MANAGEMENT INFORMATION

ERP Systems



ERP Systems

Executive Summary

Enterprise resources Planning (ERP) systems have become a vital component of successful businesses and organizations. Although ERP systems are difficult to implement and use properly and effectively, they still provide significant benefits to all kinds of businesses since they have the ability to centralize corporate data and improve the efficiency and effectiveness of their business processes and managerial decision-making. The ERP systems are part of the management accounting system (MAS); it could strengthen an organization's competitive positions in a rapidly changing marketplace. However, since the ERP systems are not perfect, the MAS has to be tailored to the internal and external environment of the organization simultaneously. This essay briefly defines the ERP systems and describes their benefits and drawbacks. It then identifies the relationship between MAS and ERP systems. Finally, it discusses whether the organisation being designed around the MAS or the MAS being tailored to the internal and external environment of the organisation.

Introduction

Over the last decade, Enterprise resources planning (ERP) systems have emerged as an essential tool so as to obtain the competitive advantage for most businesses. ERP systems are defined as management information systems (MIS) that integrate primary business applications, including all areas and levels of an organisation. (Wikipedia). Typically, ERP systems consist of applications for accounting and controlling, quality management, production and materials management, sales and distribution, project management and hunman resources. (Loadstone, 2003). MAS is a system of measuring and providing operational and financial information. ERPS and MAS are interrelated and have a close relationship. As "ERP is at its essence a data management tool"( Schuster & Brock, 2004, p.2) therefore, it can be said that ERP is a tool of MAS in order to give businesses a competitive advantage.

Discussion

The implementation cycle of an ERP system is about organisational change. It is a multi-disciplinary effort and characterized as a complexity, uncertainty and a long time scale.(Harwood, 2003, p.1). The cost and time are very important issues for an organisation to consider when implementing an ERP system.( Granlund and Malmi, 2002, p.304). However, a proper implementation of the system may provide many benefits, depending on the organisation integrating the system with its own business processes.

An ERP system has many advantages in helping organisational management accounting systems. It integrates all parts of an organisation's management processes and each application within an ERP system shares a common set of data and files that is stored in a central database. (Olson, 2004, p.4). Consequently, it may increase the competence and accuracy of the data so as to provide better financial performance and enhance competitive position.(Hayes, Hunton and Reck, 2001). In addition, an ERP system can increase the organization's overall efficiency and effectiveness since all the parts within the ERP system are connected and integrated with each other. (Loadstone, 2003). Subsequently, people may have faster access to the information so that it enhances facilitating decision-making.

However, to implement and maintain an ERP system can be costly. As Brakely says "the financial burden of implementing an ERP system ...