Ben Franklin on ERP
It is safe to say that Benjamin Franklin never heard of Enterprise Resource Planning (ERP), but that doesn’t mean he didn’t understand it.
ERP, in its simplest form, can be described by Franklin’s old adage that “time is money." To that end, ERP aims to integrate all the departments of a company into one database so that there is a single, uniform system holding all of the organization’s data and information. The main aims of ERP are saving time and increasing productivityso that organizations can in turn be more efficient and profitable.
“ERP is like the nervous system for a business,” said Mark Jeffery, research director of technology initiatives at the Kellogg School of Management at Northwestern University.
The manufacturing, supply chain, financials, human resources and customer relations management each represent a different organ of the body or one module within the ERP system. These modules help an organization run its business more effectively and efficiently through digitizing all information and data that used to have to be manually entered individually into each database.
ERP systems combine all the individual databases into one large one. These systems come together through the purchase of these modules that are available from a variety of vendors; the biggest of whom include SAP and Oracle.
Pros and cons
Naturally, ERP has both benefits and drawbacks.
“The biggest benefit of ERP is the integration and visibility of data it provides,” said Marianne Bradford, author of "Modern ERP" (Lulu.com, 2010) and associate professor of graduate and undergraduate ERP systems at the Poole School of Management at North Carolina State University. “This can lead to better business strategies and tactical decision making in a company.”
Despite all the potential, there are also drawbacks to implementing ERP systems. Chief among them are the cost, employee resentment and the potential for failure due to poor implementation strategies.
“Yes ERP is expensive, and it can get really, really expensive if people don’t know what they are doing,” said Jeffery. “The cost of the project is the cost of the software and the cost of the consultingwhich can be at least what the software costs.”
“The cost as well as the soft stuff is the biggest issue with implementing ERP,” said Bradford. “The soft stuff often becomes the hard stuff and can include managing people who are resistant to change.”
Worth the cost
Despite costs that can be in the millions, ERP has become very popular among businesses that see more of the positives than the negatives.
“If you look at just the cost, you will see a high price tag,” said Jeffery. “But if you look at the productivity of employeesand the transparency of information, that's where you get the real gains.”