Benefits of ERP Systems in Real Life Business

This essay discusses the benefits of ERP systems in real life business, including modernization of the company, reducing errors, data storage security, and processing transactions records. It also provides a conclusion and recommendation for organizations.

B11965
MANAGEMENT
INFORMATION AND
TECHNOLOLGY

Table of Contents
INTRODUCTION...........................................................................................................................3
Aims and Objectives:.......................................................................................................................4
Categories of information systems:.................................................................................................4
ERP Systems:...................................................................................................................................6
Benefits of ERP systems in a real life business:..............................................................................7
CONCLUSION AND RECOMMENDATION..............................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Enterprise Resource Planning System (ERP) is the effective tool for small and large enterprises
for achieving their business objectives. It has major role in integrating various functions of
management like financing, operations, recruitment, marketing, public relations and customer
relationship management tools for better coordination between these departments. This tool is
effective in controlling unnecessary costs, managing inventory level, reduces transactions costs,
maintains accuracy of data, built strong supply chain management and prepared for future risks
to the business. It is also helpful in increasing productivity and quality of services and product
through minimizing probability of default with the application of six sigma technology. ERP is
well known for its maintaining accuracy and transparency of data, collected in large forms. It
also facilitates privacy of these huge data information through curing leakage of personal internal
information’s of the company. Higher authorities get huge benefit from this outstanding tool
through support received in the form of management accounting reporting based on accurate
data. If there’s any lapse in data or information is missing then it could affect decisions related to
expansion or cost reduction alternatives. The IT information technologies played a magnificent
role through providing ERP system and other inventory management related software’s such as
SAP, tally, six-sigma and EOQ methodology. Without mathematical equations and logical
algorithms it was not possible for company to get artificial accountant who have more than 99%
accuracy depends on input.
ERP system has changed the meaning of how the transactions and information’s managed; it also
sets the example that integrations are possible and getting all information with one click is no
longer dream for an employer.

Aims and Objectives:
The main aim and objectives of this essay is to identify the scope and functioning of ERP and IT
system within the context of organizations. Essay on ERP will discuss in detail about benefits of
applications of these tools to simulate real situations of organization and it will also assess the
type of risks associated with specific ERP system. For proper understanding related to
application of method; Wal-Mart which is a large retail store has been taken as an example.
Categories of information systems:
Information system has various categories which classifieds on the basis of different functions of
management like marketing, financing, production, financing and customer relations. Due to
different functions and activities; there is variance in information’s and data required. For
instance, finance department required sales and expenses related information; marketing
department requires research report of marketing analyses (Zach and Munkvold, 2012). Some of
the various categories of information systems are discussed below:
1. Transaction Processing System: This is the component of ERP system which records data
and stores data in the computer system directly from the point of sale. Transaction entry lies
under operational management (Shatat and Udin, 2012). Wal-Mart is getting advantage
through this system software in following ways:
 Identifying actual sales every day.
 Shows how much inventory is left at the end of the day.
 Alerts for any due bill with supplier.
 Variations in revenue weekly, daily and monthly.
It tracks live data and minimize any man handling to avoid any error in information. It takes
care of information from scanning of product at retail outlet to preparing reports. As Wal-
Mart believes more human interference could increase the chances of error in reports.
Company usually use ERP software which directly connected and interlinked with suppliers;

which supports them to transfer the load of issuing order to supplier itself (Ifinedo, 2011).
Some of the examples of transaction processing system are as under:
 Point of Sale Systems: It usually records daily transactions details like expenses and
revenues.
 Payroll Systems: Through using biometric systems; it take attendance of employees
automatically and calculate their salary based on overtime and hours worked
automatically.
 Stock/Inventory Control System: Measures inventory level and suggests when to
order new entry and what are the available resources.
2. Management Information System: A management system is a system in which defined
linkages related to various management functions are collected, systematized and
communicated. It is a coordinated system of preparing and presenting the necessary
information to the management at the right time and time. Through this system,
information is made available for taking decisions, executing them and controlling
decisions (O'Brien, 2004). Management information system is an organized method of
providing past, present and projected information related to internal and external
activities. This system is helpful in the planning, and operational work of the organization
by providing uniform and useful information in context at the right time so that it can be
assisted in the decision making process of the organization. For example, Management
branch of Wal-Mart assess month to month income through retail location framework and
contrasts it and earlier months result, after correlation they attempt to discover
explanations for and varieties and step up in like manner to settle issues like low
consumer loyalty, higher rivalry in advertise, low quality client assistance, and so on. A
portion of the instances of Management Information Systems are:
 Sales Management Systems: It is an effective tool which manages sales through
analyzing future opportunities and threats to the business.
 Budgeting Systems: This tool is basically component of planning tool which
forecasts and makes projected income statement, balance sheet and cash flow
statement.

