What is Enterprise Resource Planning (ERP)? What are the advantages & Disadvantages of ERP?

What is Enterprise Resource Planning (ERP)?  What are the advantages & Disadvantages of ERP? What is Artificial Intelligence? How is it different from Neural Networks?

Answer:

What is Enterprise Resource Planning (ERP)?

Enterprise Resource Planning (ERP) is an integrated management information system connecting internal and external systems that facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders.

 

For example, a software package that provides both payroll and accounting functions could technically be considered an ERP software package. However, the term is typically reserved for larger, more broadly based applications.

 

·         Enterprise Resource Planning is a term originally derived from manufacturing resource planning that followed material requirements planning.

·         MRP evolved into ERP when “routings” became a major part of the software architecture and a company’s capacity planning activity also became a part of the standard software activity.
·         ERP systems experienced rapid growth in the 1990s because the year 2000 problem and introduction of the Euro disrupted legacy systems. Many companies took this opportunity to replace such systems with ERP.
·         ERPs are often incorrectly called back office systems indicating that customers and the general public are not directly involved. This is contrasted with front office systems like customer relationship management (CRM) systems that deal directly with the customers, or the eBusiness systems such as eCommerce, eGovernment, eTelecom, and eFinance, or supplier relationship management (SRM) systems.

ERP Before and After

Before ERP, systems of various departments in an organisation were isolated.

·         Prior to the concept of ERP systems, departments within an organization (for example, the human resources (HR)) department, the payroll department, and the financial department) would have their own computer systems.

·         The HR computer system, say HRMS, would typically contain information on the department, reporting structure, and personal details of employees.

·         The payroll department would typically calculate and store pay check information.

·         The financial department would typically store financial transactions for the organization.

·         Each system would have to rely on a set of common data to communicate with each other.

·         For the HRMS to send salary information to the payroll system, an employee number would need to be assigned and remain static between the two systems to accurately identify an employee.

·         The financial system was not interested in the employee-level data, but only in the payouts made by the payroll systems, such as the tax payments to various authorities, payments for employee benefits to providers, and so on.

·         This provided complications. For instance, a person could not be paid in the payroll system without an employee number.

ERP software, among other things, combined the data of formerly separate applications. This made the worry of keeping numbers in synchronization across multiple systems disappears. It standardized and reduced the number of software specialties required within larger organizations.

Advantages and Disadvantages of ERP

Advantages of ERP:

·         In the absence of an ERP system, a large manufacturer may find itself with many software applications that do not talk to each other.
·         They provide a comprehensive enterprise view with no “islands of information”.
·         They eliminate the need to synchronize changes between multiple systems—consolidation of finance, marketing and sales, human resource, and manufacturing applications.
·         The ability to streamline different processes and workflows.
·         The ability to easily share data across various departments in an organization
·         Improved efficiency and productivity levels
·         Better tracking and forecasting
·         Lower costs by not maintaining separate systems and personnel to manage them.
·         Improved customer service.

Disadvantages of ERP:

·         Customization is problematic.
·         Cost factor – ERP can cost more than less integrated and/or less comprehensive solutions.
·         Integration of truly independent businesses can create unnecessary dependencies.
·         Extensive training requirements take resources from daily operations.
·         Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning and money.