Implementing an ERP system tends to be a complex and costly process which leads many to wonder – is ERP worth it and will it really help?
Enterprise Resource Planning, commonly abbreviated as ERP, refers to a business management system that is comprised of various integrated software modules that help to manage and integrate the business functions in an organisation.
Since the late 1980s large companies such as IBM and Microsoft recognised the need of implementing an ERP system to ensure the smooth flow of data and information in face of the ever growing and complex business and technological environment. In order to make the best decision in a timely manner, businesses require efficient inter-organisational data flow.
Take for example Nestle USA. In 1997, the company decided to roll out an ERP system to integrate its various business operations in the country. The implementation would take 6 years, with a budget of approximately $ 200 million. While this may seem like an exorbitant amount, by 2002 the company reported savings of $ 325 million, increased integration within different regions, reduced training costs for employees, and more accurate demand forecasting among various other benefits. In terms of monetary investment alone, the move certainly panned out well. These benefits combined led to greater efficiency, competitiveness and an overall organisational ‘culture of continuous improvement’. Several other companies also share similar stories.
Greater integration and transparency within a company lead to increased productivity, better decision making, reduced operating costs and improved internal communication. Even the customers reap the benefits of successful enterprise integration – increased customer service, satisfaction and order fulfilment are one of the many benefits reported.
Not all businesses are capable, or even suitable for implementing a complex and costly ERP system; however, with the introduction of many out-of-the-box ERP soft wares that are very reasonably priced even small enterprises can reap the benefits of this system. It is apparent that in order to stay competitive in the market, greater efficiency provided by ERP systems and soft wares is necessary.
To be competitive, to be relevant, to be efficient – ERP is essential.