The advantages and disadvantages of Enterprise Resource Planning

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Table of Contents

Introduction
ERP
Discussion
ERP Implementation failure: A case Study, by Barker and Frolick
Academic Tutorials
Summary
Conclusion
Reference List

Introduction

Most companies have found it difficult to cope with factors such as mergers and competitiveness among others, using the old system of MRP (Manufacturing resource planning). Moreover, they have found it hard to improve in profitability with the same system.

This has prompted a shift to Enterprise Resource Planning, which has proved to be efficient in all areas of production. Companies that do not use ERP usually find themselves using incompatible software packages that carry with them numerous errors and problems, thus undermining their objectives.

This is mainly because several processes are involved in implementing ERP, all the way from designing of the product to marketing. ERP is therefore very instrumental in enhancing management and efficiency; this would help in achieving most, if not all of the company’s objectives. The paper will use two articles to analyze advantages and disadvantages of ERP in organizations (Exforsys, Inc., 2009, p. 1).

ERP

Enterprise resource planning is a platform that integrates all elements of production in an organization to manage and automate the activities, thereby improving their efficiency, logistics and work flow, among others. Its integration combines all the external and internal factors of production in an organization

. It begins right from product design and facilitates flow of work throughout the system. ERP does not rely on periodic updates and therefore ensures real time application throughout its integrated system software. Its ability to run in virtually every network as well as hardware makes it not only viable but reliable too.

ERP has a common database that work with all applications. Its reliability is unrivaled as it utilizes database as storage for information. Its main objective is to try and consolidate all the departments in a company. Communication is fastened through this method and product design is boosted as well. ERP strives to incorporate finance, manufacturing, customer service, chain supply, data services and human resource departments, among others.

ERP has been touted as one of the best management systems in the world. It has succeeded in replacing MRP as the solution based software that integrates all departments. According to Barker and Frolick, successful implementation of ERP is vital to success of a company.

More often organizations know what to implement, however they fall way shot of its implementation guidelines and in the end failing to maximize its utilization. Several articles have tried to suggest ways of implementing ERP successfully in organizations, focusing more on its advantages than the disadvantages.

Furthermore a number of companies have also failed in successful implementation of ERP, instead trying to cover for it with other software packages. However it is quite imperative to note that as much as it is very efficient and useful in its application, ERP requires proper implementation, following of all the guidelines that relates to its implementation along with the inclusion of all departments to achieve its purpose (Baltzan, Phillips, Lynch & Blakey, 2010, p. 23).

Discussion

Numerous articles have underlined the main advantages of ERP as well as its disadvantages. A number of agreements are evident in advantages with a few disparities. However most of the authors do not quite concur on major disadvantages. The following are a few analyses on two articles that share and differ on various aspects of ERP implementation (Bidgoli, 2004, p. 707).

ERP Implementation failure: A case Study, by Barker and Frolick

Barker and Frolick concur that implementing ERP is a difficult task and requires more than installation of the software. They feel that most companies have failed in their quest to implement ERP because of its management. They also argue that after installation, the management must act to involve every personnel so as to bring success.

Team attitude is emphasized in this article with an assurance that sustainable success will follow those companies that completes the required implementation. Barker and Frolick stress the fact that ERP is very important in facilitating mergers, competitiveness and acquisitions that have caused uncountable problems to companies.

In their success stories with ERP they give Fujitsu as one such company that has excelled due to ERP. According to them, ERP has the following advantages. ERP is essential in improving employee satisfaction, by dipping work redundancy that is likely to cause fatigue.

They also credit it with time conservation, which allows for value added tasks, employee satisfaction is also credited with transforming them into company assets as they gain more experience and stay with the organization. This is important in lowering employee turnover as well as training costs and helps in widening competitive advantage (Sheilds, 2001, p. 9-10).

The article goes on to state that ERP’s main targets are those departments that are incompatible and incorporates them in the system to help draw them closer. This helps in improving decision making for the organization as it speeds up information processing.

