Disadvantages to ERP

ERP isn't without its risk and detractors. There can be disadvantages and pitfalls to it.

The very rigid structure of an ERP solution oftentimes makes it difficult to adapt to the specific needs of individual organizations.

Because ERP software is enormously sophisticated, there is often a tendency to implement more features and functions for a particular installation than is actually needed. This drives up costs and may reduce usage if the system proves to be too complex to use.

The cost to implement and maintain ERP systems is very high, and can challenge ROI calculations.

Some departments and users may be hesitant to agree to the implementation if they feel they're giving up control of their data by switching from a department application to an enterprise-wide solution.

Advantages

In the absence of an ERP system, a large manufacturer may find itself with many software applications that do not talk to each other and do not effectively interface. Tasks that need to interface with one another may involve:

design engineering (how to best make the product) order tracking from acceptance through fulfillment the revenue cycle from invoice through cash receipt managing interdependencies of complex Bill of Materials tracking the 3-way match between Purchase orders (what was ordered), Inventory

receipts (what arrived), and Costing (what the vendor invoiced) the Accounting for all of these tasks, tracking the Revenue, Cost and Profit on a

granular level.Change how a product is made, in the engineering details, and that is how it will now be made. Effective dates can be used to control when the switch over will occur from an old version to the next one, both the date that some ingredients go into effect, and date that some are discontinued. Part of the change can include labeling to identify version numbers.

Some security features are included within an ERP system to protect against both outsider crime, such as industrial espionage, and insider crime, such as embezzlement. A data tampering scenario might involve a disgruntled employee intentionally modifying prices to below the breakeven point in order to attempt to take down the company, or other sabotage. ERP systems typically provide functionality for implementing internal controls to prevent actions of this kind. ERP vendors are also moving toward better integration with other kinds of information security tools.[12]

Disadvantages

Problems with ERP systems are mainly due to inadequate investment in ongoing training for involved personnel, including those implementing and testing changes, as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and how it is used.

Disadvantages

Customization of the ERP software is limited. Re-engineering of business processes to fit the "industry standard" prescribed by

the ERP system may lead to a loss of competitive advantage. ERP systems can be very expensive leading to a new category of "ERP light"

solutions ERPs are often seen as too rigid and too difficult to adapt to the specific workflow

and business process of some companies—this is cited as one of the main causes of their failure.

Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications.

Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level).

The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale.

Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software.

Some large organizations may have multiple departments with separate, independent resources, missions, chains-of-command, etc, and consolidation into a single enterprise may yield limited benefits.

The system may be too complex measured against the actual needs of the customer.

------------------------------------------------------------------------------------------------------------

Benefits of ERP

The benefits accruing to any business enterprise on account of implementing are unlimited. According to the companies like NIKE, DHL, Tektronix, Fujitsu, Millipore, Sun Microsystems, following are some of the benefits they achieved by implementing ERP packages:

o Gives Accounts Payable personnel increased control of invoicing and payment processing and thereby boosting their productivity and eliminating their reliance on computer personnel for these operations.

o Reduce paper documents by providing on-line formats for quickly entering and retrieving information.

o Improves timeliness of information by permitting, posting daily instead of monthly.

o Greater accuracy of information with detailed content, better presentation, fully satisfactory for the Auditors.

o Improved Cost Control o Faster response and follow up on customers o More efficient cash collection, say, material reduction in delay in

payments by customers. o Better monitoring and quicker resolution of queries. o Enables quick response to change in business operations and market

conditions. o Helps to achieve competitive advantage by improving its business process. o Improves supply-demand linkage with remote locations and branches in

different countries. o Provides a unified customer database usable by all applications. o Improves International operations by supporting a variety of tax structures,

invoicing schemes, multiple currencies, multiple period accounting and languages.

o Improves information access and management throughout the enterprise. o Provides solution for problems like Y2K and Single Monitory Unit (SMU)

or Euro Currency.

--------------------------------------------------------------------------------------------------------

ERP Advantages & Disadvantages

Advantages

In the absence of an ERP system, a large manufacturer may find itself with many software applications that do not talk to each other and do not effectively interface. Tasks that need to interface with one another may involve:

design engineering (how to best make the product) order tracking from acceptance through fulfillment the revenue cycle from invoice through cash receipt managing interdependencies of complex Bill of Materials tracking the 3-way match between Purchase orders (what was ordered), Inventory

receipts (what arrived), and costing(what the vendor invoiced) the Accounting for all of these tasks, tracking the Revenue, Cost and Profit on a

granular level.

