ERP Systems

A company is an organization with the goal of achieving profit through economic transactions. These economic transactions include buying and selling activities, renting out equipments or buildings, and the like. The more successful a company gets, the bigger the company becomes. For example, by wanting to expand the company to further fulfill the demand of the goods sold, a company may need to rent bigger factory or office buildings, or the company may want to expand its products reach by building a new branch in another city. New divisions may also emerge depending on the business process and needs of the company, which will also lead to an increase in employees working for the company. An example of this case is when a company’s accounting department is divided into more focused departments, such as accounts payable and taxation divisions, since the company has increased the amount of data that the accounting department have to sort through.

Even though a company has many different divisions, these divisions still have to work hand in hand to ensure successful transactions and business processes. The use of an ERP system helps information from different departments integrate, which will help raise effectiveness and efficiency of information delivery between divisions. The system itself is made up of different modules that are customizable depending on the company’s needs. These modules are, but not limited to finance, HR, manufacturing, supply chain, services, procurement, and many more (SAP, n.d.). Depending on the uniqueness of the business processes, a company may choose to buy commercial ERP software or build an in-house ERP software.

There are advantages and disadvantages to both buying ready-to-use ERP software and developing in-house ERP software. Commercial ERP systems are generally cheaper and more efficient than the cost of developing wholly customized software. Even though a lot of the features are generalized, commercial ERP still gives companies the ability to customize their own system by choosing specific modules that are needed by the company’s business processes. While official modules available from the vendor can be quite pricey at times, companies can also switch to buying ERP modules that are sold by third parties for a cheaper price. However, this may impose a certain level of risk to the system, such as the risk of data error due to third-party modules not being patched up correctly or not using the same programming language with the base ERP software. Many vendors also offer routine maintenance and consultation with little to no fee for their customers. Notable ERP software vendors include SAP, Oracle, and Microsoft.

While the usage of ERP systems can and is guaranteed to bring plenty of benefits, the company should consider the implementation and integration process of the system into the current business process. Should the company integrate the system through several stages or should the company do system integration at one time. Aside from that, the company should also consider the ability of the ERP systems’ users, which are their employees. Adequate and proper training in new system usage is also crucial to the continuity and effectiveness of business processes. Older employees tend to have a more difficult time adapting to new systems, hence company should invest more on training or hire younger employees.

References

SAP. (n.d.). What is ERP | Enterprise resource planning definition | SAP. Retrieved from SAP: https://www.sap.com/sea/products/erp/what-is-erp.html#:~:text=Enterprise%20resource%20planning%20(ERP)%20is,services%2C%20procurement%2C%20and%20more