The Importance of Enterprise Resource Planning
ERP is a Rising Need of Enterprises. is a strategic tool helping an organization to gain and edge over its competitors by helping in successfully integrating its key business operations, synchronizing, planning and optimizing the resources available in the existing extremely competitive environment.
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Its use has a much broader scope in today's world rather than of just planning the use of the enterprise resources.
Organizations (especially those which are borderless) face many difficulties in quickly making out the information required. The integration of the business processes improves coordination between bodies, streamlines workflows and processes and benefits them in terms of retaining and satisfying customers by delivering their orders "just-in-time" and keeping them well informed about their orders' current status rather than keeping them waiting for just a small piece of information. ERP has the effect of making an enterprise more time-sensitive. Another benefit is of better marketing opportunities. ERP penetrates one segment after the other and addresses solutions to many debacles existing in an enterprise.
Different ERP systems have been made to facilitate organizations in Enterprise Resource Planning. Leading ERP giants making ERP systems are Microsoft, Oracle, PeopleSoft and JD Edwards, SAP AG etc. These systems link the order, inventory, sales, purchase, manufacturing, supply chain and warehouse management modules in an enterprise for better, fast and accurate information availability to every single person which is its 'primary objective' because every single operation and action taken at any place by any person depends on consistent and updated information availability. Whatever a person needs can be immediately accessed by him subject to the delegated authority. ERP function has thus helped individuals.
They also enhance management decision making by making future projections about sales during a certain period of a certain product. Management would then be able to make decisions whether to increase/decrease production of that particular product which in turn would help save resources from being wasted which could be used for other purposes e.g for making other products. They also help managers make decisions about introducing some new value added features to an existing 'hot-demand' product to enhance sales further. This is how product quality is also enhanced. Inventory costs reduction must be given a great importance in every organization. ERP helps reduce inventory costs by better planning and forecasting of requirements. ERP system helps getting higher return on investments (ROI) in a fast manner.
While there are absolute benefits, an ERP system also poses significant challenges in the areas of information security and business continuity planning. Above mentioned things point to a very critical step, the right choice of an ERP for your enterprise! Off all the ERP systems exiting in the market, all seem to be performing the same function but the one best suiting your requirements needs to be picked up in order to achieve required results. The choice depends upon the structure and type of the organization e.g financial, manufacturing etc. This is why some organizations experience higher benefits as compared to others because they've made the right choice and are able to make the right use of their system.
One of the most powerful advantages to ERP is the implementation of software.
Even though Y2K didn't become the disaster that many people expected, it gave
rise to the concept of making sure software was properly implemented. In
addition to dealing with software issues, ERP can also help companies integrate
their operations. At the same time, it is important to realize that there are a
number of challenges involved with utilizing ERP. Perhaps one of the greatest of
these challenges is cost. Enterprise Resource Planning tools are outside the
price range of many organizations.
It is important to understand that ERP tools must be customized to meet the
needs of the company. In most cases, it will not be useful when it first
purchased. Each company has unique needs, and ERP tools must be able to meet
them. A number of companies run into problems when they attempt to customize the
To summarize, ERP has a great importance and ERP systems have become the biggest need of today's organizations to survive. They provide tremendous benefits provided the Critical Success Factors of ERP system implementation are kept in mind.