The Enterprise Resource Planning Systems

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Abstract

Enterprise resource planning (ERP) has undergone many advancement phases since its instigation in the 1970s in anticipation of establishing itself like a backbone of the majority of leading companies and organisations in the world. Regardless of the immeasurable benefits, the majority of ERP executions necessitate intense customisation to attain their proclaimed benefits. This research paper presents an attempt to discuss issues related to disparate systems, which are mainly integration issues. There is also discussion of the way ERP systems overcome issues related to disparate systems. Through two case studies, this research paper discusses the viability of minimising the profound customisation necessitated by the execution of the majority of disparate systems by choosing the best components from every vendor and incorporating them to form a single (integrated) system. In this regard, the paper gives a description of how ERP systems assisted two companies, MAE and S-Tel, to overcome the issues they encountered due to lack of integration.

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Introduction

An Enterprise Resource Planning (ERP) system is an incorporated and modularised real time data system that has a broad operational scope accountable for the organisation and processing of business deals. ERP incorporates both external and internal administration information across a whole organisation, taking up sales and service, manufacturing, and accounting just to mention but a few (Grant, Hall, Wailes, & Wright 2006). ERP systems mechanise its operation with an incorporated software function. The software is incorporated and multi-sectional; that is, it is applied in numerous departments in a large organisation. Enterprise resource planning is quickly evolving and moving to an e-business concentration with current advancements integrating Internet-permitting architecture, Supplier Relationship Management (SCM), and Customer Relationship Management (CRM).

The functions of enterprise resource planning are many and include assisting the course of information connecting all business operations within the borders of organisations, tracking numerous events in an organisation in an incorporated style, planning future undertakings founded on the tracked events, and handling the links with outside stakeholders (Loh, Koh, & Ching 2004). Enterprise resource planning systems can function on an array of computer hardware as well as system configurations, characteristically utilising a database as a reservoir for information. Enterprise resource planning systems were primarily executed to substitute numerous separate (disparate) systems, also referred to as legacy systems, which were used by companies like accounting, payroll, and production planning and the correlated issues. Businesspersons affirm that issues of integration take place at the process, application, and people levels. This research paper discusses the issues related to separate systems in addition to the way ERP systems address these issues.

Introduction to the importance of integration to companies

The importance of integration to companies includes proper management of information, data flow, and transaction processes. Selecting the correct ERP systems for a company can bring numerous benefits of integration (Head 2005). As regards the importance of integration, ERP systems enable dependable management functions across an entire company. Planning, administration, and transactions can be flourishing with integration. Even if every company is distinctive, there exist commonalities in the importance of integration. The main objective of implementing ERP systems in a company is integration. Integration is crucial since it helps in decreasing functional costs by harmonising different departments of the company. Integration seeks to manage correctness in addition to unnecessary repetition of data entry. An integrated operational system is capable of replacing numerous disparate records by the use of a single system and incorporating diverse applications and information sources. Integration in a company reduces helpdesk support as well as marketing costs.

Furthermore, integration is a perfect application to better the teamwork between departments and human resources in addition to contact with prospects and clients. Integration improves daily management actions and supports tactical planning that delineates goals of the company (Bidgoli 2004). Due to better data availability, top administration can also employ ERP systems to make improved and more efficient judgments. Moreover, integration facilitates the streamlining of various business operations coupled with elimination of cumbersome activities, which them translates to efficient business processes. Other importance of integration in a company includes the following:

  • Effortless Reporting: – Integration betters and tailors reporting. It offers a simple method of producing reports. With improved access to information, a company can produce and manoeuvre reports at a convenient time (Khosrow–Puor 2006).
  • User Responsiveness: – Non-technological people can effortlessly obtain data or information with the use of ERP systems (Khosrow–Puor 2006). In addition, ERP facilitates higher work rate conversion given that it overcomes some of the challenges that hinder high work rate conversion.
  • Cost Lessening: – ERP’s capacity to decrease cost can significantly improve if the figures being captured are evaluated accurately.
  • Enhanced Communication: – Integration improves communication that involves departments in a company and presents an array of timely, quick, and software-attuned services with litheness, for instance, ERP and web based systems.
  • Increased Safety: – “Integration does not only advance information integrity and safety, but also improves the data controls thus facilitating the keeping of client data and company information secure” (Khosrow–Puor 2006, p.98).
  • Offering business and monetary Solutions:- Integration provides the best business and monetary resolutions for nearly all kinds of companies. Allowing flow of information and funding into dissimilar and fundamental business activities enables companies to boost efficiencies in their day-to-day functions.
  • Exactness and Steadiness: – Integration facilitates the keeping of correct and consistent information in companies all through every department facilitating the full flow of information via single system coordination.
  • Enhanced Resource Management: – Centralised application “allows the devices and reporting capacities to permit the management to distribute valuable resources in a better way” (Vilpola 2008, p.68). This aspect allows timely decision making to avert time wastage and inconveniences.