Change how a product is made, in the engineering details, and that is how it will now be made. Effective dates can be used to control when the switch over will occur from an old version to the next one, both the date that some ingredients go into effect, and date that some are discontinued. Part of the change can include labeling to identify version numbers.

Computer security is included within an ERP to protect against both outsider crime, such as industrial espionage, and insider crime, such as embezzlement. A data tampering scenario might involve a terrorist altering a Bill of Materials so as to put poison in food products, or other sabotage. ERP security helps to prevent abuse as well.

Disadvantages

Many problems organizations have with ERP systems are due to inadequate investment in ongoing training for involved personnel, including those implementing and testing changes, as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and how it is used.

Limitations of ERP include:

Success depends on the skill and experience of the workforce, including training about how to make the system work correctly. Many companies cut costs by cutting training budgets. Privately owned small enterprises are often undercapitalized, meaning their ERP system is often operated by personnel with inadequate education in ERP in general, such as APICS foundations, and in the particular ERP vendor package being used.

Personnel turnover; companies can employ new managers lacking education in the company's ERP system, proposing changes in business practices that are out of synchronization with the best utilization of the company's selected ERP.

Customization of the ERP software is limited. Some customization may involve changing of the ERP software structure which is usually not allowed.

Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage.

ERP systems can be very expensive to install often ranging from 30,000 to 500,000,000 for multinational companies.

ERP vendors can charge sums of money for annual license renewal that is unrelated to the size of the company using the ERP or its profitability.

Technical support personnel often give replies to callers that are inappropriate for the caller's corporate structure. Computer security concerns arise, for example when telling a non-programmer how to change a database on the fly, at a company that requires an audit trail of changes so as to meet some regulatory standards.

ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies—this is cited as one of the main causes of their failure.

Systems can be difficult to use.

Systems are too restrictive and do not allow much flexibility in implementation and usage.

The system can suffer from the "weakest link" problem—an inefficiency in one department or at one of the partners may affect other participants.

Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications.

Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level).

The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale.

Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software.

There are frequent compatibility problems with the various legacy systems of the partners.

The system may be over-engineered relative to the actual needs of the customer.

Benefits of ERP

ERP is truly today an indespensable tool for businesses and industries though it is difficuly to operate. The biggest advatage of this software is that it facilitates cordination amongst different departments.

-----------------------------------------------------------------------------------------------------------

Advantages of ERP

Faster inventory turnover

Without ERP, a business may turn over its inventory once or twice a year With ERP to automate processes such as production planning and procurement, many manufacturers and distributors increase inventory turns by tenfold and reduce inventory costs by 10% to 40%. The result is significant reduction in inventory expense, as well as associated transportation, storage and warehousing costs. This, in turn, leads to better cash flow.

Improved customer service

To remain competitive, manufacturers are looking to improve their customer-order fulfillment rates. In many cases, an ERP system can increase fill rates to 80% or 90% by providing the information that allows the company to have the right product in the right place at the right time. The result is higher customer satisfaction and retention. Although it’s hard to put a price on lost business, customers will take their business elsewhere if the products they want are not available when they need them.

Better inventory accuracy, fewer audits

Some manufacturers physically count inventory each month-in some cases, each weekend often have an inventory accuracy rate as low as 20%. An ERP system can increase inventory accuracy to more than 90%, while reducing the need for frequent physical audits. For many, a comprehensive physical inventory is not only costly in itself, but requires a temporary shutdown of business to count, tag and check stock.

Reduced setup times Manufacturers often spend anywhere from one to three shifts setting up

major pieces of production machinery. An ERP system can improve setup time by 25% to 80%-from days to a few hours by grouping similar production jobs together, ensuring coordination of people, tools and machinery, and planning for maximum equipment use and efficient machine maintenance to minimize downtime. Optimizing production in this manner translates into increased capacity, which means you can make more products with the same amount of machinery and people, thus increasing revenue and ROI without having to increase capital expenses.

Higher quality, less re-work In some plants, re-work rates, because of unacceptable quality, may fall

between 15% and 40% of production output. The production staff may not realize there is a problem until after the product has been manufactured. ERP software with a strong manufacturing component proactively pinpoints quality issues, providing the information needed to increase production efficiency and reduce or eliminate re-work.

