What is ERP? Advantages and disadvantages of ERP.

 1. What is Enterprise Resource Planning (ERP) ?

Answer  :  Enterprise Resource Planning (ERP) refers to a type of software that organizations use to manage day-to-day business activities such as accounting, procurement, project management, risk management and compliance, and supply chain operations. A complete ERP suite also includes enterprise performance management, software that helps plan, budget, predict, and report on an organization’s financial results.

ERP systems tie together a multitude of business processes and enable the flow of data between them. By collecting an organization’s shared transactional data from multiple sources, ERP systems eliminate data duplication and provide data integrity with a single source of truth.

Today, ERP systems are critical for managing thousands of businesses of all sizes and in all industries. To these companies, ERP is as indispensable as the electricity that keeps the lights on.

Benefits of ERP software 

--One of the largest benefits is the picture it gives business owners of their operation. By tying critical data from all parts of a company into one easy-to-understand database, business owners are able to quickly identify areas of strength, as well as spot looming problems before they reach a critical stage. When used properly, the software should provide a better map for future planning. The software helps businesses cut back on duplication and saves time by better aligning each department. This allows for improved workflow and better efficiency, which can boost the company's bottom line. ERP software is also advantageous for businesses trying to improve their financial reporting and regulation compliance.

Benefits of ERP in points:

1. Better organizational control, especially in large companies, where the volume of information is more than in a small company. 

2. Increased customer responsiveness. 

3. Duplication of information is avoided. 

4. Increases communication and collaboration between business unites and sites. 

5. Company can incorporate improved best processes. 

6. Company profitability analysis can be carried out to analyse where costs are higher and where there are more sales. 

7. Increases decision-making capabilities within the company. 

8. The company is able to react better to any unforeseen problem or situation. 

9. Better use of time. 

10. May provide a strategic advantage.

Drawbacks of ERP software 

---The biggest downside to implementing an ERP software solution is the cost. Depending on 

the size of the company, it can cost millions of dollars to install and train employees to use 

the system. The cost can't just be looked at in terms of purchase price, since it will take a 

considerable effort to train employees how to use the ERP software and how to make sure 

managers are looking at the data properly to ensure they're getting the most out of it.

 

Since the training can be so extensive, businesses that install the software sometimes experience a drop in productivity while employees get brought up to speed. For some, a dip in output isn't very noteworthy, but for others, any decline in productivity can be devastating. 

Other expenses include IT infrastructure upgrades that usually need to occur before the 

software is installed, as well as the cost of maintaining the software and making sure it is 

running at optimum performance. 

Drawbacks  of ERP in points:

1. The high cost of implementation and maintenance. -(High initial investment) 

2. Implementation may require major changes in the company and its processes. 

3. It is so complex that may companies cannot adjust to it. 

4. It is necessary to train all employees in the company so that the system is used efficiently. This is a cost for the company as well as the time and effort needed for it. 

5. Integration with other applications in the enterprise needed. 

6. Inflexibility of the system, because this is a generic system.