What is ERP?

Enterprise resource planning software, or ERP, doesn’t live up to its acronym. Forget about
planning—it doesn’t do much of that—and forget about resource, a throwaway term. But
remember the enterprise part. This is ERP’s true ambition. It attempts to integrate all
departments and functions across a company onto a single computer system that can serve
all those different departments’ particular needs.

That is a tall order, building a single software program that serves the needs of people in
finance as well as it does the people in human resources and in the warehouse. Each of
those departments typically has its own computer system optimized for the particular ways
that the department does its work. But ERP combines them all together into a single,
integrated software program that runs off a single database so that the various departments
can more easily share information and communicate with each other.

That integrated approach can have a tremendous payback if companies install the software
correctly.

Take a customer order, for example. Typically, when a customer places an order, that order
begins a mostly paper-based journey from in-basket to in-basket around the company, often
being keyed and rekeyed into different departments’ computer systems along the way. All
that lounging around in in-baskets causes delays and lost orders, and all the keying into
different computer systems invites errors. Meanwhile, no one in the company truly knows
what the status of the order is at any given point because there is no way for the finance
department, for example, to get into the warehouse’s computer system to see whether the
item has been shipped. "You’ll have to call the warehouse" is the familiar refrain heard by
frustrated customers.

ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and
the warehouse, and replaces them with a single unified software program divided into
software modules that roughly approximate the old standalone systems. Finance,
manufacturing and the warehouse all still get their own software, except now the software is
linked together so that someone in finance can look into the warehouse software to see if an
order has been shipped. Most vendors’ ERP software is flexible enough that you can install
some modules without buying the whole package. Many companies, for example, will just
install an ERP finance or HR module and leave the rest of the functions for another day.
How can ERP improve a company’s business performance?

ERP’s best hope for demonstrating value is as a sort of battering ram for improving the way
your company takes a customer order and processes it into an invoice and revenue—
otherwise known as the order fulfillment process. That is why ERP is often referred to as
back-office software. It doesn’t handle the up-front selling process (although most ERP
vendors have developed CRM software or acquired pure-play CRM providers that can do
this); rather, ERP takes a customer order and provides a software road map for automating
the different steps along the path to fulfilling it. When a customer service representative
enters a customer order into an ERP system, he has all the information necessary to
complete the order (the customer’s credit rating and order history from the finance module,
the company’s inventory levels from the warehouse module and the shipping dock’s trucking
schedule from the logistics module, for example).

People in these different departments all see the same information and can update it. When
one department finishes with the order it is automatically routed via the ERP system to the
next department. To find out where the order is at any point, you need only log in to the ERP
system and track it down. With luck, the order process moves like a bolt of lightning through
the organization, and customers get their orders faster and with fewer errors than before.
ERP can apply that same magic to the other major business processes, such as employee
benefits or financial reporting.

Enterprise Resource Planning (ERP) is an integrated computer-based system used to

manage internal and external resources, including tangible assets, financial resources,
materials, and human resources. 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. Built on a centralized database and normally
utilizing a common computing platform, ERP systems consolidate all business operations
into a uniform and enterprise-wide system environment.[1]

An ERP system can either reside on a centralized server or be distributed across modular
hardware and software units that provide "services" and communicate on a local
area network. The distributed design allows a business to assemble modules from
different vendors without the need for the placement of multiple copies of complex
and expensive computer systems in areas which will noOrigin of the term

The initialism ERP was first employed by research and analysis firm Gartner Group in
1990 [3] as an extension of MRP (Material Requirements Planning; later manufacturing
resource planning[4]) and CIM (Computer Integrated Manufacturing), and while not
supplanting these terms, it has come to represent a larger whole. It came into use as
makers of MRP software started to develop software applications beyond the
manufacturing arena.[5] ERP systems now attempt to cover all core functions of an
enterprise, regardless of the organization's business or charter. These systems can now be
found in non-manufacturing businesses, non-profit organizations and governments.[6]

To be considered an ERP system, a software package should have the following traits:

• Should be integrated and operate in real time with no periodic batch updates.[citation
needed]

• All applications should access one database to prevent redundant data and
multiple data definitions.
• All modules should have the same look and feel.
• Users should be able to access any information in the system without needing
integration work on the part of the IS department.[7]
[edit] Components / Modules

• Transactional Backbone
o Financials
o Distribution
o Human Resources
o Product lifecycle management

• Advanced Applications
o Customer Relationship Management (CRM)
o Supply chain management software
 Purchasing
 Manufacturing
 Distribution
o Warehouse Management System

• Management Portal/Dashboard
o Decision Support System

These modules can exist in a system or can be utilized in an ad-hoc fashion.

