What Is ERP? Unique Advantages And Disadvantages Of ERP.
Introduction.
Running a business effortlessly and effectively requires expertise, Knowledge, decision-making skills, managing business processes skillfully, and the advantages of enterprise resource planning.
Whether it is a small, medium, or larger business, there are several benefits that can be gained after shifting to an ERP solution.
In this blog, the following topics are going to be discussed.
- What is ERP? (Enterprise Resource Planning).
- Advantages/ Benefits of Enterprise Resource Planning.
- Disadvantages/ Drawbacks of Enterprise Resource Planning.
What is an ERP system/ ERP software?
ERP system aims to integrate business-related functions like Planning, Inventory Management, Engineering, Accounting, Finance, Human Resources, e-commerce, CRM, Risk Management, and many more.
ERP provides an integrated view of the whole business, automates ` tasks and business processes.
The end goal of ERP should be to optimize operations and free up the time of employees to divert free time on more difficult/ Important tasks.
Advantages/Benefits of ERP.
1. Higher Performance
By implementing ERP an organization is able to increase performance by integrating information from various departments such as Human resources, Production, Sales, Customer Management, and much more.
Enterprise Resource Planning also helps in reducing the paperwork, data entry, and permission granting which is often the case with traditional organizations without ERP.
In comparison to traditional ERP, time wasted in converting physical data into digital form is also saved.
2. Enhanced Reporting
With the help of ERP, real-time information can be accessed. ERP also offers an integrated, quick, and easy environment for getting all kinds of information. It may be related to inventory, finance, or customer behavior, ERP covers it all.
3. Cost Saving
ERP system helps in reducing administration and operations-related costs. For instance, with ERP there is no need to prepare and maintain long paperwork.
ERP also helps in forecasting unpredicted future orders, over/ under production, or over-ordering which reduces the cost of Inventory management.
4. Organized Workflows
People usually follow a particular way of doing a task but, it might not be the most effective way of doing it. An ERP can help in cutting down all the unnecessary steps and make the whole process faster and way easier compared to the traditional way.
ERP helps in setting a standard procedure for each and every person working within the same departments, it helps to eliminate delays and uneven allocation of resources.
5. Better Customer Services
Customer satisfaction is the most important thing as various businesses are targeting the same set of customers and customers have various options to choose from and that’s the reason why customer service is most important.
As ERP system pulls in data from every department and presents it in a centralized format, thereby solving the customer problem better, effectively, and more personalized.
6. Collaboration
Employees are no longer needed permission to access information regarding what other employees in different departments are working on. When the whole team put’s their head into solving a particular issue then the probability of getting the most effective solution is greater.
Restricted communication and not being aware of what others are working on leads to problems but, an ERP can put an end to all of these issues.
7. Flexibility
The ERP system can be modified to adopt all shapes and sizes of organizations. Needs of each and every organization can be met For example granting permission or creating a separate workflow for a temporary project, all can be done without much effort.
8. Accurate forecasting
Accurate forecasting is imperative to any business because through forecasting the business gets prepared for any unexpected situation or losses. Forecasting becomes more accurate once a business switches to an ERP system as all the data of the company gets integrated into a single system.
For example, if sales are going to climb by 20%, a business can purchase inventory or hire more skilled employees to increase production to meet the increasing demand. If there are any unexpected price rises in the near future, businesses can find ways to cut costs in order to maintain the asking prices.
9. Data Security
Data is the most precious asset of any business and a properly developed ERP system can help to protect that asset. As all the data is stored in a single system the chances of data getting misplaced or lost get reduced, along with this it also reduces the frequent emails and document sharing needs.
Usually, in an ERP system, the data gets distributed over numerous locations thereby increasing the data security and protecting it from getting corrupted. This particular feature is very important if your business is handling a lot of customers’ private data.
ERP can also help to limit data access to a certain group of employees making the data difficult to manipulate.
10. Increases productivity
ERP system helps to automate repetitive tasks freeing the employees from low-value tasks and thereby bringing more value to the organization. ERP also speeds up the process of a work by making the process uncomplicated and reducing the time spent on searching for the required information.
11. Visibility
Managers can particularly benefit from this feature as they have access to all the information needed for making a particular decision.
Higher management is also able to know exactly how much and what work is being done by each and every person. It is really helpful during the time of productivity measurement and promotion decisions.
For example, excessive stock ordering can be avoided if the purchasing team has clear visibility of how much stock has not yet reached the warehouse but it is already been ordered.
ERP system helps to automate repetitive tasks freeing the employees from low-value tasks and thereby bringing more value to the organization. ERP also speeds up the process of a work by making the process uncomplicated and reducing the time spent on searching for the required information.
12. Mobility
Due to the ever-increasing use of smartphones and tablets, people are more comfortable using them as their primary devices. One of the many reasons why today ERP’s are more mobile-friendly and cloud-based, this enables employees to access data anywhere and anytime.
For some businesses, cross-platform accessibility is not a luxury but a need because they have employees who travel frequently and may not have access to their computer systems all the time, that’s the reason they can access information or provide approval for important decisions from their phones or laptops.
13. Creates a competitive advantage
Getting an ERP developed and implemented can provide your business a competitive advantage over competitors by boosting productivity, automating repetitive tasks, and having access to real-time data making the processes flawless, error-free, and better than that of competitors.
Disadvantages/Cons of ERP.
Each coin has two sides and that’s the reason why businesses must understand the cons of ERP in order to tackle any kind of inefficiency which may arise after ERP implementation, and know the ways to deal with them.
1. CAPEX of Licensing and development
Getting an ERP system developed and implemented is a big, costly decision that requires expert skills and development knowledge. Hiring experts is usually costly because of higher wages per hour and tough decisions to make which are in most cases irreversible.
There is one option that people tend to choose which is ready-made ERP but there are downsides to this option as well such as the duration of customization being longer, security risks, and non-suitability to company workflows, and business needs.
2. Deployment and maintenance costs are huge.
If the development cost of ERP seems bigger to you, then there is more to worry about because the implementation and maintenance of such a system are even larger as it requires expert knowledge and skills.
As the ready-made choice of ERP system is concerned, it requires frequent and regular updates which involve added costs.
3. Need for Training and practice
After the ERP implementation is done, the staff would require training and practice in order to understand the system works and use it effectively compared to traditional alternatives.
Another common problem that organizations face is when the experienced manpower leaves the organization, the new manpower would require training and will need to have to tackle the problem of a steep learning curve.
There is one possible solution to this problem which is to provide ample learning resources, knowledge transfer from the existing employees, and providing in-depth manuals.
4. Need for Customization
ERP implementation requires a lot of customization starting from modules, workflows, department approvals, product listing, and payment gateway integration. Sometimes, even there is a need to adjust ERP according to the hierarchy structure of a particular organization.
5. Takes time to realize its full potential
ERP system takes a bit of time to get developed, customization also takes a bit of time in understanding the requirements, and there is also a need for proper training session needed to utilize ERP to maximize productivity. Each of these steps would involve a lot of time for getting the best results possible.
Verdict.
To conclude, from the above discussion, it is clear that the ERP system is not an all-purpose solution for each and every organization that guarantees success. In fact, there is a need to take advantages and disadvantages into account before taking the decision of developing and implementing an ERP solution.
The benefits associated with custom-made ERP solutions and ready-made solutions are almost the same. To summarize an ERP system saves time, finances, boosts productivity, increases customer satisfaction, integrates and centralizes all workflows, and enables easy scalability.
