Strategic Information System

This report evaluates the use of ERP or Enterprise Resource Planning system in a contemporary organization. It discusses the role and purpose of an ERP system, its drawbacks and benefits, challenges faced by ERP systems, and components of an ERP system in contemporary organizations.

Running head: STRATEGIC INFORMATION SYSTEM
Strategic Information System
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Table of Contents
Introduction:....................................................................................................................................2
Discussion:.......................................................................................................................................2
The role and purpose of an ERP system:.....................................................................................2
Drawbacks and benefits of the ERP system in contemporary Organizations:............................3
Challenges faced by ERP systems in contemporary organizations:............................................6
Components of an ERP system in Contemporary Organizations:...............................................6
 Finance:.............................................................................................................................7
 HR:....................................................................................................................................7
 Purchasing and procurement:............................................................................................7
 Business intelligence:........................................................................................................8
 Customer Relationship Management:...............................................................................8
Conclusion:......................................................................................................................................8
References:....................................................................................................................................10

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Introduction:
Most of the companies or better to say the large companies need to use the integrated
system so as to co-ordinate various information amongst their different departments. Having an
integrated system would surely help organizations to have a competitive advantage in the world
of business (Céu Alves and Matos 2013). Enterprise resource planning generally refers to the
process which is used by several companies so as to manage and integrate different important
parts of a business. Whereas, the ERP management system generally refers to the system which
is associated with the integration of important areas like the planning, inventory, purchase,
planning, and many more. Despite providing various benefits the business software’s are
associated with bringing of various major implications whenever a firm decides to implement
new software (Ziemba and Oblak 2013). This report mainly aims at critically evaluating the use
of ERP or Enterprise Resource Planning system in a contemporary organization.
Discussion:
There exists several benefits as well as drawbacks of implementing an ERP system in an
organization. But ERP plays a major role in an organization and has several purposes.
The role and purpose of an ERP system:
The major reason for the designing an Enterprise Resource Planning so as to assist the
distributors, retailers, and professionals according to their needs. SAP Aktiengesellschaft is
currently the market and technology leader which is associated with supplying of ERP systems.
The main reason for the implementation of the ERP system is to provide better and accurate
information along with safe time, reduction in the cost of assets and financial cycles

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(Sadrzadehrafiei et al. 2013). Along with this system also aims at gaining more customer
satisfaction, integration of information globally across various enterprise supply chains. The
relational database technology is used by the ERP system so as to integrate the different unit’s
information system in an organization. Which initially results in the integration of all the
business processes as well as the subprocesses which are linked and unified into a single system.
The ERM systems are designed focusing on four main areas in a company which includes the
financial, human resource supply chain management and marketing.
ERP systems are essentially needed by almost every organization and this system can be
implemented in almost every organization irrespective of their objectives, operating area, and
size. The efficiency of any organization is surely to increase along with the economizing the
existing work of the organization (Nwankpa 2015). It is almost impossible for any organization
to run in the competitive market. And the major reason supporting this fact is that this system can
be configured accordingly so as to accommodate a larger rate of different types of work
processes. Due to this reason, this system is very much popular in large-sized organizations as
well as mid-sized organizations and along with this, the system also provides the organizations
with a seamless integration of their business. For example in the 1990s, almost 2000 companies
globally spent a huge amount of money on their ERP systems.
The most attractive feature of the ERP system is that it promises about a centrally
coordinating and controlling system for many aspects of the planning related to the corporate
world.

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Drawbacks and benefits of the ERP system in contemporary Organizations:
One of the major benefits the ERP system is that helps the organizations in reducing their
cost as well as cycle time along with increasing the productivity as well as the quality of the
services the organization provides. The ERP system also helps in improving the customer
services by making various operations basic and repetitive (Seo 2013). The ERP system is also
associated with estimating the demand for a specific product and places order for the raw
materials accordingly. After this, the ERP system also provides the working schedules for every
team and after that, the system tracks down the whole inventory and allocates the cost and the
historical customers are also kept. All the operations are repeated and all the information are kept
in order to help the analyst of the organization to analyze the impact of the products over the
product mix as well as the volumes in orders. This is done so as to maximize the margin of
corporate profits. Along with this, the ERP systems are also associated with providing of
informational benefits to the management of the contemporary organizations (Nwankpa and
Roumani 2014). Better resource management is also achievement by the use of the ERP system
for example, during the management of workforce there would be an improved rate of allocating
the manpower or while managing the inventory there would be improved inventory turn and
allocation of the stocks and many more. The process of decision making is also improved by
making use of the ERP system by means of an increased rate of response in the market which
initially results in gaining more profit and controlling the costs. Along with this, there also exists
a flexible customer service as well as increased service adjustments and response to the demands
of the customers.
Various new opportunities are brought by the Integrated Information System which is
initially associated with directly supporting the tight link that exists between the customers and