[edit] Commercial applications

Manufacturing
Engineering, bills of material, work orders, scheduling, capacity, workflow
management, quality control, cost management, manufacturing process,
manufacturing projects, manufacturing flow
Supply chain management
Order to cash, inventory, order entry, purchasing, product configurator, supply
chain planning, supplier scheduling, inspection of goods, claim processing,
commission calculation
Financials
General ledger, cash management, accounts payable, accounts receivable, fixed
assets
Project management
Costing, billing, time and expense, performance units, activity management
Human resources
Human resources, payroll, training, time and attendance, rostering, benefits
Customer relationship management
Sales and marketing, commissions, service, customer contact, call-center support
Data services
Various "self-service" interfaces for customers, suppliers and/or employees
Access control
Management of user privileges for various processes
[edit] History
The term "Enterprise resource planning" originally derived from manufacturing resource
planning (MRP II) that followed material requirements planning (MRP).[8] MRP evolved
into ERP when "routings" became a major part of the software architecture and a
company's capacity planning activity also became a part of the standard software activity.
[citation needed]
ERP systems typically handle the manufacturing, logistics, distribution,
inventory, shipping, invoicing, and accounting for a company. ERP software can aid in
the control of many business activities, including sales, marketing, delivery, billing,
production, inventory management, quality management, and human resource
management.[citation needed]

ERP systems saw a large boost in sales in the 1990s as companies faced the Y2K
problem in their legacy systems. Many companies took this opportunity to replace such
information systems with ERP systems. This rapid growth in sales was followed by a
slump in 1999, at which time most companies had already implemented their Y2K
solution.[9]

ERP systems are often incorrectly called back office systems, indicating that customers
and the general public are not directly involved. This is contrasted with front office
systems like customer relationship management (CRM) systems that deal directly with
the customers, or the eBusiness systems such as eCommerce, eGovernment, eTelecom,
and eFinance, or supplier relationship management (SRM) systems.[citation needed]

ERP systems are cross-functional and enterprise-wide. All functional departments that
are involved in operations or production are integrated in one system. In addition to areas
such as manufacturing, warehousing, logistics, and information technology, this typically
includes accounting, human resources, marketing and strategic management.[citation needed]

ERP II, a term coined in the early 2000s, is often used to describe what would be the next
generation of ERP software. This new generation of software is web-based and allows
both employees and external resources (such as suppliers and customers) real-time access
to the system's data.

EAS — Enterprise Application Suite is a new name for formerly developed ERP systems
which include (almost) all segments of business using ordinary Internet browsers as thin
clients.[citation needed]

Though traditionally ERP packages have been on-premise installations, ERP systems are
now also available as Software as a Service.

Best practices are incorporated into most ERP vendor's software packages. When
implementing an ERP system, organizations can choose between customizing the
software or modifying their business processes to the "best practice" function delivered in
the "out-of-the-box" version of the software.[citation needed]

Prior to ERP, software was developed to fit individual processes of an individual

business. Due to the complexities of most ERP systems and the negative consequences of
a failed ERP implementation, most vendors have included "Best Practices" into their
software. These "Best Practices" are what the Vendor deems as the most efficient way to
carry out a particular business process in an Integrated Enterprise-Wide system.[10] A
study conducted by Ludwigshafen University of Applied Science surveyed 192
companies and concluded that companies which implemented industry best practices
decreased mission-critical project tasks such as configuration, documentation, testing and
training. In addition, the use of best practices reduced over risk by 71% when compared
to other software implementations.[11]