Timely revenue collection, improved cash flow

Some companies take up to 90 days to collect on customer invoices. An ERP system can automatically generate a list of late paying customers, send notifications as needed, and "redflag" customers whose credit should be put on hold before more products are manufactured or shipped. ERP systems give manufacturers the power to proactively examine accounts receivable before significant problems occur, instead of merely reacting. Timely receivable equates to better cash flow, freeing up funds for the business to invest in revenue generating assets.

Disadvantages of ERP

When an ERP project fails, the finger pointing often begins with the software. But in many cases a lack of planing prior to implementation and unrealistic expectations are the real points behind an unsuccessful ERP execution.

"We find companies are buying the software but they really don’t know what there doing with it" says Barry Levine, practice leader at Toronto-based Richter Consulting Group.

The companies install their ERP projects like:

The Big Bang In this, the most ambitious and difficult of approaches to ERP implementation, companies cast off all their legacy systems at once and implement a single ERP system across the entire company.

Franchising strategy This approach suits large or diverse companies that do not share many common processes across business units. Independent ERP systems are installed in each unit, while linking common processes, such as financial book keeping, across the enterprise.

This has emerged as the most common way of implementing ERP.

Slam-dunk ERP dictates the process design in this method, where the focus is on just a few key processes, such as those contained in an ERP system’s financials module. The slam-dunk is generally for smaller companies expecting to grow into ERP.

The goal here is to get ERP up and running quickly and to ditch the fancy reengineering in favor of the ERP system’s "canned" processes.

 -----------------------------------------------------------------------------------------------------------

Advantages and Disadvantages of ERP

The advantages and disadvantages of ERP is an interesting Study. The foremost advantage of an ERP system is bringing down the costs and saving the valuable time which would have otherwise been wasted in procedural maneuvers and unwanted delays. Different software programs maintained in the departments were proving to be a great hurdle. Since ERP is a uniform platform it ensures that there in no discrepancy in the information that is processed.

Industry wise advantages

Manufacturing Sector--------------------Speeding up the whole process.

Distribution and retail Stores-----------Accessing the status of the goods

Transport Sector---------------------------Transmit commodities through online transactions.

Project Service industry-----------------Fastens the compilation of reports.

The advantage and disadvantage of ERP is best understood by studying them under different categories. Hence the next paragraph presents information on corporates as a

whole because the advantage of ERP systems in a company is different when compared industry wise.

Advantages in a corporate entity

The accounts department personnel can act independently. They don't have to be behind the technical persons every time to record the financial transactions.

Ensures quicker processing of information and reduces the burden of paperwork.

Serving the customers efficiently by way of prompt response and follow up.

Disposing queries immediately and facilitating the payments from customers with ease and well ahead of the stipulated deadline.

It helps in having a say over your competitor and adapting to the whims and fancies of the market and business fluctuations. The swift movement of goods to rural areas and in lesser known places has now become a reality with the use of ERP.

The database not only becomes user friendly but also helps to do away with unwanted ambiguity.

ERP is suitable for global operations as it encompasses all the domestic jargons, currency conversions, diverse accounting standards, and multilingual facilities .In short it is the perfect commercial and scientific epitome of the verse "Think Local. Act Global".

ERP helps to control and data and facilitates the necessary contacts to acquire the same.

Disadvantage

Inspite of rendering marvelous services ERP is not free from its own limitations. ERP calls for a voluminous and exorbitant investment of time and money. The amount of cash required would even be looming on the management given the fact that such an outlay is not a guarantee to the said benefits but subject to proper implementation, training and use. In the ever expanding era of information theft ERP is no exception. It is alarming to note the time taken to implement the system in the organization. These means large amounts of workers have to shun their regular labor and undertake training. This not only disturbs the regular functioning of the organization but also runs the organization in the huge risk of losing potential business in that particular period. There are great benefits rendered by the system. On the other hand when one thinks of this information reach in the hands of undeserving persons who could do more than misuse ,it is evident that there is no way of ensuring secrecy of information and larger chances of risk will be generated as long as they are in the public domain.

------------------------------------------------------------------------------------------------------------

Advantages:

Integration

Integration can be the highest benefit of them all. The only real project aim for implementing ERP is reducing data redudancy and redudant data entry. If this is set as a goal, to automate inventory posting to G/L, then it might be a successful project. Those companies where integration is not so important or even dangerous, tend to have a hard time with ERP. ERP does not improve the individual efficiency of users, so if they expect it, it will be a big disappointment. ERP improves the cooperation of users.

