In a business environment, managers are always faced with demands of transforming business processes so as to make them cost effective. This is because the business operational environment is highly unstable with consumer needs changing daily and therefore, business executives need to constantly monitor and alter how they conduct business to remain competitive. In particular, inclusive and informed decision-making process is critical to the success of businesses in this age. Information technology has made this easier through Enterprise Resource Planning software solutions. Enterprise Resource Planning Systems can be described as commercial software systems which are customizable and integrate core business processes such as warehouse management and product planning with main administration functions such as accounting and human resources management in a normal enterprise operating within a business environment. ERP systems first originated from Computer Integrated Manufacturing Systems and Manufacturing Resources Planning systems which mainly dwelt with automating manufacturing processes. They later evolved to cover other core business processes and functions in all business sectors. ERP applications are modular in nature where business information is held in a central repository for access and use. This paper will examine ERP systems including its typical features, purpose, and business value.
There are different ERP systems, such as SAP, that are available in the market crafted for specific business organizations. Each of the available ERP system products has powerful modules that enhance effectiveness and efficiency of a business organization. The basic key features of ERP software solutions include financial management otherwise known as accounting module. This is a module that ensures proper financial preparation and reporting is effectively done in an organization. A good ERP solution must have a perfect financial reporting component that has been carefully tested before implementation so as to offer proper and accurate financial reporting capability. The human resource component feature not only manages payroll, basic employee reporting, and employee management, but also has additional features such as time tracking, performance assessment, scheduling, and key performance index indictors for company employees.
Customer relationship management feature deals with customer management ecosystem that ranges from lead generation, closing a deal and post deal communication. It helps business managers in identifying customers in lead generation, and supporting customers for further growth of business. The Supply Chain Management feature is a module that helps business executives to monitor demand, manufacturing status, supply, logistics as well as distribution within a record time in a highly competitive marketplace. This module aids in supply chain processes that start from planning, design, fulfillment and procurement. When a company is choosing an ERP system that they are to implement in their business operation, they must consider if their preferred solution has customization capabilities, integration capabilities and if it can operate with third party components.
Before ERP systems concepts were developed, each of the organizational departments would typically have its own computer application, and therefore, payroll department and financial departments would all have their customized software applications. Typically, this had the implications that information generated from each department would not be shared across departments before being integrated from different applications. This would cause delayed decision making in a business organization since no real time business information access, and collaboration would be possible. But with ERP software solutions, a common database is developed in which all functional departments within an organization store their own generated information and access other departments’ data they would need to complete a business application in real time.
ERP systems have a general key purpose of making it possible for information to flow between the different business functions of a typical business organization and managing how the organization interacts and collaborates with outside stakeholders (Staehr, Shanks & Seddon, 2012). In addition to this key purpose, ERP software applications are important in business organizations for enhancing flexibility, productivity, and customer responsiveness. ERP business systems integrate core business processes into one single application, thus making it possible for business organizations to maximize efficiency in the entire organization. Therefore, business organizations are able to produce at faster rates, delivery time is highly reduced, order capacity is increased, demand to suppliers can be efficiently forecasted, and customer service is greatly improved. Using ERP systems, business executives are capable of managing relationships with the customers by responding effectively incorporating their concerns in manufacturing and sales plans.
ERP systems play a significant role in eliminating inefficiencies and redundant costs. Through ERP business systems, business managers have a standardized portal that they can use to communicate and collaborate with its suppliers to acquire raw materials at lower costs at the right time during the manufacturing process. This reduces inventories of low materials and ultimately lowers costs that are associated with storage of high volumes of raw materials. During manufacturing, only items that are needed for immediate conversions are purchased at any time, thus decreasing levels of inefficiencies by allocating organizational resources uniformly to only needful business processes. ERP systems also enable business organizations to eliminate redundant costs of maintaining separate database systems for each functional department in the organization. ERP software systems make use of a single repository system and hence this reduces costs that could have been incurred to run a database for each department.
Use of ERP software solutions enables integration of business management functions, and this decreases the levels of data inconsistencies that may be experienced from use of different business systems for each software systems for each department. Using ERP systems, data is only recorded once by any computer system user effectively managing a scenario where one transaction is recorded twice, yet in different formats. The variations in the recording may affect decision-making processes by managers since they may not be sure which of the two or multiple versions of the same transaction is correct. But through ERP systems, managers gather information that is consistent and correct that is stored in a central repository. Correct and consistent data stored in computer systems will then be used uniformly to make business decisions that accurately reflect a common position on a matter that is to be decided in a business organization.
Using ERP software systems integrates all business processes and functions into one single system thus increases the ability of a business organization to incorporate the use of the internet as a business strategy. Web-enabled technology is critical to a competitive business strategy as it enables managers to access information from suppliers and customers remotely, communicate with partners and customers from the locations they are in, anytime in the world and sell products to a diverse clientele. Most ERP Systems make extensive use of cloud resources for support which demands that business organizations use Internet connection to access the various modules that employees need. Use of cloud infrastructure reduces the investment that business organizations have to make in installing and running ERP software solutions. The Internet is expected to be the main driver of business transactions as it opens new opportunities to business organizations. Global economies are more connected and consumers informed, use of internet is an important tool in building stable relationships in business. In conclusion, given the business power and value of ERP systems, business managers have a responsibility of choosing the right ERP System solution that reflects their needs.
References
Staehr, L., Shanks, G., & Seddon, P. B. (2012). An explanatory framework for achieving business benefits from ERP systems. Journal of the Association for Information Systems, 13(6), 424.
