Enterprise resource planning system (ERP) is a sales management software that enables an agency to use a collection of integrated applications in automating and managing business functions. This software incorporates all phases of a business process including the sales and marketing, manufacturing, and product planning in a single database. The information in this database is also presented in a single user interface. According to Johansson (2012), ERP requires dedicated teams to analyze the data and to customize its function according to the company specifications. In fact, this software is designed to be used only in large businesses. However, this does not mean that there are no the smaller ERP applications, they exist, but they just offer lightweight solutions and can also be customized to suit the needs of a particular business. It is also important to understand that ERP system has both informational and operational functions. The operational functions ensure that there is efficiency in a business process while the informational functions help in streamlining and standardizing business operations. Inappropriate use of an ERP system can lead to lead to increasing workloads in an organization and even worse lead to tremendous losses. Depending on the needs and the size of your company, there is a variety of ERP software you can use. Moreover, ERP systems are the most preferable in decision-making process since it provides compatibility in the collection, processing, and analysis of data which in turn provides the company's management the information needed for planning and monitoring process (Johansson, 2012).
Types of information system, involved in ERP
ERP system enables organizations to increase their competitiveness since it ensures high customer satisfaction and most importantly quality provision of services. However, behind every successful management system, there must be a variety of information systems which have been installed to ensure that the business management software does what is intended to do. ERP is made up of the following information systems: Decision support system, Management Information system, and the Transaction Processing system.
A) Decision support system
This information system has been integrated to ERP system to allow the business owners to use predefined reports to support problem-resolution decisions and the operations planning. With this kind of information system, the company can find solutions to specific problems especially in solving a potential impact of a decision before it is implemented. Moreover, this information system provides a graphical representation of key performance indicator that measures the progress toward attaining certain objectives. This allows the users to conduct analysis and make decisions based on what they have seen.
B) Management information system
Management Information system allows an organization to get the current and the past operational performance data such as the inventories and sales data. Over time, this information system can help design a prescheduled reports, which the companys management can use in tactical, operational and strategic planning. A management information system report can be a graph showing the percentage decrease or increase in products sales over time or a pie chart showing product sales volume by territory. In general, most business organizations depend on this information system to help them evaluate what-if analyses.C) Transaction processing system
We know that ERP is also used in the analysis of financial ratio since it acts as a facilitator of business operations. Therefore, through the transaction processing system, we can use production budgets, cash budgets and absorption costing to evaluate the profitability analysis per client. Moreover, it allows companys management to enter the daily transaction data in the user interface, which is then stored in the database for future reference. In general, this type of information system allows the users to gather, store, modify and retrieve data.
Latest trends in ERP
It is a fact that ERP field can be slow to transform, but in the recent years, we have seen a great revolution in this field which has caused changes in nearly every sector of this system. Some of the trends we have witnessed include the introduction of cloud ERP, social ERP, and mobile ER.
1) Cloud ERP
Since the start of the 21st century, cloud technology has been continuously expanding. However, a lot of ERP users had been reluctant in adopting this technology. This is because many of them didn't want to place their data in online servers, due to fear of security of their information. But nowadays the trend is changing, and many more ERP users are adopting the cloud ERP.
2) Mobile ERP
Nowadays people want real-time access to data regardless of wherever they are. Therefore, this has forced companies to embrace mobile ERP to enable its employees and executives to conduct key business operations from their mobile phones.
3) Social ERP
Due to the latest trends in information technology and subsequent introduction of a variety of social media applications. This has inspired the ERP vendors to add social media applications to the system to increase the interactivity between the company's employees and executives to the software.
Benefits of the ERP system
Based on Oleary (2012) findings, ERP system helps in integrating and automating core business operations such as scheduling operations, taking customer orders, and keeping financial data and inventory records. This system provides tools to enable the companies to provide a high level of service to their clients. It also ensures that the critical business information is protected since it provides a clear security access and roles within the business facility. Moreover, it enables the companies to plan their workload based on existing forecasts and orders. ERP also ensures that there is an improved efficiency in the operations of the business since it reduces the time and energy required by the employees to conduct their daily activities. This system also eliminates repetitive manual processes hence freeing up the employees in certain departments. Finally, the implementation of ERP will help us save a lot of money this is because ERP is a unified system. It can include a lot of functional areas such as Supply Chain Management, Financial Accounting, and Customer Resource Management (CRM) among much more. Therefore, this means that with ERP system can lower cost since it integrates different systems together (Oleary, 2012).
Challenges related to the ERP
Sometimes there are compatibility problems with different ERP modules since different agencies relate to different vendors. Therefore there is a high tendency that compatibility problems are likely to occur if modules from different vendors are used. According to Hedman (2012), there is a high probability that cost overheads may occur if the requirements are not properly discussed during the planning phase that is why before execution of an ERP system a detailed plan with a systematic breakdown of requirements should be designed. Moreover, ERP system requires a huge storage and good processing speeds. Lack of this will lead to reduced system performance. Software and hardware security is also imperative in implementation of this system (Hedman, 2012).
Hedman, J., & Borell, A. (2011). ERP Systems Impact on Organizations. ERP & Data Warehousing in Organizations. doi:10.4018/9781931777490.ch001
Johansson, B. (2012). Exploring how open source ERP systems development impact ERP systems diffusion. International Journal of Business and Systems Research, 6(4), 361. doi:10.1504/ijbsr.2012.049468
Oleary, D. E. (2012). ERP Systems Background. Enterprise Resource Planning Systems, 27-48. doi:10.1017/cbo9780511805936.003
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