ERP is an abbreviation for enterprise resources planning, it is a technological strategy that is used to enhance communication in the organization (Dorward, 1994; pg36). It is s strategy that has been adopted by most companies to facilitate interactions with their stakeholders. Organizations make use of certain computer hardware which stores information that is required by different user groups.
To enhance the security and safety of the messages that are distributed over a number of people, the users are required to log in. this hence ensures that the right people access the correct information. In most cases, there is a networking site where the employees and customers of the company can log in to access the information that they need (Filipe, 2008; pg14). The development of technology came as a result of the advances that are being made in the field of information.
It was realized that there was a need for networking which will ensure the fastest means of communicating with individuals. Business deals have basically moved from being done on the regional scene are currently being facilitated internationally. Business organizations are moving from serving individuals only on the local market and launching their activities internationally. To facilitate the communication of their clients and employees internationally, they had to adapt a convenient means of communication.
Using ERP business organizations can be able to update their stakeholders with the current happenings in the company. They are able to monitor what is being done in other organizations without having to call them or waiting for a response more than a day. The facilities can also be used within the organization to monitor how the employees are managing their time. This enables the supervisors to supervise their departmental staff without having to physically observe them.
What is usually done with the systems used by the employees, a network cable is joined to their system which will indicate when they arrived and how they managed their time. They can be monitored on how they are using the resources of the company and hence measuring their productivity. The company is also able to monitor the movement and performance of its assets and liabilities in different branches.
The risks involved in implementing an ERP System
An ERP system is a technological advancement that may have some shortcomings that may make its frequent use risky. Just like any other technological invention, ERP may be subject to technological hitches that may tamper with business activities of the business. A business organization that over relies on technology is bound to inconveniences its stakeholders when it is faced with certain hitches.
For instance, customers who use the system to place their orders may resolve to other similar companies in case the system may fail (Grabot, 2008; pg195). They may not have the patience to wait for the system to be okay considering the urgency that they may be in. in case the customers obtain better services from another company they may never resolve going back to their previous one (Wallace, 2001; pg262). This is hence a system that may make a company lose some of its potential customers in case it is faced with a technological hitch (Grabot, 2008; 160).
Another weakness of the system is the fact that some of its information may be used by its competitors to their disadvantage. Some of the information that may be displayed for use by the clients may be obtained by the competitors of the company who may find a loophole in facilitating their downfall. For instance, a company that is recording success in their business activities due to their unique features may end up losing it when other companies adopt the same.
They will basically observe the online marketing strategies that are used by such a company, find out how they are impacting their business activities, and ultimately adopting them. They may add some extra features simply to make them be above the mother company. Depending on their marketing ability, they will be able to attract more customers than their opponents simply because they ‘stole’ their networking strategies. This has been one of the major drawbacks that the use of the system has faced as it cannot be kept secret.
Another major drawback that is faced with the use of the system is the invention of viruses and software that are used by criminals to tamper with the information stored. Even though there are various technologies that have also been invented to take care of such situations, there are still more inventions being done by criminals to get what they want. One thing about technology is that it has the ability to create a problem with its solution and vice versa.
There is hence nothing safe about technology that is still going through various inventions. The criminals seem to know so much about technology that they will easily maneuver their way through. As long as advances are still being made in the field of technology, the company may never be guaranteed absolute safety as they utilize the system. Criminals will mainly use it to either obtain some secret information about the company or obtain information about their employees and clients. There are different reasons why the criminals may want such information; first, it may be used as a competitive advantage against the company or find a reason to prosecute any of the company employees or clients. There is hence a lot of risks are involved in the use of the system.
Another disadvantage about the system is the changes that will have to be updated for it to suit the ever-changing technological needs. Technology is very temporal and there is no surety of how long it will be used before another sophisticated technology is invented that may be preferred. The world is moving very fast and so are the inventions that are being made in the area of information technology. People are looking out for technological means that will suit their busy schedules.
