Business benefits of ERP systems

Recommended reading: Enterprise Resource Planning (ERP) Definition

Installing an ERP (Enterprise Resource Planning) system has many advantages -both direct and indirect. The direct advantages include improved efficiency, information integration for better decision making, faster response time to customer queries, etc. The indirect benefits include better corporate image, improved customer goodwill, customer satisfaction, and so on.

The following are some of the direct benefits of an ERP system:

  1. Business Integration
  2. Flexibility
  3. Better Analysis and Planning Capabilities
  4. Use of Latest Technology.

Business Integration: The first and most important advantage lies in the promotion of integration. The reason why ERP packages are considered to the integrated, is the automatic data updating (automatic data exchange among applications) that is possible among the related business components. Since conventional company information systems were aimed at the optimization of independent business functions in business units, almost all were weak in terms of the communication and integration of information that transcended the different business functions. In the case of large companies in particular, the timing of system construction and directives differs for each product and department/ function and sometimes, they are disconnected. For this reason, it has become an obstacle in the shift to new product and business classification. In the case of ERP packages, the data of related business functions is also automatically updated at the time a transaction occurs. For this reason, one is able to grasp business details in real time, and carry out various types of management decisions in a timely manner, based on that information.

Flexibility: The second advantage of the ERP packages is their flexibility. Different languages, currencies, accounting standards and so on can be covered in one system, and functions that comprehensively manage multiple locations of a company can be packaged and implemented automatically. To cope with company globalization and system unification, this flexibility is essential and one can say that it has major advantages, not simply for development and maintenance, but also in terms of management.

Better Analysis and planning Capabilities: Yet another advantage is the boost to the planning functions. By enabling the comprehensive and unified management of related business and its data, it becomes possible to fully utilize many types of decision support systems and simulation functions. Furthermore, since it becomes possible to carry out, flexible and in real time, the filing and analysis of data from a variety of dimensions, one is able to give the decision-makers the information they want; thus enabling them to make better and informed decisions.

Use of Latest Technology: the fourth advantage is the utilization of the latest development in information Technology (IT). The ERP vendors were quick to realize that in order to grow and to sustain that growth; they had to embrace the latest developments in the field of information technology. Therefore, they quickly adapted their systems to take advantage of the latest technologies like open systems, client/ server technology, Internet/Intranet, CALS (Computer- Aided Acquisition and Logistics Support), electronic-commerce, etc. It is this quick adaptation to the latest changes in the Information Technology that makes the flexible adaptation to changes in future business environments possible. It is this flexibility that makes the incorporation of the latest technology possible during system customization, maintenance and expansion phases.