An overview of enterprise resource planning and its benefits.

Enterprise Resource Planning
Kevin Allen Rio
Krio Media, LLC
www.krio.me
2008

The purpose of an ERP system is to integrate systems that serve the many departments in an enterprise. The ultimate goal of an ERP system is to develop a single system that can serve each departments specific requirements (Chorafas, 2004). It acts as an intersection point; bridging the gap between each individual system. An ERP system works to increase efficiency by removing the need to utilize resources outside of ones department. For example, after the implementation of an ERP system, an enterprises human resources department no longer needs to request and import logs from the finance department, because as soon as they are posted the human resources system is updated with the current information. No conversion of the document is required and no importing of information. The ERP system integrates and updates all sources without the need for time consuming projects. All software system are linked together so each department can see updates and projects from parts of the company. The most popular use of an ERP system is the processing of customer orders; termed the order fulfillment process (Chorafas, 2004). The back-end order process is completely automated. Once the program has fulfilled the necessary steps in a particular department the order is automatically routed to the next necessary system. System users can enter data into the ERP software to check the status of orders and at what stage it is in. Financial reporting, payroll, and employee benefits are all examples of areas where an ERP system can help automate the system processes of a company to make it more efficient. ERP has many uses, such as the integration of financial information. The ERP system takes from the many departments in an enterprise and can present financial information that is all encompassing. Decision makers are not required to evaluate divisions independently as ERP systems can combine this stored data. The standardization of human resources information is another area where an ERP system can be beneficial. This provides a single system where an employee’s information can be tracked and updated providing for ease in communication. ERP systems can also be used to track customer orders from the time the order is placed until it arrives to them. Using one piece of software to achieve this allows for much better tracking and communication between departments, increasing efficiency (Chorafas, 2004). These are all benefits of the implementation of an ERP system.
One area that ERP system put to the test is accountability (Chorafas, 2004). Each department must conform to the upmost standards because they can be monitored by other departments. Warehouses must ensure that they input their data in a timely manner because due to the constant communication between systems, other departments know when shipments are coming and if they are delaying their data entry. If they do not update consistently, sales may be halted and losses would ensue. This is an example of the need for proper training and how accountability and communication are put to the test is an ERP system. Studies show that the majority of enterprises that have implemented ERP systems conclude that without the system, their firm would not function efficiently enough to remain active (Chorafas, 2004).

http://www.cio.com/article/40323/ERP_definition_and_solutions?page=2#fix

The cost of ERP systems vary exponentially; some ranging from $300,000 to $15 million. The cost of an ERP system scales depending on the size or the enterprise and their revenues. A manufacturing company that earns approximately $50 million in revenues can expect to pay nearly $400,000 is ERP costs. Firms from different industries can expect to pay much different prices depending on their systems needs. The rewards from implementing ERP systems properly average $1.6 Million per year. On average it takes eight months after implementation to begin reaping the rewards of a new system.

http://www.intoweb.co.za/articles-define-erp.html

Decreasing redundancy is the goal is enterprise resource planning. ERP fulfills a wide range of business necessities through the standardization of systems among different divisions. ERP allows managers to oversee the company as a whole by taking different departments and combining their systems and data into one, allowing for seamless data sharing. The implementation of the ERP system is especially important. Often times, enterprises attempting to implement and ERP solution will fail because of improper planning and human errors.

http://www.qualitydigest.com/magazine/2008/oct/article/launching-enterprize-resource-planning-system.html

There are many reasons why an ERP implementation project can fail, but there are some constants that can be seen time and time again in many projects. One of these reasons is a poor testing phase due to pressure to release the system. Beta testing is an important piece of the ERP puzzle that is oftentimes ignored. Proper training is essential for ERP users and enterprises do not fully grasp the amount of training that is required to be successful and this is a common reason for systems failure.
Chorafas, D. (2002). Enterprise Architecture and New Generation Information Systems. Boca Raton, FL: CRC Press, LLC.

McGovern, J., Ambler, S., Stevens, M., Linn, J.,Sharan, V., & Jo, E. (2004). A Practical Guide to Enterprise Architecture. Upper Saddle River, NJ: Pearson Education, Inc..