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the organizations. The ERP systems are also associated with providing of E-business by making
use of the capability of web integration which helps in getting much closer to the customers
(Zeng and Skibniewski 2013). Along with this the ERP system also provides benefits for the
business-to-business interactive customers as well, for example by taking of feedbacks directly
from the customers and this would be responsible for an improved design of the product and the
most important fact is that this would provide a real-time enquiry of the data which is much more
reliable.
The ERP system also provides infrastructure support to the business along with the
integrated and standard application architecture. This helps the business to become much more
flexible regarding situations when there is a need for changes and this is done by responding to
the various internal as well as external changes (Teittinen, Pellinen and Järvenpää 2013). This is
associated with providing a wide range of options for reacting or reducing the cost of IT. This
also helps in increases the capability of quick and economic implementation of the various new
applications.
The major drawback of the implementation of the ERP system by the contemporary
organization is that the cost of installing a fully operational ERP system is very expensive. The
approximate cost of installing an ERP system is almost around US$100 million. In the year of
1999, the approximate cost of installing the ERP system was around US$90-180 billion. The
charges of the consulting organizations are also very expensive with an average rate of US$150-
$225 per hour (Zach Munkvold and Olsen 2014)
. Along with this the installation of the ERP system also requires a lot of time. According to
Benjamin B. Bae, & Paul Ashcroft, 2004 the ERP system is a complicated system and it almost
requires 12-18 months for installation of the total system and making it fully operative.

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Generally, more time is required because there is a need for detailed study and reviewing so as to
match the business requirements (Ptak and Schragenheim 2016).
Another drawback of the implementation of the ERP system is that it is likely to affect
the processes of the company or break the relation with the customers. Along with this, a long
time would also be required so as to achieve the long-term financial goals (Nwankpa 2015).
Besides this, there is also a requirement of new procedures so as to manage the whole system or
for the purpose of providing training to the employees and also the managerial or the technical
support. For this reason, the implementation of new ERP systems is very slow and for many
companies, this is a painful process.
Challenges faced by ERP systems in contemporary organizations:
There are several types of challenges faced by the ERP systems along with providing benefits
some of the problems have been briefly discussed in the following section. One of the major
challenge which would be faced by the ERP solution includes the compatibility with the other
information system. Which means that the new ERP system might or might not be compatible
with the information system which are existing within the organization.in many cases it has also
been seen that the employees of the company in which the ERP system has been implemented
are not at all satisfied with the new system and this leads to various types of difficulties. Along
with the employees the senior management might also not support the new ERP system which is
a much bigger problem (Elkhani et al. 2014). Another challenge which might be faced after the
implementation of the new system is the changes in the tools, attitudes, methods and the
processes. Initially this leads to the restructuring of the organization which can be considered as
the major problem or challenge faced during the implementation of the ERP system.

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Components of an ERP system in Contemporary Organizations:
There are five major components of the ERP system in a contemporary organization. This
components are wanted and should be considered while implementation by the contemporary
organizations. The five major components are listed below:
 Finance: There any many contemporary organizations which wants to keep a record of
their sales and operational information in a central accounting system along with tracking
and consolidation of the information. The ERP software associated with the finance
generally possess a centralized system which includes the general ledger, accounts which
are receivable, accounts which are payable and payroll systems (Chou et al. 2014). Along
with this there also exists certain companies which wants their ERP system to be capable
of performing the reporting related to analytics.
 HR: There are numerous number of ERP system which are associated with providing a
centralized HR system for the contemporary organizations. This ERP systems in turn
helps in enabling the organizations to track the personnel hours and also helps in
evaluation of the performance of the employees all across the organization. Along with
this the ERP systems also brings various types of benefits for the administrator,
management of the talents and development of the staffs. Additionally the HR systems
can also be used holistically by the contemporary organizations as well (Maas Fenema
and Soeters 2014). The ERP vendors are providing which systems which are capable of
engaging new talents in the marketplace so as to map the out succession of the planning’s
and for the purpose of managing the issues related to corporate compliance concerning
the employees.

