ERP SYSTEMS

Overview of ERP Systems



Overview of ERP Systems

Introduction

The ERP (Enterprise Resource Planning in English), also known as Enterprise Resource Planning (ERP), are applications whose purpose is to coordinate all activities of a business (so-called vertical activities such as production, supply or horizontal, such as marketing, sales forces, management of human resources, etc..) around a single information system .

Enterprise Resource Planning is a term derived from manufacturing resource planning (MRPII) and followed by the Material Requirements Planning (MRP). ERP systems typically handle manufacturing, logistics, distribution, inventory, shipping, billing and accounting of the company. However, Enterprise Resource Planning or ERP software can intervene in the control of many activities of business sales, deliveries, payments, production, inventory management, quality management and human resource management.

The interrelationship of ERP with other value chain elements, in which ERP systems and their implementations represent essential enables of improvement, development, and growth with and ultimately among firms. The developments of innovative add-on modules and extensions driven by the advances of new technology and evolving business demands will lead to the next wave of ERP systems (Mohamed 2002, 56).

Definition and Characteristics

The role of Enterprise Resource Planning (ERP) does not match its name: it is about neither planning nor resources, but is rather related to the enterprise. ERP systems are often being referred to as ?Enterprise Systems and ?Enterprise-wide Information Systems. There is no universally agreed upon definition for ERP systems so far.

Advantages and Disadvantages

It is evident in literature that ERP systems, if properly implemented, can achieve substantial benefits for business computing. Among those reaping the benefits are Fujitsu, General Motors, Boeing, IBM, Oracle, Coca Cola, and so on. Numerous cases of ERP projects in a variety of industry sectors have proven that successfully implemented ERP systems do offer many advantages unparalleled by the co-existence of various stand-alone, custom-built software applications which neither collaborate with each other nor effectively interface (Abraham1979, 58).

In spite of the many advantages as described above, ERP systems have some disadvantages. Some of ERP systems' notorious disadvantages are listed below.

Long implementation periods. ERP implementation takes a long time compared with the installation of other software applications, ranging from several months to many years. A three to five year implementation period of ERP systems is fairly common in a large company. During this period, the benefit of ERP systems may not be able to be fully delivered.

Inflexibility and vendor dependence. Once an ERP system is established in a company, it is too difficult to change how the company works and is organized or to switch to another vendor.

Overly hierarchical organizations. ERP systems presume that information will be centrally monitored and that organizations have a well-defined hierarchical structure. Therefore, these systems will not match with organizations of empowerment or with employees as free agents. Additionally, re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage; and resistance in sharing sensitive internal information between departments can reduce the effectiveness of the ...