 Human resource management system: This tool of management information
system helps in identifying job requirements and skills for particular job. It also
supports in knowing how much labor is required to increase quality and
productivity of manufacturing department.
3. Decision support system (DSS): This allows senior managers to take non-routine
decisions. Through this system, a unique solution of the problem can be easily extracted.
These systems use mathematical models and statistical techniques to make good
decisions such as: predictive modeling and probability, etc (Winkelmann and Leyh,
2010).
There are different types of DSS, including data analysis systems such as cash flow
analysis and inventory systems. Not only this, it also includes information analysis
systems such as: market analysis and sales analysis systems, etc. They are very easy to
use and this system also makes the work flexible.
ERP Systems:
At its most basic level, ERP software integrates these various functions into a complete system to
simplify processes and information throughout the organization. All ERP systems have a shared
database feature, which supports many functions used by various business units. In practice, this
means that employees in different divisions — for example, accounting and sales — can rely on
the same information for their specific needs. ERP systems eliminate data duplication and
provide data integrity with "single source" (O'brien and Marakas, 2011). Enterprise Resource
Planning (ERP) software helps businesses manage and connect information from all key areas of
organization with the aim of improving effective decision making. ERP software solutions
promote visibility throughout the organization, allowing decision-makers to improve business
operations; Such as inventory management, accounting, order management, human resources,
supply chain, product lifecycle, customer relationship management (CRM), etc.

ERP software should serve as the center point for management in all important aspects of
business. ERP systems are designed around a common, defined data structure (schema) that is
usually a common database. ERP systems provide enterprise data access from multiple activities
using common constructs and definitions and user experiences. The important principle of ERP
is that it is a central collection of data for comprehensive distribution. Instead of multiple
standalone databases with an endless inventory of disconnected spreadsheets, ERP systems bring
clutter to order so that all users - from CEOs to accountants - can build, store, and use the data
they receive through the common process. Some of the efficient tools of ERP applied by Wal-
Mart have been discussed below:
Inventory Management: This tool supports centralized system of company through managing
inventory in proper manner. Inventory has certain holding costs which depend on management
perception of how much inventory to be ordered so that holding cost, ordering cost and transport
cost gives optimized expense figure (Wu and Wang, 2006). To solve such problem;
mathematical equation called economic order quantity or EOQ helps in identifying level of
inventory to be ordered at the minimum cost to the business. Some other techniques of inventory
management are KANBAN, JUST IN TIME (JIT) and six sigma techniques (to reduce default).
Accounting Management: This tool supports accounting transactions of Wal-Mart; it makes
balance sheet, income statement and cash flow statement. It also supports management by
providing performance appraisal indicators like profitability ratio, solvency ratios, leverage ratios
and investment ratio.
Customer Relationship Management: This tool helps Wal-Mart in being touch with its customers
on regular basis through continuously sending any update in retail offers; asking their valuable
feedback in the form of rating and comments and email them with essential information’s related
to new stock with attractive prices. These all functions are automatically done by system and
without any mistake.
Benefits of ERP systems in a real life business:
Apart from greater control and organization of data, the company, ERP system also offers many
other benefits. For this reason, more and more Brazilian enterprises are seeking solutions that

