Week 4 Project

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ERP System Benefits and Challenges

ERP systems enhance four dimensions of business:

Business capability: The entire organization can more ef�ciently respond to customer requests for products or information, forecast new products, and deliver them timely. This can be done by integrating discrete business processes in sales, logistics, production, and �nance.

Firm structure: An enterprise-enabled organization does business in the same way worldwide, with functional boundaries de-emphasized in favor of cross- functional coordination and information �owing freely across business functions.

Management process: Information supplied by an enterprise is structured around cross-functional business processes and it can be rapidly assembled for monitoring operational activities and measuring performance.

Technology platform: Enterprise systems create an integrated repository that gathers data about all key business processes.

ERP System Challenges

ERP systems pose multiple challenges:

Daunting implementation process: Organizations implementing ERP systems need to develop �rm-wide de�nitions of data, retrain workers, redesign their fundamental business processes, and simultaneously carry on business as usual. Employees will have to learn how to perform a new set of processes and understand how the information they enter into the system can affect other parts of the company.

In�exibility: ERP software tends to be complex and dif�cult to master and there is a worldwide shortage of people with the expertise to install and maintain it. It is dif�cult to make a change in only one part of the business without affecting other parts as well.

Realizing strategic value: If an ERP system is not compatible with the way a company does business, the company may choose a better way of performing a key business process that might be related to its competitive advantage. ERP systems promote centralized organizational coordination and decision making.

High up-front costs and future bene�ts: It might take a large company three to �ve years to fully implement all the technological and organizational changes that an ERP system needs. The total implementation cost might amount to �ve or six times the purchase price of the software. The bene�ts often can’t be precisely quanti�ed at the beginning of the ERP project and accrue from employees using the system after its completion.