An Overview of Enterprise Resource Planning

By August 30, 2017 Accounting

Enterprise Resources Planning (ERP) systems are software packages that can be used for the core systems necessary to support enterprise systems. The best-selling ERP is SAP Such ERP modules consist of Sales and Distribution, Material Managements, Financial Accounting, and Controlling and Profitability Analysis. In the words of Rockford Consulting (and many other firms), the single issue of ERP is failure to implement it.

There are five known ways of how to constitute: not making the promised return on investment, extending the implementation schedule and start-up date inordinately, going over budget by unconscionable variances, grinding the organization to a crawl pace, or the severest of all consequences, and ceasing production and/or not delivering orders to your customers.

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Rockford has twelve “cardinal sins” regarding ERP Implementation: Lack of Top Management Commitment: Inadequate Requirements Definition; Poor Package Selection; Inadequate Resources; Resistance to Change/Lack of Buy-in; miscalculation of Time and Effort; Misfit of Application Software with Business Processes; Unrealistic Expectation of Benefits and ROI; Inadequate Training and Education; Poor Project Design and Management; Poor Communications; and Ill-advised Cost Cutting. Today, companies define “success” when it comes to an ERP implementation or upgrade.

This is mostly due to well how they have planned for contingencies, set up reasonable expectations, and created lines of communication between the CEO, front-line users, and everyone else in between. For example, Au Bon Pain (a chain of restaurants) used to utilize “legacy systems” and “SAT ERP”, but currently uses a unified IT platform that provides such things as optimized performance, enhanced visibility with real-time data capture, Increased productivity, and accelerated financial closings.

The environments in which IT professionals are striving on projects (similar to the one at Au Bon Pain) is disconcerting: Most businesses today are “oversoftwared”, in that many users are frustrated by applications’ poor performances, and return on software investments is almost always forgotten. This results in many CFOs and CEOs arriving at a state of general ambivalence toward ERP systems, or (as a worst-case scenario) an accrued and outward hatred of software overhauls. Like all things, ERP has its failures as well. Even after so many people love a substantial amount of money, there are substantial benefits.

Commercial ERP software promises the seamless integration and consistency of all the information flows in an organization; financial and accounting, human resources, purchasing and supply chain, customer tracking and order placement, inventory management, and even production management. The promised savings in paperwork and man hours from automated processes is prodigious, not to mention the increased service quality provided to customers. In addition, there’s inventory reduction, supply chain cost efficiencies, and better decision support at every level. Most companies treat ERP implementation as a large scale IT project.

But the scope and impact of an ERP implementation on the business is so great that the project is required to be considered as a business initiative with an IT component. This includes the development of a business plan for the project, which specifies the “market” or “business advantages” to be gained from implementing the ERP plan. The decision to implement ERP should be in response to specific business needs or objectives. Rather than just saying “yes, we want all those possible benefits”, the organization should focus on a limited set of business benefits to be gained from the ERP implementation.

Once identified, these business needs would form the basis for much of the planning and management of the ERP project. If there are no compelling business needs that can be identified, then the ERP project is doomed to fail as a result of a lack of focus and the necessary management tools. The many companies that gain the most benefit from their implemented ERP systems are those that start by looking at them in strategic and organizational terms. The most (if not the best) fundamental reason for implementing ERP is to provide some competitive advantage, whether it be lower costs, faster response to market events, or better customer service.

Nonetheless, these benefits can often be offset, by the impact the organization’s ERP system will have on its current business strategies and competitive advantages. Even after looking over articles by CIO, Rockford Consulting, and even CFO, I have no opinion about ERP. It has its successes and it has its failures. Whether or not to implement ERP in any particular company, I suppose it would be OK, only as long as the company is certain that it’s for the best for its management, its staff, and its regular customers; it would also be allowed as long as the company doesn’t go over the budget.

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