ERP is generally seen as having the potential to very significantly improve the performance of many companies in many different sectors. This is partly because of the very much enhanced visibility that information integration gives, but it is also a function of the discipline that ERP demands. Yet this discipline is itself a ‘double-edged’ sword. On one hand, it ‘sharpens up’ the management of every process within an organisation, allowing best practice (or at least common practice) to be implemented uniformly through the business. No longer will individual idiosyncratic behaviour by one part of a company’s operations cause disruption to all other processes. On the other hand, it is the rigidity of this discipline that is both difficult to achieve and (arguably) inappropriate for all parts of the business. Nevertheless, the generally accepted benefits of ERP are usually held to be the following:
Because software communicates across all functions, there is absolute visibility of what is happening in all parts of the business.
The discipline of forcing business process-based changes is an effective mechanism for making all parts of the business more efficient.
There is better ‘sense of control’ of operations that will form the basis for continuous improvement (albeit within the confines of the common process structures).
It enables far more sophisticated communication with customers, suppliers and other business partners, often giving more accurate and timely information.
It is capable of integrating whole supply chains including suppliers’ suppliers and customers’ customers.
In fact, although the integration of several databases lies at the heart of ERP’s power, it is nonetheless difficult to achieve in practice. This is why ERP installation can be particularly expensive. Attempting to get new systems and databases to talk to old (sometimes called legacy) systems can be very problematic. Not surprisingly, many companies choose to replace most, if not all, of their existing systems simultaneously. New common systems and relational databases help to ensure the smooth transfer of data between different parts of the organisation.
In addition to the integration of systems, ERP usually includes other features which make it a powerful planning and control tool:
It is based on a client/server architecture; that is, access to the information systems is open to anyone whose computer is linked to central computers.
It can include decision-support facilities which enable operations decision makers to include the latest company information.
It is often linked to external extranet systems, such as the electronic data interchange systems which are linked to the company’s supply chain partners.
It can be interfaced with standard applications programs which are in common use by most managers, such as spreadsheets, etc.
Often, ERP systems are able to operate on most common platforms such as Windows or UNIX or Linux.