As an extension of Material requirements planning (MRP), manufacturing resource planning (MRP II) and computer integrated manufacturing (CIM); Enterprise resource planning (ERP) has integrated all the processes that take place in a company, providing it with a common database and an overall view of its performance. Implementing ERP can bring about an impressive transformation to your company. Hence, having a deep understanding about the advantages will enable you to maximize its utility. However, acknowledging its drawbacks will help you think twice before you decide.
- Access to information – ERP gives accurate and timely access to reliable information and improves proper communication between units. Business data can be shared with various departments of the company. Usually when an order progresses through an enterprise, departments like order-processing, production control and dispatch have to search for information such as customer requirements or stock levels. By implementing ERP, the database is common to all the divisions which reduces the risk of error, enhances co-ordination in the enterprise, increases productivity and the time taken to fulfill orders is considerably reduced.
- Decision making – the quick and consistently available data enables the management, human resource, the finance department, the production planning staff and the other departments to take decisions with speed and quality. The management can identify obstacles before handed that might eventually obstruct production or delay delivery. The finance unit will always be updated with the work in progress and stock levels. Human resource can identify the need for recruitment or deployment. Senior managers will have an overview of all the ongoing operations in the company and can respond quickly to the changing business scenario.
- Reduced expenditures – When core processes are fully assimilated and condensed, the risk of wasting time and money on the completion of parallel jobs being addressed in various departments within a company is eliminated.
- Enhanced business performance – Automating any number of processes by integrating an ERP system into your business significantly reduces the amount of money, time and manpower previously wasted when such processes demanded human attention.
- Secure and better organized data – information can be organized and arranged in any way you like which makes data management a lot easier and will only be a mouse click away. Also, the backup systems present in ERP software in servers keeps information preserved which is far more secure than data filed and organized physically in shelves.
- High initial investment – The initial implementation of ERP is difficult and not cost effective. The system is complex and changing or transferring all the data from the present system to ERP will slightly exhaust your money, resource and time.
- System can be difficult to use – The team working for a project when ERP is being implemented needs to be trained to develop a good understanding of how the new system will modify the entire structure of the business in order to benefit from ERP. Hence, it is advisable to seek help from external experts to prevent unnecessary expenditures and time consumption.
- No immediate results – The benefits of ERP will not present itself immediately after its implementation. It takes a while before its presence becomes more evident.
- Vendor- lock in – Once the ERP is implemented, the company is locked in with a single vendor for further upgrades and customization, which might make its negotiations for their service ineffective.
- Additional expenditures – Implementing ERP incurs additional indirect costs like new IT infrastructure, upgrading WAN links etc.
Although the pros outweigh the cons, it is important to analyze the nature of the business and ensure that the implementation of ERP is in the company’s best interests because a good strategy employed at the wrong time and place will have catastrophic results.