Benefits of Enterprise Resource Planning (ERP)

Swapnil Srivastava Jan 25, 2019
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ERP is an integral part of most big organizations these days. Here, we find out about the various benefits of Enterprise Resource Planning (ERP). Have a look.
Enterprise resource planning, commonly known as ERP, is a computer software system used to manage organizational resources. It provides a means for integration of data and processes within an organization. Thus, depending on their authorization, different departments can check this unified database, making the business process more streamlined.
ERP systems are used in both large and small organizations, covering functions like, payroll maintenance and accounting. Other functions like Supply Chain Management (SCM), Human Resource Management (HRM), Customer Relationship Management (CRM), Warehouse Management, etc. too, are integrated with their own database and network within the ERP system.

Advantages of ERP

Increased Cost-effectiveness

Despite the huge initial investment, once installed, the ERP system significantly reduces the cost of operations in a company. However, it requires adequate training and a lot of manual effort.
As the work-flow in ERP software is far more complex than any other average business software, the training becomes necessary and expensive. The employees of the company have to perform their daily tasks and learn the usage of the ERP software system at the same time.
To lessen the company's burden, there are many training firms which are specialized in coaching employees about the functionality of the ERP software from different vendors.

Enhanced Work Efficiency

ERP systems enhance the efficiency of the whole organization by smoothly integrating its various divisions. It also helps in reduction of paper documents and provides an online database for quick storage and retrieval of information.
ERP ensures a quick response to changes in market conditions and also improves the productivity of the company by providing each department with their own computer system, specific data and database.
Cross computer system communication can be effectively carried out within these departments, in order to store or retrieve information. This results in a unified working of all aspects of an organization, instead of every single system needing to be compatible with the other.

Integration of Business Functions

As the ERP system integrates data and process from different divisions of an organization, it enables easier access and work flow. Its multiple software modules aid the coordination of various business functions in an organization.
This integration provides an opportunity for the various divisions to share a unified database and ensures proper business communication within the organization.
This centralization of data in one place eliminates the problem of synchronizing the changes made by different departments and people. It also reduces the risk of loss of confidential data, thanks to the robust network security models that this system provides. ERP systems also makes available an efficient method for data recovery.

Improved International Operations

ERP system support a variety of tax structures, currencies of the world, and multiple languages, making it a truly international software. It is well suited for global operations because of its diversified accounting standards and the ability to manage world-wide clients and resources.
ERP also assists the improvement of the supply - demand linkages with the remote locations and branches in different regions or countries. The following are some other key benefits that ERP brings to an organization.
  • Most of the inefficiency in any traditionally run business process stem from improper reporting and communication. This problem is taken care of by the automated template system used by the ERPs that makes it possible for the different departments to access the information in a seamless fashion.
  • ERPs store information and data digitally. This makes it possible to use a number of advanced business and intelligent analytic tools to better access the business growth and to come up with more effective business decisions. Most ERPs theses days have these business analytic tools integrated within them.
  • ERP systems provide better management and communication tools, which allow managers to exercise a higher degree of control over the business process. This results in reduction of delays and better utilization of the company's resources and ultimately in cost savings.
  • The different data within in an organization vary according to their individual degree of sensitivity. Thus access to data too needs to be controlled accordingly. this becomes possible in the ERP systems owing to the advanced used management and access control tools that it makes available.
  • An ERP system includes real-time capabilities that makes it possible to monitor the on-goings of the company. This helps the administration in managing the business process and prevent wastage of time and resources.
  • Important regulatory requirements can be built right into the ERP systems making it possible for the each individual units to better adhere to them, thus improving the overall quality of the output.
  • ERP systems are designed to be scalable making it possible to add new functionality, processes, departments etc., conveniently to them.
  • Managing the individual elements of any business, especially its human resource, is perhaps the most complicated aspect. Using ERPs, and the neatly designed system of work-flow that it introduces, this process is largely simplified.
  • The improved communication system made available by ERPs, betters the customer relationship with the organization, thus facilitating business growth.
There are basically three types of services that are provided by ERP software vendors, namely, consulting, customization, and support. Consulting services are responsible for the initial phase of ERP installation, and deal with product training, workflow, etc.
Customization services make changes according to the needs of the organization, by creating customized interfaces or underlying application codes.
Support services include the maintenance and support of ERP systems, and deal with the troubleshooting part. All three are necessary for an organization to avail the complete benefits of Enterprise Resource Planning.
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