Efficiency

Generally, ERP software focuses on integration and tend to not care about the daily needs of people. I think individual efficiency can suffer by implementing ERP. the big question with ERP is whether the benefit of integration and cooperation can make up for the loss in personal efficiency or not.

Cost reduction

It reduces cost only if the company took accounting and reporting seriously even before implementation and had put a lot of manual effort in it. If they didn't care about it, if they just did some simple accounting to fill mandatory statements and if internal reporting did not exists of has not been fincancially-oriented, then no cost is reduced.

Less personnel

Same as above. Less reporting or accounting personnel, but more sales assistants etc.

Accuracy

No. People are accurate, not software. What ERP does is makes the lives of inaccurate people or organization a complete hell and maybe forces them to be accurate (which means hiring more people or distributing work better), or it falls.

Disadvantages:

Expensive

This entails software, hardware, implementation, consultants, training, etc. Or you can hire a programmer or two as an employee and only buy business consulting from an outside source, do all customization and end-user training inside. That can be cost-effective.

Not very flexible

It depends. SAP can be configured to almost anything. In Navision one can develop almost anything in days. Other software may not be flexible.

------------------------------------------------------------------------------------------------------------

SAP ERP

Business Benefits

SAP ERP delivers a comprehensive set of integrated, cross-functional business processes. With SAP ERP, you can gain the following benefits:

Improve alignment of strategies and operations o Run your enterprise in accordance with strategy and plans, accessing the

right information in real time to identify concerns early. o Pursue opportunities proactively. o Achieve corporate objectives by aligning workforce and organizational

objectives. o Find the best people and leverage their talent in the right job at the right

time. Improve productivity and insight

o Leverage self-services and analytics across your organization. o Improve operational efficiency and productivity within and beyond your

enterprise. Reduce costs through increased flexibility

o Use enterprise services architecture to improve process standardization, efficiency, and adaptability.

o Extend transactions, information, and collaboration functions to a broad business community.

Support changing industry requirements o Take advantage of the SAP NetWeaver platform's latest open, Web-based

technology to integrate your end-to-end processes seamlessly. Reduce risk

o Solve complex business challenges today with SAP, your trusted partner for long-term growth, with 30 years of experience working with organizations of all sizes in more countries than any other vendor.

o Join SAP's world-class partner network, uniquely qualified to support the best business practices in more than 25 industries.

Improve financial management and corporate governance o Gain deep visibility into your organization with financial and management

accounting functionality combined with business analytics. o Increase profitability, improve financial control, and manage risk.

Optimize IT spending o Integrate and optimize business processes. o Eliminate high integration costs and the need to purchase third-party

software. o Deploy other SAP Business Suite applications incrementally to improve

cash flow and reduce costly borrowing. Gain higher ROI faster

o Install SAP ERP using rapid-implementation techniques that cost less than half what traditional approaches cost.

o Leverage preset defaults and prepackaged versions available for specific industries.

Retain top performers o Retain your top performers through clearly defined career and

development plans. o Link employees' performance to compensation programs such as variable

pay plans and long-term incentives. Provide immediate access to enterprise information

o Give employees new ways to access the enterprise information required for their daily activities.

------------------------------------------------------------------------------------------------------------

The Advantages and Disadvantages of ERP

There are a number of powerful advantages to Enterprise Resource Planning. It has been used to solve a number of problems that have plagued large organizations in the past. At the same time, it is not without a number of disadvantages. Being able to weigh the two will allow a company to decide if this solution will properly meet their needs.

It should first be noted that companies that fail to utilize systems such as ERP may find themselves using various software packages that may not function well with each other. In the long run, this could make the company less efficient than it should be.

There are a number of processes that a company may need to integrate together. One of these processes is called design engineering. When a company is in the process of designing a product, the process of actually creating it is just as important as the end result. ERP can be useful in helping a company find the best design process. Another area where ERP can be useful is order tracking. When a company receives orders for a product, being able to properly track the orders can allow the company to get detailed information on their customers and marketing strategies. If different software packages are being used, this data may not be consistent.