include process management. Therefore, ERP software is customized, such as 3D set designs
designed for group information, appear on the market, and provide even greater benefits. Among
them, the following stand out:
1 - Modernization of the company:
The processes inherent in the business, including the production of reports, issuing invoices,
logistics control, and cash flow and campaign results are achieved in an automated manner. This
means that the ERP system is one of the most efficient automation tools on the market, being
able to offer standardized documents in a fast, dynamic and modern way (Choi and Kim, 2002).
2 - Reducing Errors:
Most failures in companies are caused by human errors, especially when it comes to the
production and production of reports, data storage and process management. Thus, as it is fully
automated, the ERP system reduces the number of inaccuracies, avoids rework, as well as
reducing production costs.
3 - Data Storage Security:
In ERP information security, a reference through devices is device learning and artificial
intelligence, which keeps all data encrypted. Namely, in the process created by the encryption
protocol, all information is inaccessible to any unauthorized person, which makes it impossible
for the data to be viewed without an access key. Thus, it is possible to provide greater protection
to customers, which contributes to a good relationship with the public and, as a result, stands out
from the competition.
4 – Processing transactions records: Wal-Mart operates more than 150,000 employees in many
nations and has more than £1.6 billion sales revenue per day. To handle such a huge data is not
an easy to store in personal drive. Hence, ERP supports company by various software’s like
SAP, Oracle and HANA to securely process and stores company’s data.

CONCLUSION AND RECOMMENDATION
After analyzing whole report and evaluating various factors, it can be concluded that; ERP plays
an important role in integrating various functions of an organization like marketing, accounting,
operations and public relations. Wal-Mart is big retail outlet and wholesaler organization, which
operates large number of employees and stores at various foreign locations. The key for its
sustainable success is application of latest ERP system within organization; which supports
company not only by providing accurate reports but handling its data safely. Due to efficient
inventory management tool of ERP system; company never shortfalls for stock nor recorded over
excess of stock in storeroom. Organization has reduced its overall cost by more than 25% with
this productive software. SAP tool installed by Wal-Mart records 125% return on its cost of
installation.
It is recommended that company should keep updating these tools to get latest features and
support from customer service from system Software Company. Organization should install
Netsuit which will support company in overhauling the user interface of its cloud ERP software,
hoping to maintain momentum at a time when consumer-like experiences are increasingly
becoming the norm in enterprise applications. The new UI is scheduled for release in the third
quarter and according to the company marks three years of usability research with NetSuite
customers. It is based on HTML5, which allows deployment across multiple device types.
NetSuite bases the UI on "flat" design principles, favoring a clean, minimalist approach. The
another software recommended to the company is SAP user groups; which are increasing
pressure on vendors to charge fees for their user-friendly Fiori applications, which they say
should be included as part of the substantial annual maintenance costs already paid, in particular
SAP's disappointing track record with interface to your business Sweet ERP software.

REFERENCES
Books and Journals
Choi, B.K. and Kim, B.H., 2002. MES (manufacturing execution system) architecture for FMS
compatible to ERP (enterprise planning system). International Journal of Computer
Integrated Manufacturing, 15(3), pp.274-284.
Ifinedo, P., 2011. Examining the influences of external expertise and in-house computer/IT knowledge on
ERP system success. Journal of Systems and Software, 84(12), pp.2065-2078.
O'brien, J.A. and Marakas, G.M., 2011. Management information systems (Vol. 9). McGraw-Hill/Irwin.
O'Brien, J.A., 2004. MANAGEMENT INFORMATION SYSTEMS W/E-TUTOR &. McGraw-Hill.
Shatat, A.S. and Udin, Z.M., 2012. The relationship between ERP system and supply chain management
performance in Malaysian manufacturing companies. Journal of Enterprise Information
Management.
Winkelmann, A. and Leyh, C., 2010. Teaching ERP systems: A multi-perspective view on the ERP
system market. Journal of Information Systems Education, 21(2), p.233.
Wu, J.H. and Wang, Y.M., 2006. Measuring ERP success: the ultimate users' view. International Journal
of Operations & Production Management.
Zach, O. and Munkvold, B.E., 2012. Identifying reasons for ERP system customization in SMEs: a
multiple case study. Journal of Enterprise Information Management.