As mentioned, ERP stands for Enterprise Resource Planning. Many big and small enterprises make use of this resource, which provides access to different departments and their services, via a single computer system. In other words, it can also be attributed as a business tool that the management of an organization makes use of to form a convergence of the work force, hardware and software to deliver what the company strives, and works for establishing a profitable environment. Let us consider a company that comprises various departments; one that takes care of the sales, one that is in charge for the production of the goods, a department that deals with operation, and other departments of finance, shipping and for purchasing raw materials. So for the organization to run smoothly and provide satisfactory services to its consumer, all these departments must be in synch with each other. It may happen that the sales department is doing more selling than what the production department may be able to deliver. So in order to keep any such mishaps from happening, the staffs in each of these departments must have access to up-to-date information. Thus, in this way, the organization would be able to carry on with its operation in a smoother and efficient way. So this is what the use of ERP attempts to provide to an organization. But along with the benefits that this process provides, it is also not free from its own share of disadvantages.
Advantages of ERP
→ As you must have understood from the example cited above, the main goal of following an ERP protocol is integrating data in the manufacturing process. In other words, each and every department that an organization may be comprised, with the help of ERP, can be cumulated into a single platform thus, maintaining a smooth flow chart in the production of goods or services. Basically, it aims to introduce synchronization in the work flow. Some of the important benefits that might be achieved with the help of this process include lack of data redundancy, prevention of loss of confidential data, and data recovery in case of system crash. But the ultimate advantage is linked with customer management. For instance, with the help of the enterprise resource planning process, a staff in the sales department can get access to the financial department for let's say, inquiring about the customer's billing status. Besides this, he may also retrieve information about the status of the warehouse, the inventory, and finally the delivery of the goods concerned. So with such a streamlined work flow, the customer gets a single point of contact to get the job done.
→ Cost-effectiveness in one of the major advantages of using ERP for an organization. This is due to the fact that this process would enable the company to achieve a more powerful control over the working of its various departments. This ultimately results in quicker decisions, and with fewer errors, as the data becomes visible across the organization.
→ Every department that is covered under the network of this process, is able to access real-time and up-to-date information. This saves a significant amount of time which would have been wasted otherwise. And since the data is stored in an online format, paperwork is greatly reduced and retrieval of information can be done at any random time. So all such features boost the efficiency of the organization.
Disadvantages of ERP
→ The main drawback that has to be taken in consideration is the start up-cost of implementing the ERP in the company. Apart from incurring the cost of the new hardware, the company also has to manage its budget for organizing training schedule and programs for its employees to be able to get familiar to the working principle of the ERP, which is in fact, a bit more complex than any other common software programs. Besides this, the implementation can get further pricey with the hiring of consultants who would be responsible for the instructions to be followed while working with the ERP software. Also, the training can gobble up loads of time which might affect the productivity of the company, and make it susceptible to losing potential business in that particular period. So considering all these factors, the pricey nature of ERP may be a major drawback, especially for companies which have yet not been able to gain strong roots in the market.
→ The next point of demerit of the introduction of ERP in an organization, is associated with the difficulty in customizing the system. Migrating or switching from the previous database system and client information to a whole new system can give rise to significant confusion. And not only this, once ERP is set up, it may be difficult for the company to go back to a lower version software, particularly because of its high cost. So if the company in question is a small or a mid-size one, then it may not be a safe bet to go for ERP.
→ Taking it down to the last point of disadvantage of using ERP, it is about data security. Given centralized database systems, there always lurks a risk of data breach, which may have several negative implications on the company.
It cannot be specified as whether the advantages of implementing ERP outweighs its disadvantages, or vice versa. It all depends on the organization that intends to use it or is using it. However, if there is enough planning put into place before and post the implementation of the product, then it is most likely that using ERP may turn out to be a safe bet.