Perhaps one of the most important advantages of ERP is its accounting applications. It can integrate the cost, profit, and revenue information of sales that are made, and it can

be presented in a granular way. Enterprise Resource Planning can also be responsible for altering how a product is manufactured. A dating structure can be set up which can allow the company to be informed of when their product should be updated. This is important, because it will allow the company to keep better track of their products, and it can allow the products themselves to be produced with a higher level of quality. Another area where ERP can be an indispensable tool is the area of security. It can protect a company against crimes such as embezzlement or industrial espionage.

However, with all the advantages that ERP offers, there are a number of disadvantages as well. Perhaps one of the biggest disadvantages to this technology is the cost. At this time, only large corporations can truly take advantage of the benefits that are offered by this technology. This leaves most small and medium sized businesses in the dark. A number of studies have shown that the biggest challenges companies will face when trying to implement ERP deals with investment. The employees must be continually trained on how to use it, and it is also important for companies to make sure the integrity of the data is protected.

ERP has a number of limitations. The success of the system is fully dependent on how the workers utilize it. This means they must be properly trained, and a number of companies have attempted to save money by reducing the cost of training. Even if a company has enough money to implement ERP, they may not be able to successfully use it if they do not have enough money to train their workers on the process of using it. One of the biggest problems with ERP is that it is hard to customize. Very few companies can effectively use ERP right out of the box. It must be modified to suit their needs, and this process can be both expensive and tedious. Even when a company does begin changing the system, they are limited in what they can do.

Most ERP vendors will not allow the structure of the software to be altered. One advantage to ERP is that making the necessary changes to use it may actually make a company less competitive in the market. In addition to the costs involved with implemented ERP and training workers to use it, the ERP vendors may charge additional license fees, putting a strain on companies that do not have enough resources to pay for them. The technical support of ERP departments has been questioned, and a number of problems could arise due to security, since corporate representatives must give sensitive information to the tech support department.

------------------------------------------------------------------------------------------------------------

Benefits of ERP

A good ERP system will help IT departments in just about every organization to make sure that computers are interfacing with each other and there is no information loss.  This can be one of the most frustrating aspects or running a business.  It doesn’t matter if your

current platform is a Microsoft Dynamics NAV based one or if you sell apparel instead of plastics, an ERP system can make sure that all of your data is one central location that everyone can access. The logistical advantages behind an ERP based SCM system are that it is designed to reduce costs overall and allow the data flow between single departments or international offices to move smoothly and in real time for better processing.  It can also help with the analysis of design engineering, streamlining purchasing functions, managing the basics and advanced functions of bill of materials, three-way matching of purchase orders, inventory, and costing, reports and all accounting function. The engineering details portion of the ERP system is especially handy for companies looking to streamline the current process by either trimming it or making it faster and less bulky.  It can track a rollover timeline from the old version to the new, tell employees when new ingredients are to be used and the old to be discontinued, and even help businesses determine how they want to label or identify version numbers of their products. One often overlooked advantage of an ERP system is the security features that are built into the software.  They are designed to protect the company from industrial espionage and other outsider crime as well as insider crime such as embezzlement.   There is an improved functionality in the most current ERP systems that implement internal controls to will keep data from being tampered with in addition to the integration of other security tools that are currently being utilized in today’s market. There is no doubt that in this economic conscience society that organizations of all types want to be able to reduce their manufacturing costs.  By streamlining the data flow between departments and allowing employees to view all of the information pertinent to do their jobs, they will be able to provide customers with quicker answers and waste less time trying to figure the answer out, saving the company valuable time and money and allowing the employees to work more efficiently. 

----------------------------------------------------------------------------------------------------------

Advantages of ERP Systems

There are many advantages of implementing an EPR system; here are a few of them:

A totally integrated system The ability to streamline different processes and workflows The ability to easily share data across various departments in an organization Improved efficiency and productivity levels Better tracking and forecasting Lower costs Improved customer service

Disadvantages of ERP Systems

While advantages usually outweigh disadvantages for most organizations implementing an ERP system, here are some of the most common obstacles experienced:

Usually many obstacles can be prevented if adequate investment is made and adequate training is involved, however, success does depend on skills and the experience of the workforce to quickly adapt to the new system.

Customization in many situations is limited The need to reengineer business processes ERP systems can be cost prohibitive to install and run Technical support can be shoddy ERP's may be too rigid for specific organizations that are either new or want to

move in a new direction in the near future.