The use of best practices can make complying with requirements such as IFRS, Sarbanes-
Oxley, or Basel II easier. They can also help where the process is a commodity such as
electronic funds transfer. This is because the procedure of capturing and reporting
legislative or commodity content can be readily codified within the ERP software, and
then replicated with confidence across multiple businesses who have the same business
requirement.[citation needed]

[edit] Implementation

Businesses have a wide scope of applications and processes throughout their functional
units, producing ERP software systems that are typically complex and usually impose
significant changes on staff work practices.[12] Implementing ERP software is typically
too complex for "in-house" skill, so it is desirable and advisable to hire outside
consultants who are professionally trained to implement these systems.[1] This is typically
the most cost-effective way.[2] There are three types of services that may be employed -
Consulting, Customization, and Support.[12] The length of time to implement an ERP
system depends on the size of the business, the number of modules, the extent of
customization, the scope of the change, and the willingness of the customer to take
ownership for the project. ERP systems are modular, so they don't all need be
implemented at once. Implementation can be divided into various stages, or phase-ins.
The typical project is about 14 months and requires around 150 consultants.[13] A small
project (e.g. a company of less than 100 staff) can be planned and delivered within 3–9
months; however, a large, multi-site or multi-country implementation can take years.
[citation needed]
The length of the implementations is closely tied to the amount of
customization desired.[13]

To implement ERP systems, companies often seek the help of an ERP vendor or a third-
party consulting company. Consulting firms typically provide three areas of professional
services: consulting, customization, and support. The client organization can also employ
independent program management, business analysis, change management, and UAT
specialists to ensure their business requirements remain a priority during implementation.
[citation needed]

[edit] Data Migration

Data migration is one of the most important activities in determining the success of an
ERP implementation. Since many decisions must be made before migration, a significant
amount of planning must occur. Unfortunately, data migration is the last activity before
the production phase of an ERP implementation, and therefore receives minimal attention
due to time constraints. The following are steps of a data migration strategy that can help
with the success of an ERP implementation:[14]

1. Identify the data to be migrated

2. Determine the timing of data migration
3. Generate the data templates
4. Freeze the tools for data migration
5. Decide on migration-related setups
6. Decide on data archiving

[edit] Process preparation

ERP vendors have designed their systems around standard business processes, based
upon best business practices. Different vendor(s) have different types of processes but
they are all of a standard, modular nature. Firms that want to implement ERP systems are
consequently forced to adapt their organizations to standardized processes as opposed to
adapting the ERP package to the existing processes.[15] Neglecting to map current
business processes prior to starting ERP implementation is a main reason for failure of
ERP projects.[16] It is therefore crucial that organizations perform a thorough business
process analysis before selecting an ERP vendor and setting off on the implementation
track. This analysis should map out all present operational processes, enabling selection
of an ERP vendor whose standard modules are most closely aligned with the established
organization. Redesign can then be implemented to achieve further process congruence.
Research indicates that the risk of business process mismatch is decreased by:

• linking each current organizational process to the organization's strategy;

• analyzing the effectiveness of each process in light of its current related business
capability;
• understanding the automated solutions currently implemented.[17][18]

ERP implementation is considerably more difficult (and politically charged) in

organizations structured into nearly independent business units, each responsible for their
own profit and loss, because they will each have different processes, business rules, data
semantics, authorization hierarchies and decision centers.[19] Solutions include
requirements coordination negotiated by local change management professionals or, if
this is not possible, federated implementation using loosely integrated instances (e.g.
linked via Master Data Management) specifically configured and/or customized to meet
local needs.[citation needed]

A disadvantage usually attributed to ERP is that business process redesign to fit the
standardized ERP modules can lead to a loss of competitive advantage. While
documented cases exist where this has indeed materialized, other cases show that,
following thorough process preparation, ERP systems can actually increase sustainable
competitive advantage.[20][21]
[edit] Configuration

Configuring an ERP system is largely a matter of balancing the way you want the system
to work with the way the system lets you work. Begin by deciding which modules to
install, then adjust the system using configuration tables to achieve the best possible fit in
working with your company’s processes.[citation needed]

