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Enterprise Resource Planning (ERP)
Good news: The ERP System will do everything you request from it.
Bad news: The ERP System will do everything you request from it.
Deduction: Positive results will be available when ERP is not end in itself but well planned and considered investment.

The Enterprise Resource Planning systems integrate all aspects of the business – production, sales, marketing, planning, inventory control, orders tracking, clients servicing, finances and HR.
In general ERP is software (program package), which is used to accomplish everyday business operations of any kind. Usually the package consists of a few modules – financial, production, marketing, etc. Each of the modules uses information kept in a shared database (eliminating the possibility of data duplication). Characteristic advantage of ERP is that every module contains the best practices typical for a given industry. The implementation of ERP can be partial (of a definite module) or full (all modules from the software package). In most cases a minimum change is required to fit the specific company needs.

The main difference between ERP and the other types of information systems (accountancy, storage, sales tracking, etc.) is the usage of a common database for the different modules. This guarantees minimum support expenses, maximum ease of actualization and reliability of the information. At the same time when needed, ERP (or separate modules) can be integrated with any kind of information system specific for a the type of business in the cases when it is inevitable or imperative.

Shortly, ERP is a combination of:

Best practices for business management and contemporary technologies, which allow the integration of information technologies in the main business processes of the company, aiming to improve its results. Until recently the mentioning of ERP was always associated with the idea of huge organizations with serious budgeting for IT, substantial quantity of resources, as well as with the patience to work at least a few years before until the return on the funds and efforts invested becomes visible.

Nowadays the implementation of ERP is no longer perceived as an IT project but rather as an overall initiative with an effect on every element from the company’s business processes. ERP managed to exit the narrow frame of the ‘reserved territory’ for the bigger international organizations and became more accessible for wider audience including SMEs.

The development of technologies led to the understanding that in order to achieve good results the software implementation itself is not enough. A so called second wave of ERP appeared following the idea that the ERP implementation should be seen as a project, providing an opportunity to reconsider the business processes and change the way of work using IT.

The international analysts’ expectations about the ERP systems market are that in this and the next few years the SME segment will be the main objective of the suppliers. In order to be able to reap the maximum benefits of the systems for resource management, however, managers of companies should be well-acquainted and thoroughly familiar with their capabilities, advantages and disadvantages.

Advantages of ERP

There are many ways in which an ERP system can improve the business activities of a company. The integration of the different business processes in the organization inevitably leads to improvement of the competitiveness and respectively of the financial markers of the company. Among the main advantages, proved by the experience of the companies that have already implemented ERP, are:
  • Better control on invoicing and payments processing
  • Reduction of the number and volume of paper documents
  • Drastic reduction of the terms for search and supply of information
  • Higher accuracy of the information, more details and better presentation
  • Improvement of expenses control
  • Faster reaction to customers’ inquiries and improvement of the overall servicing
  • More effective claims control
  • Better control and problem solving of any nature in the different business processes
  • Faster responsiveness to changes of the market environment and business operations
  • comparative advantage through business process improvement
  • Improvement of the supplies-demand interaction with remote company branches
  • Unification of the clients database
  • Improvement of the internal activities through the maintenance of different tax structures, invoicing schemes, different currencies, languages and reporting periods
  • Improvement of the access to information and management
Disadvantages of ERP

Naturally, not everything about the systems for resource management can be defined as ‘perfect’. Firstly it is the systems’ price that should be mentioned. Despite what ERP suppliers claim, these systems are still relatively expensive, especially for SMEs. In fact it is not the software product itself that is expensive, but the implementation procedure, which according to different assessments requires three-four times more resources. We must keep in mind however that this disadvantage becomes more surmountable with the development of technologies, while the expenses for the realization of a successful ERP project progressively decrease.

For some companies the time required for implementation of the system can also be a problem. The implementation of the project depending on its complicity can take a few months to a few years. This must be taken into account when making the final decision for implementation. The right choice of ERP supplier will support the real understanding of this factor to a great extent, before it’s too late.

Last but not least the problems with staff training to work with the new system must be mentioned. For various reasons, the change of the status quo is not well accepted by a number of people, who consciously or unconsciously block the project implementation. The management team must prepare the staff for the upcoming changes and this will surely help the successful implementation of the system.

Success factors in implementation of ERP

Firstly, we should mention the actual commitment of the management in the project implementation. Very often, the managers of the company believe that after making the decision to implement an ERP system and selecting the suppliers their commitment to the project is concluded. Such behavior inevitably affects the quality of implementation and the results achieved. The managerial commitment ensures the adoption of the inevitable ‘victims’ accompanying the process of starting the system (e.g. separation from the manufacturing process of some of the staff, and even the most qualified staff, temporary suspension or delay the production process, etc.)

In addition to the above mentioned key factors that largely determine the successful implementation of the ERP system, there are the following as well:
  • Clear definition of goals;
  • Determination of a realistic date for the project realization;
  • Minimum customization of the product;
  • Smaller range of changes (of course within the required);
  • Balanced team to implement the project (consultants and internal staff);
  • Taking responsibility and commitment to implement the planned changes.