In the past decade, ERP systems have evolved to becoming essential strategic tools in today's cutthroat business environment. An ERP system allows a business to assimilate all the primary business process in order to develop efficiency and retain a competitive position. However, improper implementation of the system might alter competitive advantage and improved productivity from surfacing.
In its basic definition, ERP is an enterprise-wide information system that integrates and controls all the business processes in the entire organization. According to Nah and Lau (2001) ERP is "a packaged business software system that enables a company to manage the efficient and effective ...view middle of the document...
Many ERP research studies have determined several critical success factors in ERP implementations. These studies, however, discussed the success factors from different prospective and in different contexts.
As a first step, it is important to identify the advantages and disadvantages of ERP systems. Moreover, intensive research on the benefits and drawbacks of ERP - while taking other businesses' experiences and incidences into consideration - can better assist the project manager's decision.
Benefits/Advantages of ERP
Many research studies have identified diverse key benefits the ERP systems bring to organizations. O'Leary (2000) stated that an ERP system integrates the majority of the business processes and allows access to the data in real time. Furthermore, ERP improves the performance level of a supply chain by helping to reduce cycle times (Gardiner et al., 2002). There are also some intangible benefits that an organization may enjoy by implementing an ERP system including, better customer satisfaction, improved vendor performance, increased flexibility, reduced quality costs, improved resource utility, improved information accuracy and improved decision-making capability (Siriginidi, 2000).
The benefits of ERP adoption can handle a wide spectrum of areas. It can develop financial performance, work force morale, and shareholders' prospects. Some of the significant advantages of ERP are:
* Enhanced Flexibility - ERP helps overcome the difficulties of accessing information inputted by one department and read by another. This efficiency in time allows key business decisions to be made quicker and effectively.
* Improved Quality - ERP helps deliver products and services with higher quality by aiding management in exploring ways to improve the business operations and the services or end products it delivers. The ERP system will shed light on the problem areas and help the business utilize what it's good at.
* Efficient Use of Resources - When properly implemented, an ERP system will help save resources, labor, and overhead. It will pick out any unneeded labor and misuse of resources thereby optimizing the business process.
* Increased Security - ERP software has been proved to setting high restrictions to fraud, misuse, and espionage.
Another area that obtains important improvements from ERP systems is accounting applications. Cost, sales, profits, and other related information that is entered in by individual departments can now be consolidated under one single system. This significantly decreases the amount of input and the chances for errors along the way.
Drawbacks/Disadvantages of ERP
In spite of the potential benefits discussed above, ERP systems also have a number of drawbacks. For example, most ERP systems tend to be large, complicated, and expensive (Mabert et al., 2001). Furthermore, ERP implementation requires a vast time commitment from an organization's information technology department or external professionals....