Enterprise Resource Planning is a business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources. Enterprise Resource Planning systems aim to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders.
What is Enterprise Resource Planning?
Enterprise Resource Planning refers to packages of software and hardware that allow the integration of various back office functions such as production, human resources, finance and accounting to a central system. It automates processes, collects transactional data and facilitates the flow of information across all functions within a company such as sales and distribution, manufacturing, transportation, procurement and project management.
At its core, Enterprise Resource Planning provides a single, holistic view of core company data and processes, which can be accessed by various departments. Some common modules in Enterprise Resource Planning systems include:
- Financial modules like accounting, costing, budgeting etc.
- Supply chain modules for procurement, production planning, inventory management etc.
- Customer relationship management modules for sales, marketing and customer support.
- Project management modules for resource allocation and project monitoring.
- Human capital management modules for recruitment, payroll, employee database etc.
Benefits of Adopting Enterprise Resource Planning
There are several reasons why companies invest in Enterprise Resource Planning implementation. Some of the key benefits of Enterprise Resource Planning systems include:
- Improved operational efficiency by eliminating redundant processes and source data entry. Enterprise Resource Planning helps streamline workflows and enhance productivity.
- Enhanced data visibility and informed decision making. Enterprise Resource Planning places real-time company-wide data at the fingertips of managers and employees, helping them gain a holistic view of KPIs and make intelligent decisions.
- Reduced costs through lower inventory levels, optimized resource utilization and eliminating wastage across functions like procurement, production and distribution.
- Improved customer service by enabling quick order processing, accurate delivery schedules and efficient returns/complaints management.
- Global operations can be more cohesively managed through a centralized Enterprise Resource Planning when a company expands internationally.
- Enterprise Resource Planning promotes compliance and auditing with its controls on data access and change management tracking capabilities.
Challenges in Enterprise Resource Planning Implementation
While Enterprise Resource Planning provides plenty of benefits, its implementation also poses significant challenges that need to be strategically addressed:
- High costs involving licensing, installation, customization, training and integration with other legacy systems. Enterprise Resource Planning projects typically range from hundreds of thousands to several millions of dollars.
- Lengthy implementation timelines stretching over months and sometimes years depending on the scope of the project and size of the organization.
- Resistance to change from employees unused to new systems and business processes. Adequate training has to be provided to ensure user adoption.
- Customization challenges in case the required changes in existing Enterprise Resource Planning modules are major which disrupt the fundamentals of the Enterprise Resource Planning package.
- Risk of going over budget due to scope creep or unexpected technical issues during integration with other internal IT systems.
- Loss of productivity initially when the new Enterprise Resource Planning goes live as employees and managers learn the new system features.
The Way Forward with Enterprise Resource Planning
To mitigate risks in Enterprise Resource Planning implementation, it is important for companies to have a well-defined project plan with realistic timelines, cross-functional involvement and clear goals aligned with overall business objectives. Ongoing training, customization within tolerable limits and phased roll-outs can help streamline the implementation process. Using cloud-based and SaaS-based Enterprise Resource Planning solutions that offer constant upgrades and instant enabling of new features through the subscription model are becoming increasingly popular compared to on-premise licensed systems. Going forward, more Enterprise Resource Planning packages are also expected to integrate technologies like machine learning, analytics, cybersecurity and mobile-enablement. When successfully adopted, Enterprise Resource Planning continues to deliver immense value for enterprises of all types and sizes.
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