Advantages & Disadvantages of ERP (Enterprise Resource Planning) Systems
In order to understand computer networks better, it would be helpful to have an overview of the applications running on the network. ERP, or Enterprise Resource Planning is an important enterprise application that integrates all the individual departments/ functions in a single software application.
ERP Systems make it easier to track the work-flow across various departments and reduce the operational costs involved in manually tracking, and perhaps duplicating data using individual & disparate systems. In this article, let us have a look at the advantages and dis-advantages of implementing ERP (Enterprise Resource Management) Systems.
Advantages of ERP (Enterprise Resource Planning) System:
1. Complete visibility into all the important processes across various departments of an organization (especially for senior management personnel).
2. Automatic and coherent work-flow from one department / function to another to ensure smooth transition/ completion of processes.
3. A unified and single reporting system to analyze the statistics/ numbers/ status etc in real-time, across all the functions / departments.
4. Since same software is used across all departments – this can avoid individual departments having to buy and maintain their own software systems.
5. Certain ERP vendors can extend their ERP systems to provide Business Intelligence functionalities as well.
6. Advanced e-commerce integration is possible with ERP systems that can handle web-based order tracking/ processing.
7. There are various modules in an ERP system like Finance/ Accounts, Human Resource Management, Manufacturing, Marketing / Sales, Supply Chain / Warehouse Management, CRM, Project Management, etc.
8. Since ERP is a modular software system, its possible to implement either a few modules (or) many modules based on the requirements of an organization. If more modules implemented, the integration between various departments might be better.
9. Single Database is implemented on the back-end to store all the information required by the ERP system and that enables centralized storage / back-up of all enterprise data.
10. ERP systems are more secure as centralized security policies can be applied to them and all the transactions happening via the ERP systems can be tracked.
11. ERP systems provide visibility and hence enable better/ faster collaboration across all the departments.
12. It is possible to integrate other systems (like bar-code reader, for example) to the ERP system through an API (Application Programing Interface).
13. ERP systems make it easier for order tracking, inventory tracking, revenue tracking, sales forecasting and related activities.
14. ERP systems are a boon for managing globally dispersed enterprise companies.
Disadvantages of ERP (Enterprise Resource Planning) Systems:
1. The cost of ERP Software, planning, customization, configuration, testing, implementation, etc is too high.
2. ERP deployments take 1-3 years to get completed and fully functional.
3. Too little customization may not integrate the ERP system with the business process & too much customization may slow down the project and make it difficult to upgrade.
4. The cost savings/ payback may not be realized immediately after the ERP implementation & it is quite difficult to measure the same.
5. The participation of users is very important for successful implementation of ERP projects – So, exhaustive user training and simple user interface might be critical. But ERP systems are generally difficult to use (and learn).
6. There maybe additional indirect costs like new IT infrastructure, upgrading the WAN links, etc.
7. Migration of existing data to the new ERP systems is always difficult to achieve as with integrating ERP systems with other stand alone software systems.
8. ERP implementations are difficult to achieve in decentralized organizations with disparate business processes and systems.
9. Once an ERP systems is implemented it becomes a single vendor lock-in for further upgrades, customizations etc.
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wow, great notes. could you also do the same for information technology infrastructure.
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Really good notes. Easy to understand…..
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Very useful article. it covers almost all the aspect about ERP System in term of advantages and disadvantages.Easy to understand too.