Limitations of ERP System in the context of Business

This presentation discusses the limitations of ERP system in the context of business. It covers the definition of ERP, its modules, and the reasons for its implementation. The major limitations discussed are policy limitation, limited ongoing support, inadequate training, expensive system, very high implementation time, and degree of customization. A case study of Nestle USA is also presented. The presentation concludes with recommendations to bypass the limitations of ERP system.

Limitations of ERP
SystemIn the context of Business

TREY
re s e a rc h
2
What Is ERP?
ERP system is used by multiple enterprises in
order to manage the physical resources like
labour and supplies.
ERP system are implemented for following
reasons:
 To develop new enterprise application (20%).
 To replace accounting software(15%).
 To replace home-grown system (16%).
 To replace out-of-date ERP software(49%).
ERP
ERP stands for Enterprise Resource
plan which is a application frequently
used by large companies in order to
increase efficiency.

TREY
re s e a rc h
3
Topics
 Understanding of ERP system.
 Identify certain limitations of the ERP system.
 Case study: Nestle USA
 Recommendation
 Conclusion

TREY
re s e a rc h
4
ERP software
Module
Generally, ERP system are consist of multiple
enterprise software modules. This modules
are used according to the business
requirement (van et al. 2014). Every ERP
system is constructed of a specific area of
business process such as product marketing
and development.

TREY
re s e a rc h
5
Modules
Some of the most common ERP modules
include those for product planning, material
purchasing, inventory control, distribution,
accounting, marketing, finance and HR (Tabata
et al. 2013).
 Manage human resources and payroll
 Accounting and financial applications
 Standardize critical business procedures
 Facilitate better project planning

TREY
re s e a rc h
Add a footer 6
Limitations
The successful implementation of an ERP
system is vast, expensive and thorny. It also
need enormous amount of time and
commitment from the IT department of certain
organization (Van et al. 2015). The major
limitations of the ERP system is followed:
 Policy Limitation
 Limited ongoing support
 Inadequate Training
 Expensive System
 Very High Implementation Time
 Degree of Customization

TREY
re s e a rc h
Limitations
Even though ERP system provides multiple advantage to manage physical resources. There are
certain limitations faced by organizations while developing new ERP system which are following:
Policy limitation
• ERP system does not always fit the business
plans of every organization.
• Often, ERP system needs to be customized in
order to extract the most of it.
• To achieve some special task existing ERP
system may need to be modified.
• However, All ERP system does not allow
modification as it is against their policy
Expensive System
• ERP systems are very expansive, its cost around
few million dollar depending on the vendor and
applications.
• Besides ERP system, organizations need to invest
in new computer hardware, security software and
updated network requirement.
• The cost measures depends on the factors such as
amount of protocols and modules necessary.
7

TREY
re s e a rc h
Limitations
Even though ERP system provides multiple advantage to manage physical resources. There are
certain limitations faced by organizations while developing new ERP system which are following:
Inadequate Training
• For utilizing an ERP system, proper training is
essential to familiarize the employees about
the ERP architecture.
• Often, organizations used vendor packages of
ERP to save the training cost (Ouyang et al.
2013).
• However, improper training can lead to
mishandling of the technology and as a result
crucial result can be compromised.
Ongoing Support
• Even though ERP systems are managed by the
special expertise. It is hard to depend on the
support.
• For minor problems, support can provide useful
tech solution.
• However, complex problems are beyond the
limited customer service available to
organizations.
8

TREY
re s e a rc h
Limitations
Even though ERP system provides multiple advantage to manage physical resources. There are
certain limitations faced by organizations while developing new ERP system which are following:
Very High Implementation Time
• The implementation time required for
implementing a proper ERP system is very high.
• The allocated time for developing the ERP
system and training modules can impact the
business production rate (Helo et al. 2014).
• The complete implementation process can take
up to one year. It is only useful if the developed
system can give significant profit.
Degree of Customization
• The customization of an Enterprise resource
planning setup is vey limited. The entire ERP
system can change depend on the customization
• The customization is totally depends on the
vendor product selection.
• Often due to this the scope of implementation of
Enterprise Resource Planning becomes too difficult
and rigid, which hampers the specific work-flow of
a business (Pomponi, Piroozfar and Farr 2016).
9

TREY
re s e a rc h
Add a footer 10
Case Study: Nestle
USA.
Business Limitations
• Nestle is a multinational company and have
thousand of employees only in USA. The CEO
of the company is seeking for an internet
based platform which is capable of providing
end user access to ERP application over
different location (Faasen, Seymour and
Schuler 2013).

TREY
re s e a rc h
Add a footer 11
Limitations of the ERP
system
Business Limitations
 Nestlé incurred high initial costs of
purchasing software, consultant costs and
disrupting the work flow of its employees.
 Retraining of all employees with the new
system became costly and time consuming
(Duan et al. 2013).
 The change of business roles and
department boundaries created upheaval
and resistance to the new system.

TREY
re s e a rc h
Add a footer 12
Major
limitations
 Evaluation prior to implementation of ERP
system is critical.
 ERP system is hard to adopt in decentralized
organization.
 Migration of existing data to the new ERP
systems is problematic.
 Once an ERP systems is implemented it
becomes a single vendor lock-in for
further customizations and upgrades.

TREY
re s e a rc h
Add a footer 13
Recommenda
tionThese are the certain recommendation to
develop an proper ERP system and bypass the
limitations.
 Chose appropriate ERP system.
 Provide trainings and practices.
 Proper monitoring and support.
 Proper Authorization.

TREY
re s e a rc h
Add a footer 14
Insert or Drag & Drop your photo
After analyzing the limitations of ERP system. It
can be concluded that the developing process
of ERP system is very critical. A precise
implementation plan need to be conducted
before start the development process.
Conclusion

References
Duan, J., Faker, P., Fesak, A. and Stuart, T., 2013. Benefits and drawbacks of cloud-
based versus traditional ERP systems. Proceedings of the 2012-13 course on
Advanced Resource Planning.
Faasen, J., Seymour, L.F. and Schuler, J., 2013. SaaS ERP adoption intent: Explaining
the South African SME perspective. In Enterprise Information Systems of the
Future(pp. 35-47). Springer, Berlin, Heidelberg.
Helo, P., Suorsa, M., Hao, Y. and Anussornnitisarn, P., 2014. Toward a cloud-based
manufacturing execution system for distributed manufacturing. Computers in
Industry, 65(4), pp.646-656.
Ouyang, G., Schacht, A., Zhou, C. and Sommer, W., 2013. Overcoming limitations of
the ERP method with R esidue I teration D ecomposition (RIDE): A demonstration in
go/no‐go experiments. Psychophysiology, 50(3), pp.253-265.
Pomponi, F., Piroozfar, P.A. and Farr, E.R., 2016. An Investigation into GHG and non‐
GHG Impacts of Double Skin Façades in Office Refurbishments. Journal of Industrial
Ecology, 20(2), pp.234-248.
Tabata, T., Kamisawa, T., Kuruma, S., Chiba, K., Iwasaki, S., Kuwata, G., Fujiwara, T.,
Egashira, H., Koizumi, S., Endo, Y. and Koizumi, K., 2013. Capability and limitations of
recent diagnostic criteria for autoimmune pancreatitis. International journal of
rheumatology, 2013.
Van Erp, W.S., Lavrijsen, J.C., Vos, P.E., Bor, H., Laureys, S. and Koopmans, R.T., 2015.
The vegetative state: prevalence, misdiagnosis, and treatment limitations. Journal of 15

TREY
re s e a rc h
16
Thank
You