Enterprise Resource planning systems

Enterprise Resource planning systems

Executive summary

The following report will cover a wide array of issues surrounding the use of Enterprise Resource plan systems by business organizations. Enterprise resource planning refers to the process of having an integrated management system of all business processes through digital technologies (Herrmann, 2016). Among the key issues include the similarities and differences between objectives of the ERP system and functional area information systems. Secondly, the key benefits and limitations of using ERP systems in the organization will be explained in detail to help organizations make better decisions regarding ERP systems. Thirdly is that the report will look at the core and fundamental modules of the ERP system. These modules include sales and marketing, accounting, among many others.

Additionally, the report will provide a recommendation on which ERP module needs to be implemented first before others. The next thing covered in the report ae the various implementation models that can be used by organizations. In this, the organization can use one-tier or a two-tier model depending on its needs and technical capabilities. Additionally, the report will look at the merits and demerits of each model and provide a recommendation on the best model to be used. Lastly, the functional departments of an organization likely to be impacted through ERP systems will be highlighted.

Introduction

Today there are many new technologies that business organizations are adopting intending to improve their processes, become successful and get a competitive advantage (McGaughey & Gunasekaran, 2018). The increased use of social media platforms like Twitter, Facebook and Instagram for marketing, advertising, and facilitating sales has tremendously helped organizations to become international firms. Additionally, organizations have adopted Enterprise resource plans and other automated systems as a way of handling the ever-changing needs and interests of their customers. Enterprise Resource planning also known as ERP refers to the process where an organization comes up with computerized management system that is supposed to control, monitor and manage the organization’s critical resources like Financial assets, human resources and internal and external resources (McGaughey & Gunasekaran, 2018). Therefore an ERP is designed to model and automate essential processes across the organization over a centralized database and eliminates the need for separate systems maintained by various units of the organization. However, there are merits and demerits of using ERP and organizations ought to look at them for long term planning (Yılmaz & Ozcan, 2018). Other key factors that organizations consider when it comes to the ERP include the following. First are the goals and objectives to be achieved in the different functional areas of the organization. Secondly are the main modules of the ERP systems and the process of choosing the best for the organization. Thirdly is that there are various ERP implementation models that an organization can use to achieve their set objectives. Lastly is that the use of Enterprise resource planning can impact some departments in the organization and their processes too. Since the use of the ERP brings the integration of processes and activities in the organization, it is quite inevitable for the various department in the organization to feel its impacts. Therefore, the organization ought to ensure that all departments in the organization have clear objectives.

Objectives of an Enterprise Resource Planning system and a functional area information system

The ERP system is often confused to a functional area of information system though the two are very different (Herrmann, 2016). The ERP system provides a framework that can be used by the organization to integrate all its processes and departments for better functioning. On the other hand, a functional area information system is one that provides middle and lower-level managers with information for better decision making. The following are the main objectives of an ERP system in the organization.

1. i) To improve service experience

This is the first objective of the ERP system (Yılmaz & Ozcan, 2018). The organization ought to be focused on improving its services to meet the customer’s needs. It should be noted that customers are the most vital stakeholders in the organization; hence the firm ought to be customer-focused if they want to be focused. Through the ERP system, the organization need to establish various ways they can use to improve their service experience, something that significantly pays off since it can be measured through customer satisfaction levels and feedback. Therefore the organization ought to use the ERP system for integrating its processes and resources for improving its services which catalyzes their continuous commitment to becoming better each day.

1. ii) To enhance competitiveness

This is the second key objective of the ERP system (McGaughey & Gunasekaran, 2018). The organization and its management ought to have various methods in place to assist them to be competitive in the industry. Through the ERP system, the organization has an opportunity of improving its multiple sectors and processes through resources integration. Additionally, the organization ought to use the data and information they get from the ERP system for analysis and future planning on how they can improve themselves and attain a competitive advantage. Being competitive helps the organization to be stable and relevant in the market.

iii) To improve operational efficiency

The organization ought to use the ERP system to improve its operations (Vargas & Comuzzi, 2019). Since the ERP helps the organization to find a robust way of integrating resources and process they should also focus on how they can improve their operations to attain a competitive advantage and satisfy their customers at all times. When the organization’s operations are tremendously improved, the organization becomes efficient, and this is plus to them since they attain a way of increasing productivity with reduced wastes and expenses.

1. iv) To automate business solutions

This the next objective of the ERP system in the organization (McGaughey & Gunasekaran, 2018). The use of digital ways for collecting and analyzing data for better decision making is a similar objective to that of a functional area information system too. This objective is usually taken to be the primary/core objective of the ERP system.Therefore the organization ought to be committed and focused on how they can adopt the ERP system to bring positive changes to the organization. Automation of business processes and solutions is paramount to catalyze efficiency.