Integration issues

Legacy systems have a problem of being purposely founded and not integrated within numerous locations or operational regions. A number of issues are associated with lack of integration as explained below.

People

The most persistent theme in organisation literature with reference to the failure of disparate systems is the lack of integration. With lack of integration, companies failed to take into consideration the interdepartmental, organisational, and human resources features of work organisations. Unanticipated effects comprise the emotional knock-on effect when workforce is abruptly given much bigger tasks due to lack of user interfaces. Without integration, managers do not assess the expertise advancement required by human resources as well as the organisational transformations required of them (Monk & Wagner 2007). Companies that adopt disparate systems, which lack integration, make it extremely hard for workforce since the project and their operations appear as unending lot of activities. With lack of integration, the little information technology (IT) employees levels in companies are insufficient for the thorough and widespread IT training and advancements obligations of an ERP project. This aspect is mainly contributed by the lack of a user interface, which could otherwise make operations simpler. In numerous instances of ERP executions, consultants are necessary to assist in meeting the requirements of projects, which are made easy and achievable due to integration.

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Process

With lack of integration, the same information is captured several times in several places and is not accessible in real time. Operations and processes are narrowly identified in reference to the division of labour and the business revolution. In this regard, some data does not make it out of various pockets of the company (Fryling 2010). With lack of integration, processes ensure that data within a company remains a local good. In cases where information does not reach all the departments in a company, there is a probability of dissimilar informational statements of the same incidents. Therefore, lack of integration creates information asymmetries involving the diverse local and operational groups as well as top management in an organisation. These issues can be overcome with the implementation of enterprise resource planning systems that present organisations with operation-processing patterns, which are incorporated with other performance of the organisation like production planning and employees.

Application

One of the greatest advantages of the ERP system hinges on the desegregation that companies enjoy once they implement the system. In the absence of integration, different departments in an organisation would operate in silos coupled with being sluggish to experience the effects of the errors that other departments make. The data flow would be slow “with the departments that generated the errors having to correct them before the mistakes start affecting other departments” (Magal & Word 2010, p.56). On the other hand, with firm integration in ERP systems, the ripple consequence of errors committed in a section of the organisation unit proceed to the other sections in real time. With lack of integration in disparate systems, the initial errors would be portentous as they pass via the value sequence of the organisation. For instance, the mistakes made by the production department, in its invoices, would not be noted quickly; consequently, such mistakes would distress not only the functions in the production department, but also the accounting department and records department along with others. The effect of these mistakes could be unfavourable to an organisation. For instance, price mistakes on acquisition orders could deceive financial analysts by presenting a deformed outlook of how much the organisation is expending on materials.

A company must be conscious of the possible risks of mistakes and take suitable strides, such as examining the operations coupled with taking instantaneous steps to correct the difficulties should they arise. Consider the current instance of MAE Company that employs ERP systems in its operations. Before the implementation of ERP systems, MAE gradually began having a shortage of materials for use in its manufacturing operations. Production workers “noticed that it was due to incorrect bills of materials, and they made necessary adjustments because they knew the correct number of parts needed to manufacturer” (Yakovlev 2002, p.52). Nevertheless, MAE did not have any integrated system to inform others whenever any mistakes were found in the statistics. Soon other departments started experiencing discrepancies and shortages. Inventory administrators considered that the company had additional material giving rise to shortages. Ultimately, the situation ended up costing the company two weeks of precious working time to clean the mess and rectify the billing. Currently, “the company has compulsory training classes to train workforce concerning the flow of transactions through the ERP system, which it implemented, and how mistakes influence the performance in a value sequence” (Yakovlev 2002, p.55).

