Enterprise Resource Planning System - Assignment Example

Enterprise Resource Planning (EPR) Introduction Enterprise Resource Planning (ERP) software applications nowadays play a significant role in determining an organization’s success. ERP systems are applied to unite internal and external management information regarding manufacturing, sales and distribution, and customer relations across an entire company. The ERP systems foster this information integration process by means of an integrated software application. The main objective of ERP systems is to ensure upward and downward flow of management information within the boundaries of the organization and effectively maintain connections to its stakeholders. The fascinating feature of an ERP system is that it will support a variety of hardware and network configurations by employing a database for effectively accessing information. This paper will analyze what an ERP system does and how such a system can help an organization to become more profitable. Enterprise Resource Planning (ERP) system Since an ERP system can have a great influence on automating every business process, it can be effectively applied to accomplish a variety of business tasks. According to Adolphs and Schubert (2008), ERP system works on the basis of ‘input-process-output’ rules and, hence, it can also be used as management information system. Since information has become an ingredient part of management operations, ERP systems specifically focus on the information needs of different organizational sectors. The ERP software system provides timely, accurate, and most relevant information to different departments of the organization, using a single software system. This system keeps information updated so as to assist managements to effectively deal with decision making. Rothlin (2010) says that the filtering facility of an ERP system timely provides the organization with answers for various queries (p.204). Modern ERP systems are capable of providing improved facilities for the company to manage its export, import, and tax activities and to fulfill other legal requirements. ERP software supports computer aided designs; therefore, it is assistable for the company to demonstrate products designs on real time according to customer requirements. This system also facilitates all financial services and it complies with international accounting standards. Moreover, an ERP system has the ability to effectively meet the needs of government, healthcare, retail, and other service sectors. Sales forecasting is another attractive feature of ERP software applications since this process assists firms to optimize their inventory levels. According to Alavudeen and Venkateshwaran (2008), it aids an organization to effectively deal with order tracking and revenue tracking (p.273). Experts point that an ERP system is can match a firm’s costing with purchase orders and inventory receipts. This system plays a notable role in product naming and coding and provides a comprehensive enterprise view. Finally, ERP software systems safeguard privacy interests of an organization by protecting its sensitivity data through the consolidation and integration of multiple security systems. How an ERP system contributes to profitability? Over the last decade, it has been clearly identified that an ERP software system greatly adds to the profitability and long term sustainability of an organization. The biggest advantage of this system is that it has the ability to oversee overall operations of the company; hence, it can accurately and timely point out even a minute pitfall in the managerial affairs of the company. In short, an ERP system aids an organization to identify its weaknesses and to provide up to date data for formulate response policies. As Oz (2009) states, ERP software applications assist firms to keep optimum inventory levels and, hence, to eliminate economic loss arising out of under and overstock of inventories (p.87). In addition, firms can avoid time wastage on transfer of files with the application of an ERP system. The effective information flow across various organizational levels enables manufactures and distributors to operate promptly and this situation, in turn, would assist them to trim down production costs and thereby to improve the volume of production. Since the ERP system assists organizations to operate cost effectively, they can enter new business opportunities with the help of this system. Such systems greatly minimize redundant data entry processes and, therefore, they are beneficial for firms to eliminate unnecessary and monotonous workload. It is obvious that an ERP system would promote improved customer satisfaction, since this system ensures on-time delivery, increased quality and up to date after sale services. Since customer satisfaction is the primary objective of every marketer, ERP software application becomes an inevitable component of modern enterprises. Industry experiences show that ERP systems contribute to better planning, tracking, and requirements forecast and, therefore, they help firms to take advantages of reduced inventory costs. It is clear that inventory cost reduction is a better strategy to trim down the overall production cost. Before the introduction of ERP software applications, increased level of billing and delivery errors had adversely affected the sales collections of firms. However, an ERP system reduces such errors to a great extent, as it effectively integrates various information systems of the organization. Effective and uninterrupted sales collection procedures are of great help for firms to timely meet fund needs and thereby improve the operational efficiency of the business. In addition, ERP systems are beneficial for firms to ensure “decrease in vendor pricing by taking better advantage of quality breaks and tracking vendor performance” (EVS, 2011). Unlike traditional business practices, modern businesses effectively estimate actual costs of activities with the application of an ERP system. Likewise, this software system performs activity based costing and this practice adds value to production cost reduction and thereby to profitability. Minimization of operating costs, promotion of day to day management, and supporting of strategic planning are some of the major benefits of an ERP software application that would assist organizations to significantly improve profitability (Sysoptima.com, 2005). To conclude, ERP system applications provide a consolidated view regarding sales, inventory and receivables. Such an effective flow of information greatly assists managements to timely identify pitfalls in operations and effectively frame adequate policies to overcome those issues. Conclusion In total, an enterprise resource planning system plays a great role in integrating internal and external management information. Since an ERP system is capable of maintaining optimum inventory levels, it can ensure uninterrupted flow of production and supply. Moreover, this system promotes effective managerial decisions by avoiding errors to a large extent. In short, the ERP system adds value to the profitability of a business. References Alavudeen, A. & Venkateshwaran, N. 2008. Computer Integrated Manufacturing. Prentice-Hall of India: New Delhi. Adolphs, C. & Schubert, P. 2008. ‘Persobox: A personalization engine between ERP system and web frontend’. 21th Blede Conference Collaboration: Overcoming Boundaries through Multi-channel Interaction, pp.510-522. EVS, 2011. ‘What are the benefits of an ERP system?’. ERP Benefit. [Online], Available at [Accessed 18 December 2011] Oz, E. 2009. Management Information Systems, Cengage Learning, USA. Rothlin, M. 2010. Management of Data Quality in Enterprise Resource Planning Systems. JOSEF EUL VERLAG. Sysoptima.com, 2005. ‘ERP Benefits - operational control, management control and strategic planning’. [Online], Available at [Accessed 18 December 2011] Read More