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 Purchasing and procurement: Streamlining of the procurement processes are done
by the ERP while purchasing of the software’s. Which means that it starts from purchase
order issuance and management of the vendors to the payments and reporting. The ERP
software’s associated with purchasing of the software’s also have the ability of routing
the approvals for purchasing automatically and making of payments to the corporate
decision makers who are appropriate (Sadrzadehrafiei et al. 2013).
 Business intelligence: More and more data analytics is wanted by the organizations
which initially enables them to get access of the information’s and makes them act on the
information which is about the business. Due to this reason the vendors are associated
with providing of designs which are predesigned, dashboards and best in class matrices
and guidelines which is used by the organizations for the purpose of assessing the sales of
the business and other operations. The contemporary organizations are also provided with
a facility of doing data mining on their ERP information so as to develop their own
customized reports.
 Customer Relationship Management: The ERP CRM can be considered as the
centralized repository of the information about the customers. This information may be
used and accessed by the departments of the contemporary organization which generally
faces the customers. The information might include the interactions of the contemporary
organizations with the prospects, customers, clients and partners. It is also possible to
track down the information regarding the interaction which takes place across the
marketing, service, sales and all other services which faces the customer’s (Dietz 2014).
This is generally done so as to make sure that the information used by everyone is same.

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ERP CRM mainly includes the tracking and automation, sales force reporting, marketing,
support, and service.
Conclusion:
Most of the contemporary organizations face crunches related to resources which
ultimately results in the adaptation of the innovative method for proper utilization of the
resources. Due to the launch of various ERP systems the integration of all the functions of a
contemporary organization is possible. This report also discusses about the various advantages
and disadvantages of the ERP system in a contemporary organization. Along with this the report
also discusses about the major components that needs to be considered before implementation of
an ERP system. The report also helps in understanding the role ERP system plays in a
contemporary organization along with understanding the purpose of the ERP system. So some of
the major things that should be considered by a contemporary organization while selecting the
ERP system includes the following: the ERP should fit with the organization, provide
functionality related to the environment of the business, support for vendor implementation,
good support after implementation and many more.

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References:
Céu Alves, M.D. and Matos, S.I.A., 2013. ERP adoption by public and private organizations–a
comparative analysis of successful implementations. Journal of Business Economics and
Management, 14(3), pp.500-519.
Chou, H.W., Lin, Y.H., Lu, H.S., Chang, H.H. and Chou, S.B., 2014. Knowledge sharing and
ERP system usage in post-implementation stage. Computers in Human Behavior, 33, pp.16-22.
Dietz, J., 2014, April. Why ERP systems will keep failing. In Evaluation of Novel Approaches to
Software Engineering (ENASE), 2014 International Conference on (pp. 1-2). IEEE.
Elkhani, N., Soltani, S. and Nazir Ahmad, M., 2014. The effects of transformational leadership
and ERP system self-efficacy on ERP system usage. Journal of Enterprise Information
Management, 27(6), pp.759-785.
Maas, J.B., Fenema, P.C. and Soeters, J., 2014. ERP system usage: the role of control and
empowerment. New Technology, Work and Employment, 29(1), pp.88-103.
Nwankpa, J. and Roumani, Y., 2014. Understanding the link between organizational learning
capability and ERP system usage: An empirical examination. Computers in Human
Behavior, 33, pp.224-234.
Nwankpa, J.K., 2015. ERP system usage and benefit: A model of antecedents and
outcomes. Computers in Human Behavior, 45, pp.335-344.
Nwankpa, J.K., 2015. ERP system usage and benefit: A model of antecedents and
outcomes. Computers in Human Behavior, 45, pp.335-344.

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Ptak, C.A. and Schragenheim, E., 2016. ERP: tools, techniques, and applications for integrating
the supply chain. Crc Press.
Sadrzadehrafiei, S., Chofreh, A.G., Hosseini, N.K. and Sulaiman, R., 2013. The benefits of
enterprise resource planning (ERP) system implementation in dry food packaging
industry. Procedia Technology, 11, pp.220-226.
Sadrzadehrafiei, S., Chofreh, A.G., Hosseini, N.K. and Sulaiman, R., 2013. The benefits of
enterprise resource planning (ERP) system implementation in dry food packaging
industry. Procedia Technology, 11, pp.220-226.
Seo, G., 2013. Challenges in implementing enterprise resource planning (ERP) system in large
organizations: similarities and differences between corporate and university
environment (Doctoral dissertation, Massachusetts Institute of Technology).
Teittinen, H., Pellinen, J. and Järvenpää, M., 2013. ERP in action—Challenges and benefits for
management control in SME context. International Journal of Accounting Information
Systems, 14(4), pp.278-296
Zach, O., Munkvold, B.E. and Olsen, D.H., 2014. ERP system implementation in SMEs:
exploring the influences of the SME context. Enterprise Information Systems, 8(2), pp.309-335.
Zeng, Y. and Skibniewski, M.J., 2013. Risk assessment for enterprise resource planning (ERP)
system implementations: a fault tree analysis approach. Enterprise Information Systems, 7(3),
pp.332-353.

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Ziemba, E. and Oblak, I., 2013, July. Critical success factors for ERP systems implementation in
public administration. In Proceedings of the Informing Science and Information Technology
Education Conference (pp. 1-19). Informing Science Institute.