Modules — Most systems are modular simply for the flexibility of implementing some
functions but not others. Some common modules, such as finance and accounting are
adopted by nearly all companies implementing enterprise systems; others however such
as human resource management are not needed by some companies and therefore not
adopted. A service company for example will not likely need a module for
manufacturing. Other times companies will not adopt a module because they already
have their own proprietary system they believe to be superior. Generally speaking, the
greater the number of modules selected, the greater the integration benefits, but also the
increase in costs, risks and changes involved.[citation needed]

Configuration Tables – A configuration table enables a company to tailor a particular

aspect of the system to the way it chooses to do business. For example, an organization
can select the type of inventory accounting – FIFO or LIFO – it will employ, or whether
it wants to recognize revenue by geographical unit, product line, or distribution channel.
[citation needed]

So what happens when the options the system allows just aren't good enough? At this
point a company has two choices, both of which are not ideal. It can re-write some of the
enterprise system’s code, or it can continue to use an existing system and build interfaces
between it and the new enterprise system. Both options will add time and cost to the
implementation process. Additionally they can dilute the system’s integration benefits.
The more customized the system becomes the less possible seamless communication
between suppliers and customers.[citation needed]

[edit] Connectivity to Plant Floor Information

ERP systems connect to real-time data and transaction data (data accumulated into
collections to deliver sets of information) in a variety of ways. These systems are
typically configured by System Integrators, able to bring their unique knowledge on
process, equipment and vendor solutions.

Direct Integration – ERP systems include connectivity (communications to plant floor

equipment) as part of their product offering. This requires the ERP system developers to
offer specific support for the variety of plant floor equipment that they want to interface
with. ERP Vendors must be expert in their own products, and connectivity to other
vendor products, often those offered by competitors.

Relational Database (RDB) Integration – ERP systems connect to plant floor data
sources through a Relational Database Staging Table. Plant floor systems will deposit the
necessary information into a Relational Data Base. The ERP system will remove and use
the information from the RDB Table. The benefit of RDB Staging is that ERP vendors do
not need to get involved in the complexities of plant floor equipment integration.
Connectivity becomes the responsibility of the System Integrator.

EATM (Enterprise Transaction Modules) – These devices have the ability to

communicate directly with plant floor equipment and will transact data with the ERP
system in methods best supported by the ERP system. Again, this can be through a
staging table, Web Services, or through system specific business system APIs. The
benefit of an EATM is that it offers a complete, off the shelf solution, minimizing long
term costs and customization.

Custom Integrated Solutions – Many system integrators designs offer custom crafted
solutions, created on a per instance basis to meet site and system requirements. There are
a wide variety of communications drivers available for plant floor equipment and there
are separate products that have the ability to log data to relational database tables.
Standards exist within the industry to support interoperability between software products,
the most widely known being OPC, managed by the OPC Foundation. Custom Integrated
Solutions typically run on workstation or server class computers. These systems tend to
have the highest level of initial integration cost, and can have a higher long term cost in
terms on maintenance and reliability. Long term costs can be minimized through careful
system testing and thorough documentation.

[edit] Consulting services

Many organizations do not have sufficient internal skills to implement an ERP project.
This results in many organizations offering consulting services for ERP implementation.
Typically, a consulting team is responsible for the entire ERP implementation including:
[citation needed]

1. selecting
2. planning
3. training
4. testing
5. implementation
6. delivery

of any customized modules. Examples of customization includes creating processes and

reports for compliance; additional product training; creation of process triggers and
workflow; specialist advice to improve how the ERP is used in the business; system
optimization; and assistance writing reports, complex data extracts or implementing
Business Intelligence.[citation needed]

For most mid-sized companies, the cost of the implementation will range from around the
list price of the ERP user licenses to up to twice this amount (depending on the level of
customization required). Large companies, and especially those with multiple sites or
countries, will often spend considerably more on the implementation than the cost of the
user licenses—three to five times more is not uncommon for a multi-site implementation.
[citation needed]

Unlike most single-purpose applications, ERP packages have historically included full
source code and shipped with vendor-supported team IDEs for customizing and
extending the delivered code. During the early years of ERP the guarantee of mature
tools and support for extensive customization was an important sales argument when a
potential customer was considering developing their own unique solution in-house, or
assembling a cross-functional solution by integrating multiple "best of breed"
applications.[citation needed]

