ERP system is thus a mirror image of the major business processes of an organization.

Need for Enterprise Resource Planning - Why ERP ?

Separate systems were being maintained during 1960/70 for traditional business functions like
Sales & Marketing, Finance, Human Resources, Manufacturing, and Supply Chain Management.
These systems were often incongruent, hosted in different databases and required batch updates.
It was difficult to manage business processes across business functions e.g. procurement to pay
and sales to cash functions. ERP system grew to replace the islands of information by integrating
these traditional business functions.
The successful implementation of an ERP system will have many advantages, as indicated
below:

Business integration and Improved Data Accuracy: ERP system is composed of

various modules/ sub modules where a module represents a particular business
component. If data is entered in one module such as receiving, it automatically updates
other related modules such as accounts payable and inventory. This updating occurs at
real time i.e. at the time a transaction occurs. Since, data needs to be entered only once at
the origin of transaction, the need of multiple entries of the same data is eliminated.
Likelihood of duplicate/ erroneous data is, therefore, minimized. The centralized structure
of the data base also enable better administration and security provisions, which
minimizes loss of sensitive data.

Planning and MIS: The various decision support tools like planning engines and
simulations functions, form integral part of an ERP system which helps in proper
utilization of resources like materials, human resources and tools. Constrained based
planning help in drawing appropriate production schedules, thereby improving operation
of plant and equipment. As a part of MIS, an ERP system, contains many inbuilt standard
reports and also a report writer which produce ad hoc reports, as and when needed.

Improved Efficiency and Productivity: In addition to provision of improved planning,

ERP system provides a tremendous boost to the efficiency of day to day and routine
transactions such as order fulfillment, on time shipment, vendor performance, quality
management, invoice reconciliation, sales realization, and cash management. Cycle time
is reduced for sales to cash and procurement to pay sequences.

Establishment of Standardized Procedures: ERP system is based on processes of

international best practices, which are adopted by the organizations during
implementation. Department silos are purged and maverick practices are done away with.
Because of top down view available to management, chances of theft, fraud and
obsolescence are minimized.

Flexibility and technology: Due to globalized environment, where production units,

distribution centers and corporate offices reside in different countries, organizations need

multi currency, multi language and multi accounting modes, in an integrated manner.
These provisions are available in most of the ERP systems, particularly in products
offered by tier 1 and tier 2 vendors. ERP vendors are also quick to adopt latest
technologies, from mainframe to client server to internet. Unlike a bespoke system,
Upgrading to latest technology for a running ERP system is uncomplicated, involving
mostly adoption of service packs and patches.
Conclusion

Although ERP provides many advantages; its implementation is a strategic decision, involving
significant resources (both financial and human), proper evaluation and business process reengineering. There must be commitment from all levels. A failed implementation may lead to
bankruptcy of an organization.

The opening up of the global economy has led to a significant development of the small and mid market
segment. This growth has been across industry verticals in the manufacturing, retail, services, pharma,
telecommunication and information technology sectors. This growth and along with that the new
competition and quest for enhancing total market share has led the companies to re-look at its processes
and procedures. Now, companies are trying to utilize their all resources effectively to make business more
efficient and effective.
In this case, companies are looking for enterprise software and other quality techniques. Companies are
implementing different practices to utilize their resource effectively viz. business process re-engineering
(BPR), six sigma, enterprise resource planning (ERP), just in time (JIT), Kanban and other quality
improvement systems. All these techniques are good and helping companies to provide better quality and
lower cost, which is the key factor to sustain a business in this competitive environment.
The implementation of ERP systems has helped small and mid sized companies, significantly improve
their business metrics by process optimization, improving the entire supply chain process, better inventory
control, better reporting to take decisions, integration across functionalities and increasing transparency
across the company. Purchase department can see the sales department data, Sales department can see
inventory data, and top management can see any data on a click of single button.
The introduction of ERP in any company has also helped it move up the value chain in term of market
credibility and building the confidence of its customer, stakeholders and vendors. Most of the small and
mid sized companies were living with in-house developed applications which are non-integrated and on
disparate technology architectures. This has resulted in running with redundant technology, loss of
support, non availability or less availability of critical information at the right time resulting in overall
business loss.
The key drivers of introducing an ERP system in a small and midsized company are introduction of
industry standard processes which are already embedded in the application, adopting integration across
business functions leading to better transparency, access to real time information, analytical reporting for
business decisions and adopting state of the art technology. Another key reason for implementing an ERP
vis--vis a tailor-made development is the speed of implementation resulting in achieving a quicker return
on investment (ROI).

An ERP solution can deliver dramatic benefits to businesses of all types and sizes increased
productivity, reduced operating expenses, improved information flow, and enhanced performance
management.

ERP solutions have been around for quite some time, and until now, many companies have succeeded
without one.
Yet, as ERP solution vendors begin to focus their efforts on small and mid-market businesses, more
and more companies continue to jump on the ERP bandwagon and reap significant benefits from
doing so.
So, why does your company need an ERP solution?
Countless different processes, activities, and systems are used to run your business. Numerous
workflows and procedures some manual, some automated that may or may not be formally
documented. And a variety of departmental applications and legacy databases that are likely
disjointed and not well-integrated.
While this approach may have served its purpose in the past, in todays dynamic and highly
competitive marketplace, it can seriously hinder productivity, profitability, and growth.
The primary reason an ERP solution is so vital to a companys success is efficiency. Cumbersome,
error-prone, labor-intensive manual processes can drain both time and money. Businesses must
operate as lean as possible in order to keep the bottom line in check, and failing to automate critical,
yet routine business activities makes it nearly impossible to do that.
ERP solutions allow companies to achieve true business process automation streamlining many of
the important day-to-day tasks across a business, and freeing up staff to focus their efforts on more
complex initiatives that require more personalized attention. This can not only boost productivity and
worker output, it can dramatically reduce operating and overhead expenses.
An ERP solution also bucks the notion that efficiency needs to be considered one department at a
time. Business processes and activities have become increasingly complex no matter how big or
small your company is, or what industry youre in requiring multiple teams and divisions to operate
as a single, cohesive unit. Without an ERP solution in place, creating that kind of cross-departmental
coordination and workflow execution can be quite challenging.

Another reason ERP solutions are so critical is their ability to increase information consistency and
accuracy. Many companies still suffer from multiple versions of the truth incorrect and inconsistent
information across the business. For example, if the accounting department and the contact center
access two different databases which arent integrated, a customer with a billing question will likely
get an inaccurate answer if they call the contact center for assistance. These problems, although they
may appear small on the surface, can add up, leading to bigger customer satisfaction and retention
issues that can negatively impact revenues and market share.
But most importantly, an ERP solution makes it easier for employees at all levels from front line staff
members and team supervisors to senior managers and executives to assess company performance
and understand their impact on it.
ERP solutions enable effective objective setting, and allow everyone to monitor progress towards that
goal. This makes companies far more agile by helping them quickly identify problems in the business,
and take immediate corrective action. An ERP solution can also empower companies to be more
responsive to shifts in the marketplace, quickly changing strategies to address new customer needs as
they emerge.