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#17 Advantage and Disadvantage of ERP

24 Jul

Date: 24 July 2011

Enterprise resource planning (ERP) integrates internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. Its purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders

Advantage and Disadvantage

Advantages:

Integration

Integration can be the highest benefit of them all. The only real project aim for implementing ERP is reducing data redundancy and redundant data entry. If this is set as a goal, to automate inventory posting to G/L, then it might be a successful project. Those companies where integration is not so important or even dangerous tend to have a hard time with ERP. ERP does not improve the individual efficiency of users, so if they expect it, it will be a big disappointment. ERP improves the cooperation of users.

Efficiency

Generally, ERP software focuses on integration and tends to not care about the daily needs of people. I think individual efficiency can suffer by implementing ERP. The big question with ERP is whether the benefit of integration and cooperation can make up for the loss in personal efficiency or not.

Cost reduction

It reduces cost only if the company took accounting and reporting seriously even before implementation and had put a lot of manual effort in it. If they didn’t care about it, if they just did some simple accounting to fill mandatory statements and if internal reporting did not exists of has not been financially-oriented, then no cost is reduced.

Fewer personnel

Same as above. Less reporting or accounting personnel, but more sales assistants etc.

Accuracy

No. People are accurate, not software. What ERP does is makes the lives of inaccurate people or organization a complete hell and maybe forces them to be accurate (which means hiring more people or distributing work better), or it falls.

Disadvantages:

Expensive

This entails software, hardware, implementation, consultants, training, etc. Or you can hire a programmer or two as an employee and only buy business consulting from an outside source, do all customization and end-user training inside. That can be cost-effective.

Not very flexible

It depends. SAP can be configured to almost anything. In Navision one can develop almost anything in days. Other software may not be flexible.

Aggyey

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Posted by on July 24, 2011 in ERP

 

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