[edit] "Core system" customization vs configuration

Increasingly, ERP vendors have tried to reduce the need for customization by providing
built-in "configuration" tools to address most customers' needs for changing how the out-
of-the-box core system works. Key differences between customization and configuration
include:

• Customization is always optional, whereas some degree of configuration (e.g.,

setting up cost/profit centre structures, organisational trees, purchase approval
rules, etc.) may be needed before the software will work at all.
• Configuration is available to all customers, whereas customization allows an
individual customer to implement proprietary "market-beating" processes.
• Configuration changes tend to be recorded as entries in vendor-supplied data
tables, whereas customization usually requires some element of programming
and/or changes to table structures or views.
• The effect of configuration changes on the performance of the system is relatively
predictable and is largely the responsibility of the ERP vendor. The effect of
customization is unpredictable and may require time-consuming stress testing by
the implementation team.
• Configuration changes are almost always guaranteed to survive upgrades to new
software versions. Some customizations (e.g. code that uses pre-defined "hooks"
that are called before/after displaying data screens) will survive upgrades, though
they will still need to be retested. More extensive customizations (e.g. those
involving changes to fundamental data structures) will be overwritten during
upgrades and must be reimplemented manually.

By this analysis, customizing an ERP package can be unexpectedly expensive and

complicated, and tends to delay delivery of the obvious benefits of an integrated system.
Nevertheless, customizing an ERP suite gives the scope to implement secret recipes for
excellence in specific areas while ensuring that industry best practices are achieved in
less sensitive areas.
[edit] Extensions

In this context, "Extensions" refers to ways that an ERP environment can be "extended"
(supplemented) with third-party programs. It is technically easy to expose most ERP
transactions to outside programs that do other things, e.g.:[citation needed]

• archiving, reporting and republishing (these are easiest to achieve, because they
mainly address static data);
• performing transactional data captures, e.g. using scanners, tills or RFIDs (also
relatively easy because they touch existing data).

However, because ERP applications typically contain sophisticated rules that control how
data can be created or changed, some such functions can be very difficult to implement.

[edit] Advantages

In the absence of an ERP system, a large manufacturer may find itself with many
software applications that cannot communicate or interface effectively with one another.
Tasks that need to interface with one another may involve:[citation needed]

• ERP systems connect the necessary software in order for accurate forecasting to
be done. This allows inventory levels to be kept at maximum efficiency and the
company to be more profitable.
• Integration among different functional areas to ensure proper communication,
productivity and efficiency
• Design engineering (how to best make the product)
• Order tracking, from acceptance through fulfillment
• The revenue cycle, from invoice through cash receipt
• Managing inter-dependencies of complex processes bill of materials
• Tracking the three-way match between purchase orders (what was ordered),
inventory receipts (what arrived), and costing (what the vendor invoiced)
• The accounting for all of these tasks: tracking the revenue, cost and profit at a
granular level.

ERP Systems centralize the data in one place. Benefits of this include:

• Eliminates the problem of synchronizing changes between multiple systems -

consolidation of finance, marketing and sales, human resource, and manufacturing
applications
• Permits control of business processes that cross functional boundaries
• Provides top-down view of the enterprise (no "islands of information"), real time
information is available to management anywhere, anytime to make proper
decisions.
• Reduces the risk of loss of sensitive data by consolidating multiple permissions
and security models into a single structure.
• Shorten production lead time and delivery time
 • Facilitating business learning, empowering, and building common visions

Some security features are included within an ERP system to protect against both
outsider crime, such as industrial espionage, and insider crime, such as embezzlement. A
data-tampering scenario, for example, might involve a disgruntled employee intentionally
modifying prices to below-the-break-even point in order to attempt to interfere with the
company's profit or other sabotage. ERP systems typically provide functionality for
implementing internal controls to prevent actions of this kind. ERP vendors are also
moving toward better integration with other kinds of information security tools.[22]

[edit] Disadvantages

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Problems with ERP systems are mainly due to inadequate investment in ongoing training
for the involved IT personnel - including those implementing and testing changes - as
well as a lack of corporate policy protecting the integrity of the data in the ERP systems
and the ways in which it is used.[citation needed]

Disadvantages

• Customization of the ERP software is limited.