ERP solution

By executing standard enterprise progressions and a particular database, which covers the scope of enterprise conduct and settings, ERP systems offer integration across various locations and operational areas. In this regard, ERP systems have brought about improved judgment-making abilities that manifest in an extensive array of metrics like reduced inventory (materials, in-process and refined products), human resources lessening, and speeding up the monetary close procedure among others. Therefore, ERP systems can be applied to assist organisations generate value (Anderson & Larocca 2005). Particularly, ERP systems deal with issues of integration in numerous manners, such as:

Integrates activities

Enterprise Resource Planning connects different tasks of companies in an integrated style. Integration underscores the essence of Enterprise Resource Planning. The progressions of Enterprise Resource Planning are cross-operational forcing companies out of traditional, practical, and work islands. Additionally, dissimilar business developments in a company are frequently amalgamated with one another. In addition, information that was previously stored on dissimilar disparate systems is now incorporated into just one system. ERP systems deal with integration issues via generating integrated activities that have the capacity to update statistics automatically linking related progressions and operations. For instance, the standing of a command at one location like in the supply management unit is the only one that would require being updated and all the other units would automatically update (Callahan 2002). The attractiveness of the ERP system is that data updating occurs in real time. This aspect permits getting up-to-the-minute data at the fingertips. Information integration in ERP systems facilitate better decision making in addition to resolution of problems. A further benefit of this integration is that it allows people, who are concerned, to connect with one another. Integrated activities have remarkable potential for bettering productivity.

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Compels the Application of ‘Best Practices’

Enterprise Resource Planning systems have incorporated numerous best practice progressions within them. The best practices integrated in ERP systems can be employed to improve the manner that firms carry out business. Selection and execution of ERP systems necessitates implementation of such best practices (Themistocleous, Irani, & O’Keefe 2001). By implementing an ERP system, a company is compelled to modify the manner of doing business and take up new and additional proficient ways to complete tasks. The ERP system therefore carries with it time-assessed and flourishing business practices, which will assist a company to become more competitive.

Benefits when companies address integration issues

Companies can accomplish much through integration because of using ERP systems. A number of the key gains that companies can achieve include company broad integration, fasten broken progressions, incorporated vendors and clients, augmented effectiveness, and competitive edge. Benefits achieved from the use of ERP systems stands out conspicuously from the position of the endeavour by companies to rise above existing restrictions. A company that gains from ERP system conquers restrictions that originate from lack of integration since information has been spread out across various departments. There is similarly a benefit for a company that has executed ERP since the difficulty of either inappropriateness or redundancy of information is dealt with effectively. Integration allows companies with international operations to coordinate their processes (Pan, Hackney, & Pan 2008). To this regard, companies can successfully respond and contain quickly varying business strategies and processes. Similarly important, companies have a tendency of realising their business in a better way when they execute ERP system. Additionally, integration after execution of ERP system has a tendency of catering for client demands irrespective of the place and the product a client seeks.

In the attempt to guarantee internal integration, implementation of ERP system connects departments of a company by integrating data and information thereby making it obtainable and accessible if required for re-evaluation or analysis. In this regard, the ERP system makes it easy to group consolidation because of accessibility of centralised information (Pan, Hackney, & Pan 2008). Essentially, the system merges multiple operations of a number of functions that a company requires to perform optimally.

With integration, the progressions in the company are influenced constructively. The system generates procedures that are more proficient, which serve clients in a better way thereby leading to effective customer contentment and thus bring about highest profits (Pan, Hackney& Pan 2008). Moreover, integration through ERP system allows companies to standardise business processes and afterwards easily apply the most excellent business practices.

Integration has a benefit of facilitating the upgrading of different system factors or functionality because of open system design. Therefore, this aspect illustrates that there is an advantage of flexibility of the system and any transformation can be executed from every location through a central position. Therefore, organisations should consider the reality that integration, through implementation of ERP system, benefits companies by ensuring constant advancement via supporting the full life cycle (Grant, Hall, Wailes, & Wright 2006). Integration can thus be applied to optimise the present business operations and simultaneously permit additional business operations.

When integration occurs, it allows companies to decrease the cost of carrying out businesses and management of data. For example, ERP allows the administration to follow the reviews of their funding. It is similarly effortless to manage security via approvals that can be upheld at dissimilar stages (Grant, Hall, Wailes, & Wright 2006). Cost saving is attained in the sense that it is cheaper and simper to sustain a single company wide-system than a number of incompatible systems.

