Advantages & Disadvantages of ERP (Enterprise Resource Planning) Systems

In order to understand computer networks better, it would be helpful to have an overview of the applications running on the network. ERP or Enterprise Resource Planning is an important enterprise application that integrates all the individual department functions into a single software application.

ERP Systems make it easier to track the workflow across various departments. They reduce the operational costs involved in manually tracking and (perhaps) duplicating data using individual & disparate systems. In this article, let us have a look at the advantages and dis-advantages of implementing ERP (Enterprise Resource Management) Software Systems.

Advantages of ERP (Enterprise Resource Planning) System:

1. Complete visibility into all the important processes, across various departments of an organization (especially for senior management personnel).

2. Automatic and coherent workflow from one department/function to another, to ensure a smooth transition and quicker completion of processes. This also ensures that all the interdepartmental activities are properly tracked and none of them is ‘missed out’.

3. A unified and single reporting system to analyze the statistics/status etc. in real-time, across all functions/departments.

4. Since same (ERP) software is now used across all departments, individual departments having to buy and maintain their own software systems are no longer necessary.

5. Certain ERP vendors can extend their ERP systems to provide Business Intelligencefunctionalities, that can give overall insights on business processes and identify potential areas of problems/improvements.

6. Advanced e-commerce integration is possible with ERP systems – most of them can handle web-based order tracking/ processing.

7. There are various modules in an ERP system like Finance/Accounts, Human Resource Management, Manufacturing, Marketing/Sales, Supply Chain/Warehouse Management, CRM, Project Management, etc.

8. Since ERP is a modular software system, it's possible to implement either a few modules (or) many modules based on the requirements of an organization. If more modules implemented, the integration between various departments may be better.

9. Since a Database system is implemented in the backend to store all the information required by the ERP system, it enables centralized storage/backup of all enterprise data.

10. ERP systems are more secure as centralized security policies can be applied to them. All the transactions happening via the ERP systems can be tracked.

11. ERP systems provide better company-wide visibility and hence enables better/faster collaboration across all the departments.

12. It is possible to integrate other systems (like bar-code reader, for example) to the ERP system through an API (Application Programing Interface).

13. ERP systems make it easier for order tracking, inventory tracking, revenue tracking, sales forecasting and related activities.

14. ERP systems are especially helpful for managing globally dispersed enterprise companies, better.

Disadvantages of ERP (Enterprise Resource Planning) Systems:

1. The cost of ERP Software, planning, customization, configuration, testing, implementation, etc. is too high.

2. ERP deployments are highly time-consuming – projects may take 1-3 years (or more) to get completed and fully functional.

3. Too little customization may not integrate the ERP system with the business process & too much customization may slow down the project and make it difficult to upgrade.

4. The cost savings/payback may not be realized immediately after the ERP implementation & it is quite difficult to measure the same.

5. The participation of users is very important for successful implementation of ERP projects – hence, exhaustive user training and simple user interface might be critical. But ERP systems are generally difficult to learn (and use).

6. There may be additional indirect costs due to ERP implementation – like new IT infrastructure, upgrading the WAN links, etc.

7. Migration of existing data to the new ERP systems is difficult (or impossible) to achieve.  Integrating ERP systems with other stand alone software systems is equally difficult (if possible). These activities may consume a lot of time, money & resources, if attempted.

8. ERP implementations are difficult to achieve in decentralized organizations with disparate business processes and systems.

9. Once an ERP system is implemented it becomes a single vendor lock-in for further upgrades, customizations, etc. Companies are at the discretion of a single vendor and may not be able to negotiate effectively for their services.

10. Evaluation prior to implementation of ERP system is critical. If this step is not done properly and experienced technical/business resources are not available while evaluating, ERP implementations can (and have) become a failure.