Erp systems; the pros and cons
Erp systems; the pros and cons
Erp systems; the pros and cons
Enterprise Resource Planning (ERP) is attractive to companies because it integrates numerous resources - human resources, strategy and planning, finance, production and distribution - into a single software solution.
Benefits
Workflows can be streamlined. Redundant data entry can be eliminated. Information can be shared quickly and easily between departments and branch offices.
These improved efficiencies commonly trickle down to customers in terms of better on-time deliveries, faster delivery times and even cost savings as expenses are reduced for inventory, vendors etc.
Customer management is often made more efficient as a result of integrated systems, e.g. a customer's entire history with the organization can be seen by any member of staff.
Disadvantages
One of the cited drawbacks to ERP is the stress it places on the organization. All employees must learn a new system; this can effect productivity in the short and long term.
Companies must also ensure that the ERP system addresses every business need. Given that an ERP can require massive investments of time and money the software must meet the needs of every aspect of the business or the entire project could do more harm than good. Add-ons or modifications can be both costly and extend the implementation time.
Costs
The total cost of operation for ERP projects can range anywhere from $400,000 to millions of dollars. For a typical ERP project a good benchmark to consider is $50,000 per user, which includes training and other costs over a two-year period.
Costs can however be recovered in as little as eight months and total savings can run into the millions. A survey by the Meta Group in 2002 cited in the CIO article listed the median annual savings from a new ERP system at $1.6 million.
Warning
It is not uncommon to experience cost overruns while implementing ERP systems. Among the areas that tend to be underestimated when it comes to ERP budget are: training employees; converting old data; testing the new system; adding customized modules.
Time Frame
An effective implementation of an enterprise resource planning system requires both software installation and a change in work processes. A company that wants to maximize an ERP should expect to commit to a project of between one and three years.
A new innovation in ERP software called on-demand / software-as-a-service (SaaS) has reduced implementation time on some projects. This is achieved by hosting ERP systems by third party vendors, so that on-site installation is unnecessary.
Enterprise Resource Planning (ERP) is attractive to companies because it integrates numerous resources - human resources, strategy and planning, finance, production and distribution - into a single software solution.
Benefits
Workflows can be streamlined. Redundant data entry can be eliminated. Information can be shared quickly and easily between departments and branch offices.
These improved efficiencies commonly trickle down to customers in terms of better on-time deliveries, faster delivery times and even cost savings as expenses are reduced for inventory, vendors etc.
Customer management is often made more efficient as a result of integrated systems, e.g. a customer's entire history with the organization can be seen by any member of staff.
Disadvantages
One of the cited drawbacks to ERP is the stress it places on the organization. All employees must learn a new system; this can effect productivity in the short and long term.
Companies must also ensure that the ERP system addresses every business need. Given that an ERP can require massive investments of time and money the software must meet the needs of every aspect of the business or the entire project could do more harm than good. Add-ons or modifications can be both costly and extend the implementation time.
Costs
The total cost of operation for ERP projects can range anywhere from $400,000 to millions of dollars. For a typical ERP project a good benchmark to consider is $50,000 per user, which includes training and other costs over a two-year period.
Costs can however be recovered in as little as eight months and total savings can run into the millions. A survey by the Meta Group in 2002 cited in the CIO article listed the median annual savings from a new ERP system at $1.6 million.
Warning
It is not uncommon to experience cost overruns while implementing ERP systems. Among the areas that tend to be underestimated when it comes to ERP budget are: training employees; converting old data; testing the new system; adding customized modules.
Time Frame
An effective implementation of an enterprise resource planning system requires both software installation and a change in work processes. A company that wants to maximize an ERP should expect to commit to a project of between one and three years.
A new innovation in ERP software called on-demand / software-as-a-service (SaaS) has reduced implementation time on some projects. This is achieved by hosting ERP systems by third party vendors, so that on-site installation is unnecessary.
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