Enterprise e-Business Systems... Contd

Section II: Enterprise Resource Planning: The Business Backbone

INTRODUCTION

Enterprise resource planning (ERP) systems serve as a cross-functional enterprise backbone that integrates and automates many internal business processes and information systems within the manufacturing, logistics, distribution, accounting, finance, and human resource functions of a company.

WHAT IS ERP? 

Enterprise resource planning (ERP) is a cross-functional enterprise system that serves as a framework to integrate and automate many of the business processes that must be accomplished within the manufacturing, logistics, distribution, accounting, finance, and human resources functions of a business.  Characteristics of ERP software include:

·         ERP software is a family of software modules that supports the business activities involved in vital back-office processes. 

·         ERP gives a company an integrated real-time view of its core business processes.

·         ERP systems track business resources, and the status of commitments made by the business no matter what department has entered the data into the system.

·         ERP software suites typically consist of integrated modules of manufacturing, distribution, sales, accounting, and human resource applications.

BENEFITS AND CHALLENGES OF ERP

·         Quality and efficiency – ERP creates a framework for integrating and improving a company’s internal business processes that results in significant improvements in the quality and efficiency of customer service, production, and distribution.

·         Decreased costs – many companies report significant reductions in transaction processing costs and hardware, software, and IT support staff compared to the non-integrated legacy systems that were replaced by their new ERP systems.

·         Decision support – ERP provides vital cross-functional information on business performance quickly to managers to significantly improve their ability to make better decisions in a timely manner across the entire business enterprise.

·         Enterprise agility – ERP can be used in breaking down many former departmental and functional walls, which results in more flexible organizational structures, managerial responsibility, and work roles. The result is a more agile and adaptive organization and workforce that can more easily capitalize on new business opportunities.

The Cost of ERP:

·         Costs and risks involved in implementing ERP are considerable.

·         Hardware and software costs are a small part of the total costs.  The costs of developing new business processes (reengineering) and preparing employees for the new system (training and change management) make up the bulk of implementing a new ERP system.

·         Converting data from previous legacy systems to the new cross-functional ERP system is another major category of ERP implementation costs.

Causes of ERP Failures:

·         Business managers and IT professionals underestimate the complexity of the planning, development, and training that are needed to prepare for a new ERP system that would radically change their business processes and information systems.

·         Failure to involve affected employees in the planning and development phases and change management programs

·         Trying to do too much too fast in the conversion process.

·         Insufficient training in the new work tasks required by the ERP system.

·         Failure to do enough data conversion and testing.

·         Over reliance by company or IT management on claims of ERP software vendors or the assistance of prestigious consulting firms hired to lead the implementation.

TRENDS IN ERP 

Four major developments and trends that are evolving in ERP applications include:

·         ERP software packages are gradually being modified into more flexible products.

·         In relation to the growth of the Internet and corporate intranets and extranets prompted software companies to use Internet technologies to build Web interfaces and network capabilities into ERP systems.

·         Development of interenterprise ERP systems that provide Web-enabled links between key business systems of a company and its customers, suppliers, distributors, and others.

·         ERP software companies have developed modular, Web-enabled software suites that integrate ERO, customer relationship management, supply chain management, procurement, decision support, enterprise portals, and other business applications and functions.