It has also become vital for organizations to adopt technological means that will be convenient to their clients. They may not be able to resist the changes that are being invented considering the high competition of the services they provided (Robinson, 2007; webpage). People are always excited about new technology and will hence run to organizations that have adopted such technological change. New technology is usually expensive to adapt which hence requires the company to keep investing a lot in such changes to manage the competition. The use of ERP is hence experiencing some modifications that will require the company to employ a technological expert to install them.
The use of technology in business undertakings depends on the loyalty of the company employees. There are certain secrets about the company that may be revealed to certain employees with the hope that they will not be revealed then to unauthorized individuals. IT managers and personnel are people who are most aware of the sensitive issues about the systems used by the company for communication. They are hence to be treated with utmost care lest they tamper with the secrecy of the company.
The company may never know when an employee violates the privacy rights of the company and leak the information to other individuals. The process may be done in a very clever means that the company may not able to suspect. By the time they may realize this, a lot of harm may have been caused to the company. Depending on the number of people that were entrusted with such secrecy, it may be hard for the company to determine who the guilty party is. These are some of the dangers that the companies using ERP are exposed to.
Costs and benefits of implementing an ERP system
An ERP system has several advantages that have led to its wider use by organizations. One of the biggest benefits of the system is the fact that it brings people from different geographical locations together. The changes that are taking place in business management require organizations to launch their activities on the international market. This requires a lot of networking that will enhance communication among different individuals.
Using the facilities available in ERP a company is able to effectively communicate with people around the world. Before such an invention was made, people used postal mails, phone calls, and emails to communicate with their international stakeholders. It was however realized by the time that such means are either expensive or ineffective in realizing the goals of a company. Using an ERP system, the information may be sent immediately and a response received instantly. This will hence enable the company to effectively act on it without having to wait for long.
ERP has enabled business deals to be established and finalized within minutes. This has become a convenient strategy for business organizations and clients who don’t have to wait not knowing what the outcome will be (Harwood, 2003; pg21). Technology has even made it possible for certain deals to be legalized online without the parties having to physically see each other. Terms of entering into such contracts can be obtained with a click and hence making the whole procedure cheaper and stress-free. They are also able to determine if the deal is best for them by carrying out researches using online sources.
This has enhanced international business practices by making companies make clients almost anywhere in the world (Robinson, 2007; webpage). The company is also able to liaise with similar organizations in other countries to enhance partnerships. All this is done at a much cheaper rate than it was in the past. Some decades back, international business deals could not be completed unless one of the parties travels to another country for the same. It was not only expensive for the parties but also time-consuming.
Even though the installation of the installation and maintenance of the system may be expensive, the costs may be nothing compared to the benefits that the company may derive from it. The profitability of the system will depend on far the company markets its activities (Burke, 2004; pg 24).
They are able to generate a lot of profits from such networks if they ensure that their clients are adequately informed about the services. However, a company that has not gone far in terms of coverage may find the system slightly cumbersome considering the expenses that they may incur in maintaining it. The system should be able to cater to its own expenses by having the ability to generate more than enough. Some companies may install the system simply because others are using it. This may prove to be very disastrous to the companies as they realize that the system is not profiting from them much.
Methodologies / Tools for Implementing
The installation of an ERP system requires the help of professional assistance. This is due to the complexities that are involved in the installation process. The software may not be installed all at once and may be done in stages. The stages are mainly aimed at making the company staff familiarize themselves with the different uses of the software and also testing it for function ability (Harwood, 2003; pg47).
There are external IT consultants that may be used by the company to help them with the installation process. The consultants will advise the company on how to effectively use the software as well as recommending the available alternatives for them (Kumar, 2004; pg 153). They will also form the basis on which the company will always consult in case they need any maintenance and modification. In the initial installation process, the IT consultants may advise a company that has different branches to first implement a pilot plant at the main branch. The continuity of its installation at other branches will depend on how it is received at the main branch.
This is usually done with the aim of finding out the reaction of the employees on the system and whether it will serve the function that it has been installed for. Its performance at the main branch will also give the company a clear reflection of how it will function in other branches. The IT consultant will also give the company the necessary advice concerning the installation of the system basing on the response.