Case studies

MAE Company

MAE (a concealed name of a company) plans and manufactures tools and engineering materials. The products of MAE Company include test sockets, gadget change equipment, and fasteners. These artefacts are mainly exported to the Middle East, Asia, as well as the United States of America. MAE has set up branches in China, Malaysia, and Philippines to maintain and complement the entire operations in Singapore. Due to lack of integration, MAE encountered the challenge of rapidly changing its operations resulting from the growing demands from clients for quicker delivery of high-class engineering artefacts at lower costs (Loh, Koh & Ching 2004). Manual as well as outdated data management systems, which handle MAE’s functions, needed replacement. For instance, MAE began having a shortage of materials for use in its manufacturing operations because of incorrect bills of manufacturing materials. Even with well-functioning production control, sales management would be ineffective in managing demands of customers. As every business separately functioned, cost estimates were sluggish, quotes were frequently inaccurate, and monetary reports were often delayed.

The objectives of MAE are to turn into one of the leading companies internationally in delivering precision in engineering merchandises and services to the international electronics companies by establishing trust, technological superiority, and value sequence. Thus, these objectives presented an assignment for MAE to search for an ERP system well suited to its distinctive location and that could help offer better management of its operations. MAE chose to substitute its legacy systems with ERP systems. The return on investment took longer than anticipated because of the lack of knowledge on ERP systems. Additionally, it took MAE some months to experience the gains resulting from execution of ERP systems (Loh, Koh & Ching 2004). Implementing ERP contributed to improvement of business operations of MAE. The application of ERP systems along with the standardisation of business progressions of the company gave rise to a raft of advancements that manipulated management excellence, cost management, and customer contentment.

S-Tel

S-Tel is a leading telecommunication corporation based in the Middle East. It began its functions in 1981 to offer and sustain telecommunications services. Over the years, S-Tel has set up a well-merited status as a local telecommunications centre in the Middle East. At present, its dream is far more striving brought about not just by the remarkable growth of expertise, but also by other similarly potent aspects like deregulation and internationalisation that are the key anticipated challenges. The legacy systems in S-Tel comprised of over twenty disparate systems (Head 2005). A number of the functions had not been built up competently, thus lacked accurate records thereby making them difficult or even impractical to control, uphold, and maintain. Information integrity, steadiness, and safety were not assured. Additionally, a number of the systems were not integrated; therefore, a lot of effort was wasted during information re-entry. With the intention of catching-up with expertise and technology, S-Tel began replacing the majority of its legacy systems with ERP systems. Thus, S-Tel chose to initiate a project to substitute all its disparate systems with an integrated solution. The success of implementing ERP systems in S-Tel included the provision of a wholly integrated back office resolution that allowed the company to better its processes, sustain the business more proficiently and successfully, and generate timely and perfect information applicable to the competitive company environment. ERP systems also provided a centralised database for all data with suitable control and substantiation of all information elements (Head 2005). This move eradicated duplicate and redundant information maintained at diverse levels thus ensuring information integrity and quality.

Conclusion

ERP includes both external and internal administration information across a company. ERP systems mechanise its operation with an incorporated software function. The software is incorporated and multi-sectional, in other words, it is applied in numerous departments in a large organisation. However, the information flows automatically among these departments. Disparate systems have numerous issues because they lack integration. Through case studies of S-Tel and MAE companies, it is evident that ERP systems help in overcoming issues related to disparate systems (Bidgoli 2004). One substantial benefit of the ERP system is integration. When integration occurs, it allows companies to decrease the cost of carrying out businesses and management of data.

Reference List

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Pan, G, Hackney, R & Pan, S 2008, ‘Information systems implementation failure: Insights from prism’, International Journal of Information Management, vol.28, no.4, pp. 259-269.

Themistocleous, M, Irani, Z & O’Keefe, R 2001, ‘ERP and application integration: exploratory survey’, Business Process Management Journal, vol. 7 no.3, pp.195-204.

Vilpola, I 2008, ‘A method for improving ERP implementation success by the principles and process of user-centred design’, Enterprise Information Systems, vol. 2 no. 1, pp. 47–76.

Yakovlev, I 2002, ‘An ERP implementation and business process reengineering at a Small University’, Educes Quarterly, vol. 2 no. 1, pp. 52–57.

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