider gives a proposition that are easily understandable by clients, yet in reality this proposition may possessed unseen problems once the system finished development, that can result in significant clashes between the client and ERR system provider. Organizations must ensure that they had considered all expense segments and how specific situations may influence the system development cost.
One of the common problem faced by organization is their failure to conduct feasibility study when deciding to have the ERP system or not. Failure to do feasibility study will lead to painful results at the end of the day whereby the real cost of eating up the ERP (e. G. Agreement, permit, upkeep, expenses of execution) could cost a lot more than the revenue they could earn when the ERP is up and running. Incorrect ERP Selection A small or medium organization ought to abstain from purchasing an enormous framework, and rather actualities one that is more proper to their prerequisites and plan (with some room to develop).
Another similar issue is picking the incorrect kind of ERP system – many varieties of ERP systems are readily available in the market, some that are task arranged Reps and some that are handling line situated Reps. It is important to verify the type of framework an organization pick that adjusts to the sort of business they operate. The Advantages & Disadvantages of using an ERP System Essentially, ERP system which is correctly outlined, properly setup and accurately completed ERP results could give huge profits to any organization regardless of their volume or development.
The capacity to immediately run status reports with no physical information entrance in databases can give organizations significant data on business operations and consider all the more opportune responses to changing business situations. Farsighted corporations have started to take a gander at their professional frameworks as a very vital component of their general business speculation system and operate similar monetary measurements to professional programming that are highly utilized when procuring another plant or new gear.
In the quick moving universe of business, a progressed, present day ERP framework is no more simply a key to business achievement, however a centre component of survival. If any organization experiences issues running reports continuously, or their workers spent unnecessary time inputting the same piece of information repeatedly into other frameworks, or vital business measurements that needs to be ascertained by hands on worksheets, this organization will definitely reap the benefits of when they have an advanced ERR business bundle (Leer-lie, 2012).
However, on the other end some disadvantages of using an ERP system would be the huge cost, its long journey, its data length, and the time spent on implementing the programmer. The implementation process can take up to several months for the system to be full up and running. Complexity is also one of the factor that organization faces when it comes to implementing the yester. Overall, ERP frameworks do not really seem appropriate for Small or Medium-sized Enterprises, or simply known as Seems whereby they essentially have difficulty in defending the starting cost of their enterprise (LOL, 2011).
Some other disadvantages of using an ERP system would be discussed below (LOL, 2011). Impacting on Business Processes: ERR structures are often an immediate progression to the processes or procedures of business organizations, and this often leads to entanglement rather than actualities. In order to ensure that each one some piece of the equines fits into the ERP structure, it is unrealistic that individual procedures and arrangements could be kept up, so the execution of an ERP structural engineering has a tendency to take the state of a much more extensive business change venture.
This is all the time an iterative methodology. At the point when characterizing the extent of the ERP at an early stage, huge numbers of such contemplations are often remains unknown. ERR executions possessed the possibility of being viewed as tasks that “constrain” unwanted reforms on the business organizations’ operation. Thus once the ERP usage is underway, the only solution for any change is to change business formats without preparing the whole system from scratch.
ERP Systems that lacks Flexibility and Adaptability: ERP system building design gives itself well to build organizations that possessed characterized procedures and methods. With the ERP system being set up, the system would succeed for those organizations, yet for other organizations that wish to perform major fundamental reforms, the ERP system could turn out to be exceptionally rigid. Because of the path in which the structural engineering is situated up, even generally little changes might e immoderate and entangled to execute.
Dynamic organizations, continually looking to roll out improvements in course would not be able to enjoy the profit brought about by having an ERP, as the ERP would never be synchronized with what the business actually does. Problems Created through Ongoing Supports: External vendors often uphold ERP frameworks. This can result in many issues created when these external vendors are required to adhere to administration level understandings, thus the time to react to abnormalities and the nature of essential help could not keep up with business requisites.
Permitting and support charges could be incurred heavily into the already thriving expenses of the ERR system. The greatest fear of any organizations are the security of their confidential information held within the ERP, as the system are mostly maintained by external vendors, the organizations feel that they do not have ‘true’ control of these confidential information. Risk of Efficiency being Dissolved by Businesses A compelling ERP depends on the correct type of business procedures to help and keep up with structural planning.
For instances, Organizations that do not UT resources into further skills upgrading of staffs will never be able to see the profits through ERP execution. Whenever organizations are working in an extremely conservative way, these organizations can never truly understand and appreciates the ability of an ERP framework. Structural engineering relies heavily on an exceptionally incorporated plan of action and disappointment to impart information between offices will restrain viable living up to expectations. Fundamentally, to completely profit using ERP framework, the business will be required to be executed in a certain manner readily.
A few organizations have acknowledged robust benefits from the usage of the ERP system, though majority of the people believes that the results did not advocate the start-up cost of the ERP. As these ERP systems are often very costly, organizations must think thoroughly of whether does this ERP truly benefit the business, and at the same time whether business really needs to have an ERP. Conclusion An ERP system may be an exceptionally important device for each undertaking in which centre methodology could be supported by programming.