• Re-engineering of business processes to fit the "industry standard" prescribed by
the ERP system may lead to a loss of competitive advantage.
• ERP systems can be very expensive. (This has led to a new category of "ERP
light" solutions.)
• ERPs are often seen as too rigid and too difficult to adapt to the specific workflow
and business process of some companies—this is cited as one of the main causes
of their failure.
• Many of the integrated links need high accuracy in other applications to work
effectively. A company can achieve minimum standards, then over time "dirty
data" will reduce the reliability of some applications.
• Once a system is established, switching costs are very high for any one of the
partners (reducing flexibility and strategic control at the corporate level).
• The blurring of company boundaries can cause problems in accountability, lines
of responsibility, and employee morale.
• Resistance in sharing sensitive internal information between departments can
reduce the effectiveness of the software.
• Some large organizations may have multiple departments with separate,
independent resources, missions, chains-of-command, etc, and consolidation into
a single enterprise may yield limited benefits.

t use their full capacity.[2]

which is an abbreviation for Enterprise Resource Planning, is principally an integration of
business management practices and modern technology. Information Technology (IT) integrates
with the core business processes of a corporate house to streamline and accomplish specific
business objectives. Consequently, ERP is an amalgamation of three most important
components; Business Management Practices, Information Technology and Specific Business
Objectives.

In simpler words, an ERP is a massive software architecture that supports the streaming and
distribution of geographically scattered enterprise wide information across all the functional units
of a business house. It provides the business management executives with a comprehensive
overview of the complete business execution which in turn influences their decisions in a
productive way.

At the core of ERP is a well managed centralized data repository which acquires information from
and supply information into the fragmented applications operating on a universal computing
platform.

Information in large business organizations is accumulated on various servers across many

functional units and sometimes separated by geographical boundaries. Such information islands
can possibly service individual organizational units but fail to enhance enterprise wide
performance, speed and competence.

The term ERP originally referred to the way a large organization planned to use its organizational
wide resources. Formerly, ERP systems were used in larger and more industrial types of
companies. However, the use of ERP has changed radically over a period of few years. Today
the term can be applied to any type of company, operating in any kind of field and of any
magnitude.

Today's ERP software architecture can possibly envelop a broad range of enterprise wide
functions and integrate them into a single unified database repository. For instance, functions
such as Human Resources, Supply Chain Management, Customer Relationship Management,
Finance, Manufacturing Warehouse Management and Logistics were all previously stand alone
software applications, generally housed with their own applications, database and network, but
today, they can all work under a single umbrella - the ERP architecture.

In order for a software system to be considered ERP, it must provide a business with wide
collection of functionalities supported by features like flexibility, modularity & openness,
widespread, finest business processes and global focus.

Integration is Key to ERP Systems

Integration is an exceptionally significant ingredient to ERP systems. The integration between

business processes helps develop communication and information distribution, leading to
remarkable increase in productivity, speed and performance.

The key objective of an ERP system is to integrate information and processes from all functional
divisions of an organization and merge it for effortless access and structured workflow. The
integration is typically accomplished by constructing a single database repository that
communicates with multiple software applications providing different divisions of an organization
with various business statistics and information.

Although the perfect configuration would be a single ERP system for an entire organization, but
many larger organizations usually deploy a single functional system and slowly interface it with
other functional divisions. This type of deployment can really be time-consuming and expensive.

The Ideal ERP System

An ERP system would qualify as the best model for enterprise wide solution architecture, if it
chains all the below organizational processes together with a central database repository and a
fused computing platform.

Manufacturing

Engineering, resource & capacity planning, material planning, workflow management, shop floor
management, quality control, bills of material, manufacturing process, etc.