1. v) To modernize business systems and processes

This is the last objective of the ERP system. It is also similar to the objectives of a functional area information system. Both of them are focused on bringing positive changes in the organization. Through this objective, the organization can utilize the ERP system and other automated systems to collect vital information regarding the organization and how they can improve in the long run. Additionally, the functional area information system helps the organization to make better decisions regarding any organizational issues, and this helps them to improve their processes.

Benefits and limitations of ERP systems

Benefits

1. Facilitates data accuracy and business integration in an organization (Vargas & Comuzzi, 2019). Through the various sub-systems available in the ERP, the organization can get accurate data concerning the various departments. Through this, the organization can adequately plan and execute its current and future processes successfully.
2. Boosts productivity and efficiency-The ERP system assist in quality management and the day to day operations efficiency and routine transactions such as order fulfilment, on-time shipment, vendor performance, quality management, invoice reconciliation, sales realization, and cash management. Cycle time is reduced for sales to cash and procurement to pay sequences.
3. The organization achieves a more detailed procedure in handling issues in the organization (McGaughey & Gunasekaran, 2018). This consequently helps in doing away with hectic and bulky work in the organization. The integration feature in ERP systems dramatically helps in ensuring that all processes and issues in the organization are handled well.
4. Helps in proper planning and achieving a better management information system (MIS) (Olson & Staley, 2019). ERP is the engine that is used to relay information in all the departments of the organization. The modules and sub-module found in the ERP are very vital in planning and managing information in the organization. This information provides the organization with critical insights concerning customer and market changes; hence the organization can come up with ways of dealing with these changes to avoid losing customers. Additionally, since the emerging technologies are catalyzing changes in the market and industry at large, the use of ERP systems has dramatically helped firms to be proactive and agile in the long run.
5. Helps the organization to be flexible and easy to adopt new technologies in the market (Vargas & Comuzzi, 2019). The ERP systems infuse new and better technologies in the organization. Through this, the organization gets a fast and effective way of adopting any new technologies that can help them become better and more competitive. Flexibility and being dynamic is key to the organization due to the unpredictability of the business environment.

Limitations

There are several drawbacks of ERP systems that organizations ought to look at and have robust methods of dealing with them.

First is that ERP systems are costly to be installed and implemented in an organization (Olson & Staley, 2019). This, therefore, means that the organization adopting the ERP system has to make an enormous initial investment that can end up affecting their financial stability and other processes in the long run.

Secondly is that ERP systems can be highly complex. This means that the organization can face difficulties here and there trying to understand how to use them for their benefit. Additionally, due to their complexity, the organization can end up messing up the whole ERP systems, which results in a massive loss to them.

The third limitation of ERP systems is that due to their complexity, they take too long to be fully implemented (Vargas & Comuzzi, 2019). This, therefore, means that the process of implementing the ERP system is time-consuming and can make the organization face delays in doing other crucial activities.

The fourth limitation of ERP systems is that it requires the organization to change its current business processes to fit the software. This can sometimes be challenging since the organization can fail to find linkages or a smooth way of integrating their processes/activities to be in line with the software being used.

The next limitation is that it puts an organization in a disadvantaged position since they are forced to buy a whole software package even when they need a single or few models (Olson & Staley, 2019). This, therefore, means that the organization will end up having lots of other models that they don’t require. Lastly is that the ERP systems success depends on the experience and skills of the employees only.

Core modules of ERP Systems

The ERP software comprises of various enterprise software modules that are purchased according to the organization’s needs and technical capabilities (Olson & Staley, 2019). Therefore each ERP module is usually meant to deal with a specific business process. Depending on the organizational needs and technological capabilities, the organization prioritizes these modules differently. Among the key ERP modules include the following.

Human resources-The ERP is supposed to help bring improvements in the training and competencies among the human resources in the organization.

Inventory-The ERP system in place should help the organization find a way of effectively managing its inventory.

Other ERP modules include sales and marketing, purchase, finance and accounting, supply chain management (SCM), customer relationship management (CRM) among many others. The first module that I would recommend to be implemented in the organization is the Customer relationship management. The customers are essential stakeholders in the organization; hence the firm ought to be focused on how to retain the existing ones and to attract potential customers. Through this, the organization will find a way of analyzing any customers changes and their needs which will consequently lead them to be customer-centred which is paramount to being successful and attaining a competitive advantage. However, it should be noted that organizations are different, and they can decide to implement a different module depending on the challenge they are facing.

ERP implementation models

Business organizations can choose an ERP implementation model, depending on several factors (Pavel & Evelyn, 2017). Additionally, the model selected by an organization can make the process successful or fail too. There are two models that an organization can use to implement its ERP system.

1. a) Direct/one-tier model

This entails several vital steps to be followed to implement the ERP system successfully. In this model, the following are essential steps to be followed.