Steps for Success
The steps that must be followed for the success of the system are to first know what it entails and how it will boost the income of the company. Such a consideration should paramount to ensure that the company is not investing its resources in something that will be a liability rather than an asset to the company. The second consideration is the costs that will be involved in the entire installation of the system. This will ensure that the company makes a calculated risk and is not just implementing a system that will prove difficult for them to maintain. The costs should be calculated for the necessary budgets and allocations to be made (Kapp, 2001; pg11).
The other important factor to consider is the skills of the employees in their ability to use the system. Before the system imparts on the outside world, it must first be applied to the internal community. They should be tested to have the ability to comprehend what it entails and how they should use it. Most companies will resolve to train their staff on how to use it. In this case, they will also need to ascertain if there are any associated costs and how the training will be done.
The other important consideration is how the system will be marketed especially among the clients of the company. The purpose of the system is not only to enhance communication among company employees but also to network with clients all over the world. It will hence be necessary for the system to be marketed for it to realize the objectives of its installation.
There are a number of companies that have effectively adapted the use of ERP software and received tremendous results. There are also other companies that have adopted the system but are not able to realize as much result as it would be required. This is mainly based on the trading activities of the company and its size. A multinational company will mostly find the system beneficial compared to a regional or national company.
For small-sized companies, the system may not be very profitable them considering the level of their coverage (Donovan, 2006; pg 3 column 2). For instance, most banking institutions have successfully used the system to network with their stakeholders all over the world. Due to increased international travel, and the risk that is involved in carrying cash money, banks have opened international branches to make it convenient for their clients.
This enables them to access their banking needs anywhere in the world as long as the branch is there. Even when there is no such branch, they have partnered with local banks to be able to offer the necessary assistance to their visiting clients (Grabot, 2008; pg55). Through the systems, central branches will be able to know and understand the state of their banking activities in other countries. They are also baling to ascertain the need of their services especially in areas where they do not have such branches.
There have also been cases when the system has been used especially for regional small scale industries but failed to realize results due to poor planning. The companies installed the system basically because it was working well for other corporations. They hence installed it with the hope that it will realize the same results for them. However, as the days went by, they realized that even their employees are not using it much because they don’t see its relevance.
There was no adequate marketability of the system which made it not familiar to their clients. The company had to reconsider whether to continue using the system or not as they were incurring more expenses for nothing (Yakovlev, 2002; webpage). After considerable consultations were done, it was agreed that they discontinue the use of the system but put it aside for future consideration when the company will be ready. Lack of planning and inadequate training led to the failure of the system (Brada, King and Ying, 1997; pg 106). Most clients of the company were also within reach which made them see no reason for using the system.
An ERP is a software that needs a lot of planning and its effect on the company should never be underestimated (Zaidi, 2007; pg282). It will definitely have some positive and negative consequences which should be planned for. The company should ensure that they have the right mechanisms that will enable them to handle what the system may cause or bring about in the company. Installation of the software basically means that the company will be operating at a much higher level than it has been operating and hence the need to make necessary adjustments. They may receive orders from far places of which they will be required to meet.
As they install the system, they should have a clear understanding of how the required services will reach tier clients that are located away from their branches. The company should also be ready for expansion which may involve setting up new branches to serve the needs of their new clients.
From the analysis above, we have discovered the strategies that should be employed min installing an ERP system. It is not a system that should simply excite the management but carry out extensive research on how beneficial it will be to the activities of the organization. There are both positive and negative outcomes of the system that should be planned for to avoid inconveniencing the company and its stakeholders (Mayhew and Seabright, 1992; pg110). We have also learned that it is not a cheaper procedure that needs a proper financial plan (Phelan, 2010; webpage). There are costs that are associated with its installation and also its maintenance (Knapp, 2007; pg292).
Hiring an IT consultant for the job is not a cheap procedure and adequate finances need to be set aside for the same. Once the installation process has been finalized, the company needs to be on the lookout and employ all the necessary procedures to ensure that the sensitive information of the company is not vulnerable to attacks.
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