The History Of Main Features Of Erp

Published Date: 02 Nov 2017

ERP is an information system that integrates business activities across departmental boundaries which including planning, manufacturing, sales, accounting, marketing and so forth, into a single system with a common database. Recently, many companies have invested in ERP in order to integrate all departments and functions of a company onto a unified system that can serve all different departments’ particular needs and create an opportunity for value added business processes. ERP replaces stand-alone applications by providing various modules according to a common database and similar application interfaces that service the whole organization rather than parts of it (Valacich, Schneider & Behl, 2012). Furthermore, users are able to access real time information on all aspect of business and enhance the efficiency of companies as it can increase competitive advantage in the global market.

Financial and business information is often generated automatically by ERP systems based on data that previously entered without further manually instructions. Thus, users can easily track the work flow across various departments and reduce the operational costs which include in manually tracking. A good ERP system is essentially consists of a common centralized database management system which also known as DBMS. All the data are entered and stored only once that is where the data originate and then used by all the departments and modules simultaneously. For instance, when users are using an ERP system, both inbound logistics and operations have access to current inventory data as both business activities have access to the same information. This help to reduce routine data and information in gathering and processing the data.

The modular design of an ERP system is to integrate several business modules such as manufacturing, financial, accounting and distribution while sharing one database and aid the users in responding to real time information. For example, a customer calls in wondering about the status of an order, the customer service representative can answer the customer by accessing the database which stored in ERP system. Since the modules are totally separate, it can generate the information independence and also provide a seamless flow of data between the different modules. The separate modules work in real time with internet-enabled and batch processing capabilities. In addition, the data stored in central database of ERP system is centrally coordinated in implementation and operation.

Mechanism of the Enterprise Resources Planning System

ERP system is most commonly deployed in a distributed and often widely dispersed manner. In simpler words, an ERP is a massive software architecture that supports the streaming and distribution of geographically scattered enterprise information across all the functional units in a company. Normally ERP systems use the same database throughout an entire company to store various types of data for different departmental functions.

Generally there are three functional areas of responsibility that is distributed among the servers and the clients. First, there is the database component or the server. The server is a central repository for all of the data that is sent to and from the clients. Secondly are the clients. Function of clients is make sure raw data gets inputted, requests for information are submitted, and the data satisfying these requests is presented. Lastly, we have the application component that acts as the intermediary between the client and the database. Where these components physically reside and how the processes get distributed will vary somewhat from one implementation to the next.

In simpler explain, server is the database and the clients is the business processes of a company. Business processes of a company included Human Resources, Supply Chain Management, Customer Relationship Management, Finance and accounting, Manufacturing and Logistics. Recall back to the last paragraph, these business processes or departmental will enter the daily data in database from the ERP system. For example, when the staff of Customer Relationship Management enters the information of the customer information, the customer data will automatically stored in the company’s huge database and available to accessed by other business process. For another example, finance and accounting department of the company can be easily to getting the information about the payroll from the human resources department via a database. The staffs of the financial department in the company don’t need to correct payroll data in the human resources department because the data is available in the database and ready to be accesses. This will improve the company’s effectively and efficiency. Therefore, better decision can be made from the Manager because of all information was available in the company database developed by the ERP system.

Without the ERP system, these business processes is stand alone software applications only, and generally work with their own applications, database, and network. This leads to less effective of performance by a company. But if a company implement the ERP system, all the functional area in this company will integrated with all data or information from the functional areas will be stored on a single unique database for ERP system.

Benefit and Cost of ERP system

Benefits of ERP

In this dynamic and force of globalization and innovation of new technology, ERP systems offer flexibility to respond to regularly changing needs of the enterprise and also assist in decision making process. For example, ERP system provides real time access facility and up-to-date information and makes the users easier for order tracking, inventory tracking, revenue tracking, sales forecasting and related business activities. So that, manager of the company will make the better decision making on the company’s policy or decision making on a potential project based on the newest information that frequently update in their company to gain competitive advantage.

