The Advantages of ERP

7/30/2019 The Advantages of ERP

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Theadvantages of

ERPInstalling an ERPsystem has manyadvantages -bothdirect and


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indirect.The directadvantagesinclude

improved efficiency, information

integration forbetter decision

making, fasterresponse time to


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customer queries,etc. The indirectbenefitsinclude

better corporateimage,

improved customer goodwill,

customer


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satisfaction, andsoon.The following are

some of the directbenefits of an ERP

system:1.Business Integ

ration2.Flexibility3.Better Analy


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sis and PlanningCapabilities4.Use of Latest Techn

ology.1. Business

Integration:The first and most

importantadvantage lies in


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the promotionof integration. Thereason why ERP

packages areconsidered to

the integrated, istheautomatic data

updating(automatic data


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exchange amongapplications) thatis possibleamong

the relatedbusiness

components.Sinceconventional

companyinformation


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systems wereaimed at theoptimization

of independentbusiness functions

in business units,almost all were

weak in terms ofthecommunication


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and integration ofinformation thattranscended the

differentbusinessfunctions.

In the case oflarge companies

in particular, thetiming of system


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constructionanddirectivesdiffers for each

product anddepartment/

functionand sometimes,

theyaredisconnected.


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For this reason, ithas become anobstacle in the

shift to newproduct

and businessclassification.In

the case of ERPpackages, the data


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of related businessfunctions is alsoautomaticallyupda

ted at the time atransaction

occurs. For thisreason, one is able

to graspbusinessdetails in


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real time, andcarry out varioustypes of

managementdecisions in a

timelymanner,based on that

information.2. Flexibility:


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Thesecond advantageof the ERP

packages is theirflexibility.

Differentlanguages, currencies,

accountingstandards and so


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on can be coveredin one system,andfunctions that

comprehensivelymanage multiple

locations of acompany can be

packagedandimplemented


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automatically. Tocope withcompany

globalization andsystemunification,

this flexibility isessential and one

can say that ithas major


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advantages,notsimply fordevelopment and

maintenance, butalso in terms of

management.3. Better Analysis

and planningCapabilities:


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Yet anotheradvantage is theboost

to the planningfunctions. By

enabling thecomprehensive

and unifiedmanagement of


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related businessand its data, itbecomes possible

to fully utilizemany types of

decisionsupportsystems

and simulationfunctions.


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Furthermore,since it becomespossible to carry

out,flexible and inreal time,the filing and

analysis of data


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from a variety ofdimensions, oneisable to give

the decision-makers the

information theywant; thus

enabling themtomake better and


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informeddecisions.4. Use of Latest

Technology: the fourth

advantage isthe utilization of

thelatestdevelopment


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in informationTechnology (IT).The ERP vendors

were quick torealize thatin

order to growand to sustain that

growth; they hadto embrace the


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latestdevelopmentsinthe field of

informationtechnology.

Therefore, theyquickly adapted

their systemstotake advantage


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of the latesttechnologies likeopen systems,

client/ servertechnology,Intern

et/Intranet, CALS(Computer- Aided

Acquisition andLogistics


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Support),electronic-commerce, etc.Itis this quick

adaptation to thelatest changes in

the InformationTechnology that

makesthe flexibleadaptation to


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changes in futurebusinessenvironments

possible. It isthisflexibility that

makes theincorporation of

the latesttechnology


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possibleduring systemcustomization,

maintenance andexpansion phases.What is thatERP enables?


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a)Systematic Look into your Systems &

procedures b)Optimizing

the processesc)Enables you

to adapt yourself to


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new technologiesd)Disciplineacross the

functionsProblems Taken

Care of by theERP:a)Availability check at the time


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of AcceptingSales order b)On-line Material

Status &Shortagesc)Prod

uctivity Enhancementsd)Material

Planninge)Customer Servicef)Ca


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shManagementg)Inventoryh)Qual

ity What drives

ERP?


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Businessdrivesa)CustomerSatisfaction b)Bu

sinessDevelopment -new areas,

products,


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servicesc)Abilityto facecompetitiond)Eff

icient processes required

to push thecompany to top

gear


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IT drives

a)Present Software does notmeet businessneeds b)Legacysystems difficultto

maintainc)Obsole


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tehardware/software difficult to

maintainDriversThe

market for ERP

however does not

sound so


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depressing.

Companies still

havegrowth

avenues whichinclude:Less penetratedmodules within

the ERP suite,both horizontal


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and vertical. Thenewhorizontalareas include E-

commerce,Customer

relationshipmanagement,

Supplychainmanagement


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, plantmaintenance, fieldservice, data

warehousing,product

datamanagement,service contract

management, warehousing &


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distribution,,transportationmanagement etc.

Among thevertical

application areindustries such as

retail,utilities,insurance,


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and governmentorganizations.Themid market

segment presentsimmense

opportunities.However, the

marginsfromSMEs will be


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far below thatfrom the largerplayers.Another

problem that theSMEs present is

the lowtransaction (order)

size andthedifficulty of


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reaching outto these players.Also they are

relatively lesssophisticated

onthe technologyside.Another

major demanddriver will be the


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e-commercewave. As moreand more

companymovetowards e-

commerce itbecomes

necessary to


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implement ERPsolutions.Inhibitors or

hurdles for

the growth ofERP market:After postingsignificant gains


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for 3-4 years theERP market maybe

heading towardsaslowdown.

Except for SAPmost other players

have witnessed a


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slowdownin revenuegrowth.The main

constraints togrowth for the

sector can beclassified as:a)Saturationof the certain


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horizontalapplicationsincluding Finance

andaccounting,MRP etc which

accounted fornearly 45% of the

ERP revenuesduring1998. b)Sat


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uration of largecustomers. Mostof the Fortune

500 companiesand

companieshavingrevenues over

$1bn have alreadyimplemented


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ERP.c)Thoughthe mediumenterprises

provide a goodopportunity for

growth,pricingfor these

companies willhave to be highly


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competitive andmargins maycomeunder

pressure. Thussmaller players

who have a costadvantage will

have an edgeoverthe others.


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ERP in India

Until recentlyIndianorganizationswere in a sellersmarket andoperating in a

regulatedenviron


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ment. They grewby managing theenvironment,

rather thaninnovating

andimprovinginternal

efficiencies. Thecustomer was


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taken for grantedand qualitywasavailable only

at a premium.With globalization

and gradual liftingof regulation,

there isa paradigmshift in running


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the business.Indian companies nowneed to increase

customer focus,improve speed of

delivery, becostcompetitive and

provide value formoney (improved


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quality at lowerprice).Indiancompanies

therefore need toimplement ERP

systems forimproving their

business processesand becoming


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more competitivein the globalenvironment. Tho

ugh ERPimplementation iscostly and timeconsuming, it has

several benefits


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which willhelprecover thesecosts in the long

run.According toNASSCOM,

during the year1998-99, the

Indian ERPmarket has


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beenestimated atR5200mncompared to

Rs2800mn in theprevious year ie a

growthof 85%yoy. The

growth inthe export market


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was far higher andmore thandoubled duringthe

same time period.According to the

NASSCOM, bythe end of

FY2001-02, thetotalIndian ERP


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market isexpected tomultiply by nearly

4 times and reachRs65bn

comparedtoRs13.4bn in 1998-

99

The Advantages of ERP

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