Better decision making in companies help them instill corporate environment. The authors attest to the fact that ERP helps break barriers that usually exist between departments, thus helping in workflow. These benefits are usually enticing to companies, causing them to rush into implementation of ERP.

The article also majors on disadvantages of ERP, stating that it is prone to failure without proper implementation as well as management. They also concede that ERP is difficult to implement. Other disadvantages include its inability to be modified into the company’s structure and high risks of failure (Barker, & Frolick, 2003, p. 43-49).

Academic Tutorials

Academic tutorials provides several advantages of ERP namely its ability to interface engineering design, tracking of orders, revenue cycle, control and security of information against any sabotage, among others.

The article also dwells on disadvantages, in which it concurs with Barker and Frolick that implementation of ERP is very tasking, it has a high risk of failure as companies try to transform into ERP model, difficult in usage and too rigid.

Other disadvantages listed by academic tutorials include high switching cost after its implementation, technical support, which may at times cause computer insecurity.

Still others are charges by ERP vendors that is not reflective of the size, and profitability of the organization, risk of over engineering the system that makes it more complex, problems of accountability due to broken barriers as well as its ability to be affected by other department, among others. The article gives more disadvantages than advantages.

Summary

The articles have given substantial facts on advantages and disadvantages of ERP implementation. The first article by Backer and Frolick emphasizes on importance of using ERP in management systems although it warns organizations of what to expect if they do not comply with its implementation guidelines.

Throughout the article they attribute failure to mistakes by organization; on the other hand Academic tutorials provide several disadvantages of ERP. Nonetheless they both concur that ERP is difficult to implement.

Among the advantages provided by the article include reduced costs on inventory, chain supply, material time flow as well as in logistics. It is also credited with standardization of the organization practice, improvement of work flow, error reduction, customer satisfaction, and achievement of company goals.

Other advantages include breaking of departmental barriers, faster decision making, improvement on communication and relationships between departments, as well as employee satisfaction, among others (Barker, & Frolick, 2003, p. 43-49).

Both articles also concur that ERP has disadvantages, although academic tutorials discusses more of it. Among the disadvantages listed include its high rate of failure, high costs of implementation and training of staff as well as the high cost of switching from ERP.

Other disadvantages named include its complexity, misfits that may lead to bankruptcy (as in FoxMeyer’s case), high risk of failure, for instance about 20% of companies that attempted implementation of ERP have failed; another example is Dell, which never implemented ERP due to its rigidity to expansion.

It may take too long (three or more years) to start reaping benefits, by this time most companies may have succumb to failure. ERP also exposes the company to internet insecurity and this becomes very expensive as they have to continually adapt to contemporary data protection techniques that are costly. Implementation of ERP is therefore very challenging to companies much as it is the best (Vyom Technosoft Ltd., 2011, p. 1).

Conclusion

ERP is very essential for companies as it helps improve their competitiveness, profitability and product design processes. However, it has several guidelines that make it rigid and therefore very complex. This makes it very expensive to implement and poses a high risk of failure if not successfully implemented.

Reference List

Baltzan, P., Phillips, A., Lynch, K., & Blakey, P., (2010). Business Driven Information Systems, 1 Edition. Print.

Barker, T., & Frolick, M., (2003). ERP IMPLEMENTATION FAILURE: A CASE STUDY. Information Systems Management. EBSCO Publishing.

Bidgoli, H., (2004). The Internet Encyclopedia, Volume 1. John Wiley & Sons, Inc. p. 707.

Exforsys, Inc., (2009). The Advantages and Disadvantages of ERP. Web.

Sheilds, G., (2001). E-Business and ERP: Rapid Implementation and Project Planning. John Wiley and Sons, Inc. p. 9-10.

Vyom Technosoft Ltd., (2011). ERP: The Advantages and Disadvantages of ERP. Academic Tutorials. Web.

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