The implementation of ERP enables the organization to reduce the transaction costs of the business and enhance its productivity, customer’s satisfaction and profitability. Storing data in a single unified database and making it available to existing users within organization to enable them be aware of the current state of business and perform their job better. The automatic and coherent work flow from one department to another, across the entire company will ensure the smooth transition or completion of process. With the ERP system, a department on company can easily share or get information from other departmental in company. For example, financial department can get the information of worker’s payroll in the database that human resources department shared. This will improved the company’s performance and productivity by using the ERP system. The customer satisfaction will be create and lead to profitability to the company.

The single database of ERP system empowers the centralized storage and backup of all necessarily enterprise data. Backup can avoid the risk of company when the system of a company failure. The system can and will fail every now and then for the of reasons such as hardware failure, viruses in the computer system, or Fire, flooding, longer power failures and other related reason. Consequently, ERP system is more secure as centralized security policies can be applied to them and all the transaction occurring through ERP system can be tracked. This means that the security of company only needs to focus on the single unique database in the ERP system that stored almost all information of the company. This will reduce the cost in implementing ERP system

Costs of ERP

The ERP core components are designed primarily to support the important internal activities of the organization for producing their products and services. Therefore, they tend not to be well suited for managing value system activities such as integrate their value chains with their suppliers, business partners and customers. Many large companies and small businesses are fails to implement the ERP software project successfully because of its complexity

Furthermore, ERP system require more time consuming tailoring and configuration setups in integrating with the company’s business functions. For instance, it may take one to three years to get completed and fully functional of ERP. Besides, training employees to correctly and effectively use the ERP system will also increase the time consuming. Company need to be well informed about the features and procedures to their employees, otherwise the whole ERP system will prove to be inefficient or failure and the investment of money and time will be in vain. Implementing ERP system involved its complexities and to train all the employees about its module is time consuming.

In addition, the cost of ERP Software, planning, customization, configuration, testing, and implementation is too high and possibly may incur indirect costs such as new IT infrastructure, upgrading the WAN links and so forth. Usually, ERP solutions are very expensive and only large companies can afford them. To introducing an ERP system may also require additional acquisitions or modifications in the internal infrastructure of the company, so the implementation costs can rise considerably. In order to have an effective working ERP system, an additional cost also will be use to train employees who are responsibility to the ERP system. ERP system also will leads to higher cost when the system failure. Just imagine that if the ERP system failure, the whole operation of the company will stop running, it will lead to lose of huge money of the company.

Example of an organization (AirAsia Berhad)

To be further explaining in the Enterprise Resources Planning System (ERP), we chosen the Air Asia as the example of the successful organization in implemented the ERP system. AirAsia Berhad is a Malaysian low-cost airline headquartered in Kuala Lumpur. Air Asia had implemented Enterprise Resource Planning system (ERP system) powered by Microsoft Business Solutions (MBS) on Microsoft technology platform in May 2005 by Avanade consultants.

ERP is the system that integrated comprehensive software to make the IT system works more effectively and efficiently. ERP system helps Air Asia to integrate business processes within AirAsia Berhad such as manufacturing and production, finance and accounting, human resources, sales and marketing to collect the data and storing e in a single central data repository which called database. This will lead to the information in the company is easy to shared between the departmental to help the different parts of business work together. This is because all information is available in a huge database when needed. This will increase the effective and efficiency in the Air Asia Berhad. In additional, better decision making will be made by manager due to all information is available in the database to support decisions concurrent with planning and controlling the business. This will help the AirAsia Berhad to gain the competitive advantages.

Besides that, AirAsia used ERP system in maximized information system to meet the lowest cost during their business activities. ERP is the system that integrated comprehensive software to make the IT system is more effectively and efficiently. By implementing this package, AirAsia is looking to successfully maintain process integrity, reduce financial month-end closing processing times, and speed up reporting and data retrieval. Furthermore, to save its operational costs of the AirAsia Company as well as to increase the efficiency and integrity in its operation, ERP also helps to focusing on capturing transactions in daily operations.