1. i) Identifying the problem and end objectives of the ERP system. This helps the organization to have a clear purpose of why the ERP system is needed and the precise problem it will solve currently and in the future.
2. ii) Evaluating the ERP scope intensively (Singla, 2019). This is the second step, and the organization gets an opportunity of knowing the primary purpose of the ERP system. Defining the scope helps the organization to understand the key areas the ERP system will be used to improve. Additionally, it helps remove delays and any issues of over budgeting.

iii) Data migration. This the third step of the implementation process in this model. It is one of the most crucial steps in the ERP systems since the organization has to carefully transfer all data into the ERP systems to achieve automation. A single mistake in this step can lead to the whole ERP system not to function correctly.

1. iv) Customizing services (Singla, 2019). This the fourth step I this model and it entails an organization coming up with ways of automating their various processes like accounting, marketing, inventory, customer service, among many others.
2. v) Testing and going live (Vargas & Comuzzi, 2019). This is the last step in this model and kit involves the organization testing the ERP system to identify any loopholes and address them via different corrective measures. Through this, the organization avoid making mistakes when the actual ERP system is being used in the organization.

The fundamental merit of this model is that the organization has reduced the costs of implementing the ERP system. However, the demerit is that the model is complex and can be problematic to be implemented at times.

1. b) Two-tier Enterprise Resource plan model

This is the second model that the organization can use to implement its ERP system (Pavel & Evelyn, 2017).In this model, the organization keeps its existing tier one ERP systems to ruin common organizational processes like the financials. On the other, the organization uses the Tier-2 ERP system to address specific business needs and requirements with increased flexibility and agility.

This model gives the organization an advantage of having different ERP systems dealing with various issues hence can easily attain efficiency. It critical demerit is that it comes at a considerable initial capital investment and at times can be exhausting to the organization to coordinate all the systems being used.

Therefore, the Two-tier ERP model is the most recommended since it provides an organization with a clear way of dealing with the various issues affecting them (Pavel & Evelyn, 2017). Additionally, the two-tier model does not have many demerits like the one-tier.

Functional departments likely to be impacted by ERP implementation

When an organization adopts an ERP system, all its functional departments are likely to be impacted (Singla, 2019). This happens because the ERP system provides a fast way of integrating resources and information across all departments for efficiency. Therefore among the functional departments that are impacted by ERP systems include the following. First is Information technology since new systems and software are adopted.

Second is the human resources because the organization has to train employees and get new ones (Pavel & Evelyn, 2017). The third department likely to be impacted by ERP systems is the sales and marketing since the ERP system generates vital information about them. Lastly, the finance and accounting department is also likely to be impacted since the ERP system is adopted to improve financial analysis.

Conclusion

In a nutshell, the following can be said. The business environment is becoming highly unpredictable and dynamic (Singla, 2019). Business organizations need to ensure that they adopt robust frameworks of dealing with any changes emerging in the market if they want to be successful. The ERP system is one of the frameworks that have much-helped organizations become better. Through the ERP systems organizations have found ways of automating their processes and infusing efficient methods of doing their activities too. However, it is paramount for the organization to evaluate the different models to be used when implementing the ERP system. In a similar vein, the organization ought to assess its needs and challenges and come up with clear objectives of why they need the ERP. When the goals are clear, the organization can prioritize the ERP modules well and have a systematic way of doing things. Lastly but not least is that the organization needs to incorporate all the functional departments in the organization so that the organization can improve holistically.

References

Herrmann, F. (2016). Using Optimization Models for Scheduling in Enterprise Resource Planning Systems. Systems, 4(1), 15. doi: 10.3390/systems4010015

McGaughey, R., & Gunasekaran, A. (2018). Enterprise Resource Planning (ERP). International Journal Of Enterprise Information Systems, 3(3), 23-35. doi: 10.4018/jeis.2007070102

Olson, D., & Staley, J. (2019). Case study of open-source enterprise resource planning implementation in a small business. Enterprise Information Systems, 6(1), 79-94. doi: 10.1080/17517575.2011.566697

Pavel, J., & Evelyn, T. (2017). An Illustrative Case Study of the Integration of Enterprise Resource Planning System. Journal Of Enterprise Resource Planning Studies, 1-9. doi: 10.5171/2017.176215

Singla, A. (2019). Enterprise resource planning systems implementation: a literature analysis. International Journal Of Business and Systems Research, 3(2), 170. doi: 10.1504/ijbsr.2009.024860

Vargas, M., & Comuzzi, M. (2019). A multi-dimensional model of Enterprise Resource Planning critical success factors. Enterprise Information Systems, 14(1), 38-57. doi: 10.1080/17517575.2019.1678072

Yılmaz, Y., & Ozcan, G. (2018). Implementing ERP-systems with accelerated ERP more efficient and quickly – a best practice. Journal of Systems Integration, 2, 28-37. doi: 10.20470/jsi.v2i3.97