In this post I will be discussing Enterprise Resource Planning (ERP), why it’s used and the advantages & disadvantages of this information system.
ERP is an integrated information system that serves all departments within an organisation. Originating in the manufacturing industry, ERP implies the use of packaged software rather than proprietary software written by or for one customer. ERP software applications can be used to manage product planning, the purchasing of parts, inventories, interacting with suppliers, providing customer service, and tracking orders.
Advantages of ERP
- There is coherent work-flow from one department to another, which ensures smooth transition and completion of processes.
- The possibility of advanced e-commerce integration with ERP systems, which can handle web-based order tracking and processing.
- ERP systems can help managing globally dispersed enterprise companies.
- ERP systems make it easier for tracking, sales forecasting and related activities.
- ERP systems provide visibility and therefore enable better and faster collaboration across all of the departments.
- The possibililty of integrating other systems to the ERP system.
Disadvantages of ERP
- Costs can be an issue, due to planning, testing, implementation etc.
- There are also indirect costs, such as the need to upgrade links.
- ERP systems can take time before being fully functional.
- Long user training is essential, as the systems can be both difficult to learn and use.
Example: If a company manufactures tables, an ERP would keep an eye on how many raw products the firm has in stock. If it notices that the stock of one particular item needed to make a table is low, it will automatically re-order that product.
Although the above example is quite simplified, it shows how ERP helps processes to run smoothly and efficiently.