Financials

Accounts payable, accounts receivable, fixed assets, general ledger, cash management, and
billing (contract/service)

Human Resource

Recruitment, benefits, compensations, training, payroll, time and attendance, labour rules, people
management

Supply Chain Management

Inventory management, supply chain planning, supplier scheduling, claim processing, sales order
administration, procurement planning, transportation and distribution

Projects

Costing, billing, activity management, time and expense

Customer Relationship Management

Sales and marketing, service, commissions, customer contact and after sales support

Data Warehouse

Generally, this is an information storehouse that can be accessed by organizations, customers,

suppliers and employees for their learning and orientation

ERP Systems Improve Productivity, Speed and Performance

Prior to evolution of the ERP model, each department in an enterprise had their own isolated
software application which did not interface with any other system. Such isolated framework
could not synchronize the inter-department processes and hence hampered the productivity,
speed and performance of the overall organization. These led to issues such as incompatible
exchange standards, lack of synchronization, incomplete understanding of the enterprise
functioning, unproductive decisions and many more.
For example: The financials could not coordinate with the procurement team to plan out
purchases as per the availability of money.

Hence, deploying a comprehensive ERP system across an organization leads to performance

increase, workflow synchronization, standardized information exchange formats, complete
overview of the enterprise functioning, global decision optimization, speed enhancement and
much more.

Implementation of an ERP System

Implementing an ERP system in an organization is an extremely complex process. It takes lot of

systematic planning, expert consultation and well structured approach. Due to its extensive scope
it may even take years to implement in a large organization. Implementing an ERP system will
eventually necessitate significant changes on staff and work processes. While it may seem
practical for an in-house IT administration to head the project, it is commonly advised that special
ERP implementation experts be consulted, since they are specially trained in deploying these
kinds of systems.

Organizations generally use ERP vendors or consulting companies to implement their customized
ERP system. There are three types of professional services that are provided when implementing
an ERP system, they are Consulting, Customization and Support.

• Consulting Services - are responsible for the initial stages of ERP implementation where they help
an organization go live with their new system, with product training, workflow, improve ERP's use in
the specific organization, etc.
• Customization Services - work by extending the use of the new ERP system or changing its use by
creating customized interfaces and/or underlying application code. While ERP systems are made
for many core routines, there are still some needs that need to be built or customized for a
particular organization.
• Support Services - include both support and maintenance of ERP systems. For instance, trouble
shooting and assistance with ERP issues.

The ERP implementation process goes through five major stages which are Structured Planning,
Process Assessment, Data Compilation & Cleanup, Education & Testing and Usage &
Evaluation.

1. Structured Planning: is the foremost and the most crucial stage where an capable project team is
selected, present business processes are studied, information flow within and outside the
organization is scrutinized, vital objectives are set and a comprehensive implementation plan is
formulated.
2. Process Assessment: is the next important stage where the prospective software capabilities are
examined, manual business processes are recognized and standard working procedures are
constructed.
3. Data Compilation & Cleanup: helps in identifying data which is to be converted and the new
information that would be needed. The compiled data is then analyzed for accuracy and
completeness, throwing away the worthless/unwanted information.
4. Education & Testing: aids in proofing the system and educating the users with ERP mechanisms.
The complete database is tested and verified by the project team using multiple testing methods
and processes. A broad in-house training is held where all the concerned users are oriented with
the functioning of the new ERP system.
 5. Usage & Evaluation: is the final and an ongoing stage for the ERP. The lately implemented ERP is
deployed live within the organization and is regularly checked by the project team for any flaw or
error detection.

Advantages of ERP Systems

There are many advantages of implementing an EPR system. A few of them are listed below:

• A perfectly integrated system chaining all the functional areas together

• The capability to streamline different organizational processes and workflows
• The ability to effortlessly communicate information across various departments\
• Improved efficiency, performance and productivity levels
• Enhanced tracking and forecasting
• Improved customer service and satisfaction

Disadvantages of ERP Systems

While advantages usually outweigh disadvantages for most organizations implementing an ERP
system, here are some of the most common obstacles experienced:

• The scope of customization is limited in several circumstances

• The present business processes have to be rethought to make them synchronize with the ERP
• ERP systems can be extremely expensive to implement
• There could be lack of continuous technical support
• ERP systems may be too rigid for specific organizations that are either new or want to move in a
new direction in the near future