Introduction
Scientific innovation and inventions have lead to development in technology; one major use of technology within businesses is communication and integration of processes and departments. An ERP system is a computer application that integrates different departments within an organization into one system that allows real-time information transmission.
Traditionally, different departments used to have their own computer systems that were not integrated into one system; ERP is an improvement of the traditional computer system aims at having an entire organization or some related departments linked into one system.
The systems is a conglomeration of different systems and procedures in an organization, for example the system a company with three departments have the departments linked to the same process such that when something has been put in the system, anybody with computer entry rights within the organization can see the post (O’Leary 12-56). This paper discusses the advantages and disadvantages of adopting an ERP system and evaluates the systems currently in the market.
To understand how the system works better, let take an example of how an order is processed with the traditional system and with an ERP system.
Traditional system
- At the selling point, which is mostly in the forefront office, a customer makes an order; the order is keyed in the computer with the specific details.
- The seller, then passes the documents to the store departments who confirms whether the products ordered are available (the warehousing department has to capture the details of the order).
- The order then is passed to the paying section, where the price that the buyer will pay is calculated and the buyer is advised on costs accordingly (data of payments are captured).
- After payments, the order is then passed to the delivery department for the delivery of the products.
ERP system
If the order was to is processed using an ERP system, then the buyer after placing the order will have the details keyed at the selling point. At this point, he will be advised o the pay and whether the commodities are available as well as how they can be delivered to him.
The quick attendance is possible because the attendant at the selling point can pull information from the warehousing database, the pricing as well as the delivery department.
The buyer can get real-time information from one point; this boosts confidence and improves customer service, however there are come shortcomings of the system that among others include cost of running and implementation.
Advantages of an EPS system
The system has numerous advantages to a company; some benefits are direct while other is indirect. The main aim of a business establishment is to get profits; when an ERP system has been implemented, it integrate myriad processes in the most efficient manner that lead to minimization of expenses and reduction of costs.
A well implement system has the potential of improving customer service within an enterprise, which in turn results to increased business. The benefits brought by the system can be categorized into three main areas, they are:
Integration of processes that lead to reduced costs
One of the most obvious advantages is the integration of different departments in to one system. When an organization is working as a single unit, then the corporation and business integration is enhanced, there is no one department that feels is more superior to the other. Leaders in such organizations will be able to monitor transactions and business deals at a single point thus facilitating establishment of areas of deficit for strategic actions.
ERP system allows for data capture in one section then the data is distributed throughout the organization; this reduces the time of data processing, saves the human resource energy that could have been used to key in data and reduces the error in data that mostly result from multiple data entry. When an organization has free flow of data, decisions are made fast from reliable internal and external data.
Inventory management
One area that the system has assisted is in management of inventories; it is able to manage the flow of an order and updates records within the system that triggers purchases decision making. The system is made in such a way that when a customer makes an order, and the order has been accepted, the data passes to the warehouse department, which records a deduction of inventory.
The system has the capability of managing the reorder level of stock thus when the level is reached, it raises an alarm to the procurement department. When the company adopts and integrated supply chain management, it will have a just in time stock management system. This system ensures there are minimal stocks in the warehouses thus reducing warehouse costs.
Customer service improvement
When a company is using the system, at any one point within the organization, a customer can be advised on the level at which his transaction has reached. The customer only needs to contact one person who will not have to run from one section to another demanding to know the level of progress of a customer’s transaction. When customers get quality services, they are bound to be loyal to the company; this has long benefits to the company.
When the system is implemented, it comes with as strong software that interlinks different business sections; there is high likelihood of reduction of computer operation costs as a result.
For example when tracing an order, it is easy to know the level that the order has reached from one desk without having to move from one department to another looking for the order. This reduces customer service time, offers informed, and real time information (O’Leary 11).
Disadvantages of the system
To develop the system that fits a certain organization is a complex and expensive process, customization of the system is problematic. When a company is developing the system, there is risk that there will be a shift of focus in a business; the businesses may be more concerned with the computer systems and forgets the original corporate goals it was implemented to fulfill.
In the same light, implementing an ERP system is similar with implementing a change in an organization, thus a company will suffer the dangers brought about by such changes.
Other than rolling out the system, which is an expensive exercise, a company needs to incur further expenses training employees on how to use the system. Another shortcoming of the system is chances of integration of unnecessary sectors in the company, this leads to departmental dependency that could be ignored for better efficiency within the company (O’Leary 12-56).
Five Commercial systems
A number of commercial systems have been developed to perform and integrate processes within an organization; some of the most common systems are:
NetSuit
It is the most current system in the market and aims at striking an often claimed but seldom achieved balance between value and cost, through its wholesome approach to an organizations operations; it integrates products, services and competitors into one processes to facilitate decision making regarding the development of products and services.
The system plays an important role in pricing strategy and management of costs within an organization. When a company is using the system, the management is able to generate periodical trend analysis within the organization and the industry for strategic decision-making. The system incorporates transactional backbone, advanced application and management dashboard.
SAP
The system has been developed by Analyst Steven Briggs; it is based on five info-objects, which are used to describe business variable relationships. They come in different languages, hierarchy, currency, weights among others. So far, it is the most known and sold system. The advantage with the system is the integration of different departments and generation of reports for decision-making; it is used as a tool managing through information. The major difference with Netsuit is that SAP does not include competitors in its analysis.
Microsoft CRM
The system is concerned with the general welfare of the customer; it aims at developing strategies that facilitate quality service and customer satisfaction. It focuses in areas of marketing, customer service, and customer after sales, and considers customer feedback when making decisions.
The system is widely used in the service industry however; its positive effects have pulled manufacturing and products industry to use the system. The system integrates the customer by offering feedback mechanisms and uses the data from customers to improve on services and products.
Compiere
It is Italian software distributed by Consona Corporation ; it was founded in 1999 and has been improved with time with the latest version produced in 2006. The system targets small and medium scale businesses that are mostly in the retailing, manufacturing and distribution system. The system has a number of inbuilt systems that can be rolled out while others can be blocked, the systems include Quote to Cash, CRM (Customer relationship management) systems, Integrated Supply Chain Management, and Double-entry Book-keeping.
OpenMFG
The EPS system covers three main business applications: accounting, customer relation management and supply chain management. A system can be dismantled to have the ones that are required by a particular company. The system is an open source based, fully-integrated system that offers room for modifications by organizations in the move to satisfy their needs. The system can be accustomed to the needs and line of business of a company (ERPsoftware360.com).
Conclusion
Advancement in technology has enabled more users’ friendly and result-oriented softwares. Companies are increasingly adopting the systems to facilitate their operations; enterprise resource planning (ERP) systems are strategic management tools that ensure that both internal and external processes in a business are efficient.
It uses computer-based applications to manage different section of a company. When a company has adopted an effective ERP system, then it benefits from process integrations, which result to, improved customer service and cost reduction.
Works Cited
ERPsoftware360.com. Top five Open Source ERP Software Application. 2011. Web.
O’Leary, Edmund. Enterprise resource planning systems: systems, life cycle, electronic commerce, and risk. Cambridge: Cambridge University Press, 2000.