Let’s start off by defining what an ERP systems entails.
The Enterprise Resource Planning (ERP) system is seen as an accounting oriented application.
ERP system’s are used for identifying and planning the resources of an organization, while still managing the entire operations of the organization.
In other words, the system organizes major business processes of an organization. It combines several common management functions into a logically integrated system and enables the flow of information across company’s departments.
Let’s discuss further the many advantages of a successfully implemented ERP system on an organization.
Benefits of erp system in an organization
- Business Integration and Improved Data Accuracy: ERP system helps any organization with the improvement of its data accuracy as well as its business integration.
ERP system as a whole is composed of various modules where a module represents a particular business component.
So, it simply means that if data is entered in one module such as receiving, it automatically updates other related modules such as accounts payable and inventory.
This updating occurs at real time i.e. at the time a transaction occurs.
In addition, the centralized structure of the database also enables better administration and security provisions, which minimizes loss of sensitive data.
- Planning and MIS: These support tools such as planning engines and simulation function all form a major part of an ERP system that helps in proper utilization of resources like materials, human resources, and tools.
- Improved Efficiency and Productivity: In addition to provision of improved planning, ERP system provides a tremendous boost to the efficiency of day to day and routine transactions such as order fulfillment, on timely shipments, vendor performance, quality management, invoice reconciliation, sales realization, and cash management.
- Establishment of Standardized Procedures: ERP system is based on processes of international best practices, which are adopted by the organizations during implementation.
So because of its top-down view available to management, chances of theft, fraud and obsolescence are minimized.
- Flexibility and technology: Due to the globalized environment, where production units, distribution centers, and corporate offices reside in different countries, organizations need multi-currency, multi-language and multi-accounting modes, in an integrated manner.
These provisions are available in most of the ERP systems, particularly in products offered by tier 1 and tier 2 vendors. ERP vendors are also quick to adopt latest technologies, from mainframe to client server to the internet.
Unlike a customized system, Upgrading to latest technology for a running ERP system is uncomplicated. It involves mostly adoption of service packs and patches.
Other advantages of ERP system includes:
- – Optimization of business processes.
- – Accurate and timely access to reliable information.
- – Reduction of time and costs of litigation.
- – The performance of all work units that make up their business because better use time is increased. If you previously had to make reports and take them from one place to another, now the time is spent on other activities.
- – To improve performance and save time, optimize the control and analysis of management decisions there in the long term, reduced costs for the company.
- – Another obvious advantage is in terms of customer service, because the response time is reduced attention to them.
- – When a company has an ERP system is more competitive in the environment in which it operates.
In conclusion, although ERP provides many advantages; its implementation is a strategic decision, involving significant resources (both financial and human), proper evaluation and business process re-engineering.
Information worthy to note is that a failed implementation may lead to bankruptcy of an organization.
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