Enterprise Resource Planning
Introduction to Concept Enterprise resource planning is a fully integrated information technology that integrates a company’s operations by delivering timely and accurate information in real time. These systems were born in an environment demanding more efficiency and higher customer service and are designed to help an organization optimize its distribution of enterprise resources for efficient utilization of those resources (Park & Park, 2015; De Toni, Fornasier, & Nonino, 2015; Kuo, 2014). Today, these systems extend to include the customers and suppliers of the central organizations, allowing information to be shared across the whole supply chain (Babaeia, Gholamib, & Altafib, 2015; Shatat, 2015). These systems have been utilized effectively in insurance, manufacturing, petroleum production, and many other industries around the world (Park & Park, 2015; De Toni, Fornasier, & Nonino, 2015; Shatat, 2015). The largest providers of enterprise resource planning software include SAP, Oracle, and PeopleSoft. Companies around the world spend $10 billion dollars per year, on average, to acquire these software platforms based on enterprise resource planning (Shatat, 2015).
Benefits and Challenges of Enterprise Resource Planning The benefits of implementing an enterprise resource planning system can be broken down into three categories: intangible, tangible, and financial. The intangible benefits of implementing such a system are those which are hard to measure in practice. They include things such as an improved decision-making processes, better utilization of information, reduced risk in uncertain environments, and higher levels of flexibility and response to market needs. Tangible benefits include those things which can be measured properly, including quality improvements, better warehouse management, and higher levels of both productivity and customer satisfaction. Lastly, companies will reap financial benefits such as higher profitability, cash flow ratios, and sales revenue (De Toni, Fornasier, & Nonino, 2015; Park & Park, 2015; Tian & Vu, 2015; Kuo, 2014). Studies show that only somewhere between thirty and sixty percent of enterprise resource planning systems are considered successful while ninety percent take longer to implement or cost more than projected (Babaeia, Gholamib, & Altafib, 2015; Park & Park, 2015; Shatat, 2015). Implementation of these systems will cause a company to incur a high initial cost (2-6% of annual sales), cause an initial decrease in firm performance, and take a considerable amount of time (2-5 years) before the benefits of implementation are realized (Park & Park, 2015; De Toni, Fornasier, & Nonino, 2015; Shatat, 2015). Researchers in this field have been able to isolate the top ten challenges that firms face in implementing an enterprise resource planning system. These include things such as lack of senior management commitment, insufficient training of end-users, conflicts between departments in the organization, attempts to hold onto past software or applications, and a failure to …show more content…
The first is the pre-implementation stage where the company must decide why it wants to implement an ERP system, what steps it needs to take for successful implementation, and what they hope the system to become. The implementation stage is second and involves a company actually implementing the steps to integrate the system in its environment and anticipating any coming challenges or problems in this process. The third stage is post-implementation and involves a company continually improving the system and attempting to implement any future technological advancements into the system (Babaeia, Gholamib, & Altafib, 2015; Shatat,
Introduction to Concept Enterprise resource planning is a fully integrated information technology that integrates a company’s operations by delivering timely and accurate information in real time. These systems were born in an environment demanding more efficiency and higher customer service and are designed to help an organization optimize its distribution of enterprise resources for efficient utilization of those resources (Park & Park, 2015; De Toni, Fornasier, & Nonino, 2015; Kuo, 2014). Today, these systems extend to include the customers and suppliers of the central organizations, allowing information to be shared across the whole supply chain (Babaeia, Gholamib, & Altafib, 2015; Shatat, 2015). These systems have been utilized effectively in insurance, manufacturing, petroleum production, and many other industries around the world (Park & Park, 2015; De Toni, Fornasier, & Nonino, 2015; Shatat, 2015). The largest providers of enterprise resource planning software include SAP, Oracle, and PeopleSoft. Companies around the world spend $10 billion dollars per year, on average, to acquire these software platforms based on enterprise resource planning (Shatat, 2015).
Benefits and Challenges of Enterprise Resource Planning The benefits of implementing an enterprise resource planning system can be broken down into three categories: intangible, tangible, and financial. The intangible benefits of implementing such a system are those which are hard to measure in practice. They include things such as an improved decision-making processes, better utilization of information, reduced risk in uncertain environments, and higher levels of flexibility and response to market needs. Tangible benefits include those things which can be measured properly, including quality improvements, better warehouse management, and higher levels of both productivity and customer satisfaction. Lastly, companies will reap financial benefits such as higher profitability, cash flow ratios, and sales revenue (De Toni, Fornasier, & Nonino, 2015; Park & Park, 2015; Tian & Vu, 2015; Kuo, 2014). Studies show that only somewhere between thirty and sixty percent of enterprise resource planning systems are considered successful while ninety percent take longer to implement or cost more than projected (Babaeia, Gholamib, & Altafib, 2015; Park & Park, 2015; Shatat, 2015). Implementation of these systems will cause a company to incur a high initial cost (2-6% of annual sales), cause an initial decrease in firm performance, and take a considerable amount of time (2-5 years) before the benefits of implementation are realized (Park & Park, 2015; De Toni, Fornasier, & Nonino, 2015; Shatat, 2015). Researchers in this field have been able to isolate the top ten challenges that firms face in implementing an enterprise resource planning system. These include things such as lack of senior management commitment, insufficient training of end-users, conflicts between departments in the organization, attempts to hold onto past software or applications, and a failure to …show more content…
The first is the pre-implementation stage where the company must decide why it wants to implement an ERP system, what steps it needs to take for successful implementation, and what they hope the system to become. The implementation stage is second and involves a company actually implementing the steps to integrate the system in its environment and anticipating any coming challenges or problems in this process. The third stage is post-implementation and involves a company continually improving the system and attempting to implement any future technological advancements into the system (Babaeia, Gholamib, & Altafib, 2015; Shatat,