ERP software is the most effective software solution for medium and large sized businesses. Discuss.
What is ERP?
ERP, enterprise recourse planning systems is made up of a collection of integrated software applications modules that target to regulate the company’s data flow. Using their personal computers (PCs) operators can view company information in real time. This allows them to rapidly process information ergo persistently improving process efficiency. A bonus of the ERP systems users only have to enter the data once which have inevitably lead to the success of the program. Systems, Applications, and Products in Data Processing (SAP) are industry titans. In its first year in business SAP where very successful earning a significant revenue of DM 620,000. https://www.sap.com/corporate/en/company/history.html
ERP and Best of Breed
A Best of Breed system (BOB) concentrates on the best package of functions or characters in one component of the value chain, such as accounting, construction, management or any other component. On the other hand, an ERP package is where one software package is used throughout all the functional areas in an organization. ERP packages integrates information throughout tightly through one single data base, unlike Best of Breed. This allows the business with ERP to only have to enter information once. This makes them more productive and gives the business better time management, giving them a competitive advantage. Time can be a make or a break for business, this can be the difference between reacting to change quicker than a competitor and generating revenue as normal while the competitor has a more delayed reaction using BOB. Although reactions may be slower BOB gives you more control over improvements. This is because you can improve processes for individual departments. As they are different software, this allows the business to easily target certain departments for upgrades. https://www.techopedia.com/definition/23200/best-of-breed-system
http://www.thereflex.com/_pdfs/bob_or_fully_integrated_enterprise.pdf
ERP and CRM
Customer Relationship Management (CRM) and ERP are both used to rise the general profitability of a business. They both have many similar features and characteristics that overlap. CPM is software that deals with just customers, it logs all customer information and monitors every interaction. The information collected is used in all departments that come into contact with customer’s information, so it can be any of the departments of a business. CRM looks to build customer report and building relationships so that they can build customer loyalty, which can give a huge competitive edge. This is built in the hopes to increase revenue over time. Despite that CPM still has its disadvantages. Similar to ERP they require a lot of training for employees before the software can become fully implemented and effective. This adaptation for the employees may seriously effect productivity. ERP is a good all-rounder for both operational aspects of the and the management aspects of the business. Furthermore, some businesses may use both ERP and CRM as CRM can focus on the customer relations part of the business, this would further improve profitability but only with caution as it may be hard to predict how employees would react. For larger sized businesses using both would help separate customer information and keeping it in one place.
ERP can be tailored to certain businesses.
Competitive advantage
FoxMeyer was the fifth largest pharmaceutical drug wholesaler in the USA in 1995. They achieved annual sales of around 5 billion US dollars selling over 500 thousand units. Christopher Cole, chief operating officer at Pinnacle, stated that FoxMeyer mess was “not a failure of automation. It was not a failure of commercial software per se. It was a management failure.” FoxMeyer was driven to bankruptcy in 1996. One of the factors responsible may have been due to selecting software not suited to FoxMeyer. SAP R/3 was created for manufacturing companies and not for wholesalers like FoxMeyer. FoxMeyer also ignored their consultant’s advice early on before full implementation. SAP was not developed for pharmaceutical businesses, instead for manufacturing businesses, according to this case study FoxMeyer picked this business SAP due to its reputation. FoxMeyer should have invested further and tailored the system to their selves specifically. This would have led to significantly different outcome as the software would have worked. This may have also been due to
ERP Advantages
FoxMeyer suing SAP, ERP vendor as well as Anderson Consulting, its SAP integrator for $500 million each
All data has the same description throughout the software, the data is integrated enabling managers from other departments to analyse information easily as all functional areas can understand each other’s displayed information.
Dealing with one supplier has its advantages, such as easier communication and companies need to deal with less administrative effort with only one suppliers, for larger businesses this can be a large expense. This is a big advantage when it comes to ERP because technical products such as software require a lot of engineering to install the software and fully implement it. Thus making it more effective for business as communication is quicker and more straight forward. This also means they are easier to contact. However, it poses a big risk for catastrophic events such as all systems experiencing a down time. If there is an error in one functional area, all areas would experience the same thing meaning for businesses that they would significantly affect the day-to-day running of the business, especially for medium and large sized businesses.
Cost is the biggest factor for enterprise resource planning, it is considered more of an investment for the long run. It may be more cost effective to purchase an ERP as it would reduce wasting money on software that doesn’t suit your business as well as an ERP. Obviously the main disadvantage is the initial cost. This may look bad in financial statements for possible investors as it may seem as if they are spending large sums of money on intangible assets that may or may not be necessary.
Another advantage is that
Removes duplication and errors
If help is required there is only one supplier to call.
Quality and efficiency of processes
ERP Disadvantages
One disadvantage of ERP is that it is very complex, has a high initial investment and time consuming to implement.
Complex, Expensive and time consuming to implement
Lack of ownership for an organisation wide system
Data definition and agreement on the definition
Data migration
Change to Process
Change to staff work, role and organization. – RISKS OF USING NEW SOFTWARE – HUMAN ERROR
50% of ERP implementations are classed as failures, this is because they did not meet the budget, timescale, or requirements.
Processes are provided
300 million – 500 million to implement ERP
ERP software is the most effective software solution for medium and large sized businesses. Discuss.
Discussion should cover:
What are the pros and cons for ERP /
Introduce case study businesses with ERP
pros or cons for specific business
Explanation/role of ERP in software portfolio
Benefits/costs of ERP
Conclusion that relates to medium and large sized businesses.
ERP
All software is by one supplier
ERP software suppliers are large and powerful organisations
Organisations data is in the supplier’s software