Benefits of ERP Systems in Real Life Business

This report discusses the benefits of implementing ERP systems in real-life businesses, using Wal-Mart as an example. It covers topics such as effective supply chain management, inventory management, and data security.

B10688
MANAGEMENT
INFORMATION
AND
TECHNOLOGY

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 RECOMMENDATIONS............................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Enterprise Resource Planning System (ERP) is manufactured for small and large enterprises.
The main purpose behind designing this software is to integrate various processes like
Financing, Operations, Human resource planning, Marketing and many other activities of
organizations together for better functioning. It increases the efficiency and productivity of
business by supporting in optimizing several business processes like transaction entry,
inventory recording, stock reordering, minimum stock level check, supply chain
management and alerting for any error in system. ERP best suits for accuracy and
transparency of data; it gathers large information’s and protectively stored it in system.
These information’s through analyses helps top management in taking appropriate decisions
for company. The IT companies through their effective code system and encryption of data
processing make it possible to work artificial intelligence on the place of human. The main
advantage of system working for human is fast processing at minimum risk of error. These
software’s shows how innovatively IT sector has provide AI’s to various industries and
small sectors to maintain their data and information well. There are many benefits of using
ERP system including reducing cycle time, fast transactions processing, alert on time, better
financial management and customer satisfaction.
ERP systems came up with many supporting modules such Customer Relationship
Management, Decision Supporting Software, Management Information Systems and many
more. It plays a major role in take revolutionary changes small scale industry by convert it
from human oriented sector to system centric organizations.

Aims and Objectives:
The main aim and objectives of this essay report is to know about ERP systems and various
categories of information systems. This report will describe the benefits of application of
ERP system in real-life industries and also risk and limitations of this software. Wal-Mart
Company is taken as an example to understand this concept well; as Wal-Mart is the best
example for managing its whole process with this effective software.
Categories of information systems:
Every organization follows hierarchal structure of governance and divides this structure into
further parts which is operational, management and execution. Each level has different
information requirement; due to this there are various categories of information systems
which fulfils the need of each level of organizations (Winkelmann and Leyh, 2010). Some of
them are discussed below:
1. Transaction Processing System: It is mainly used by accounts department to record
daily transactions rather than book keeping. Entry a transaction comes under
operational level of management (Ifinedo, 2011). This software system generally
supports Wal-Mart business in identifying:
 Total number of sales today.
 Inventory left in store.
 Bills due with suppliers.
 Total revenue generated within a day.
This software works on real time basis and provides strong base to every organization;
as base of each business is dependent on its operation structure. Transaction
Processing System plays a major role for Wal-Mart malls and stores in keeping daily
record of transactions and identifying which product has largest sale, which inventory
should be ordered and what should be the minimum stock level to maintain inventory.

Examples of Transaction Processing System are:
 Point of Sale Systems: Records daily sold items and their revenue
 Payroll Systems: Through biometric devices prepares payroll automatically
 Stock / Inventory Control System: Check how much inventory is sold, how
much left and how much should be ordered by company (Choi and Kim, 2002).
2. Management Information System: This system is basically management tool for
watching if everything going will according to plan. It is used by tactical managers at
management level to monitor current performance of the business. It is second level
after operational stage; therefore output from transaction processing system is used
as input for this management level system. Management Information System is a
powerful tool which interpret results from lengthy transactions into simpler form so
that tactic management could understand whole impact and take decision accordingly
(O'Brien, 2004). If found critical result than this management level forward this
outcome to higher level management for crucial decisions. For instance,
Management department of Wal-Mart take account of monthly revenue through
point of sale system and compares it with previous months result, after comparison
they try to find reasons behind and variations and take initiative accordingly to solve
issues like low customer satisfaction, higher competition in market, low quality
customer service, etc. Some of the examples of Management Information Systems
are:
 Sales Management Systems: It manages over all sales by analyzing
variations in sales unit daily, weekly and monthly.
 Budgeting Systems: It tracks the total fund utilized by company’s different
department for various activities and match it with budgeted one.
 Human resource management system: It supports in short listing of
candidate automatically through algorithm. Manages overall employees
welfare, track staff turnover and absent rate per day (O'brien and Marakas,
2011).
Management level or tactical managers have authority to take semi-structured
decision which doesn’t include many changes in structural line of organization. The

main these managers to forward their finding and judgment to top level
management handle by CEO.
3. Decision Support System (DSS): This tool is mainly usable by top level management
to make non-routine decisions. In this system it uses input from tactical management
or management information systems and some information’s from external source
such as competitor analysis, economic status, government policies and outsider force
etc. The main role of Decision Support System is to help CEO for analyzing data
through simple and clear interpretation and to solve issue which is arising at
organizational level and need to implement solution in whole firm. This decision
technique uses complex mathematical and statistical models such as probability
identification, predictive model, decision tree, least square method, game theory, etc
to reach at conclusion and take strong decisions to implement solution (Wu and
Wang, 2006).
ERP Systems:
ERP or Enterprise Resource Planning system is integrated tool which gathers information’s
from all organizational functions such as marketing, financing, operations, Human resource
and selling departments to build a huge system to integrate all different functions into one
information system. It makes easy for top level management to track all firms’ activities
with only one click. Wal-Mart specially uses ERP to collect, store, manage and interpret
information to take decision by top level management. The data provided by ERP is
maintained by database management system of company. This system keeps watch on cash
and raw material movement, production capacity and performance of business. It supports
basic structure of organization through sharing information’s related to manufacturing,
purchasing, sales and accounting with all functional departments together; it also helps in
maintaining sound relationship with stakeholders (Shatat and Udin, 2012). For instance, one
of the big retail customer wants to book an order for various products from Wal-Mart; the
order receiver found that many of the products which demanded by retailer is out of stock

and will take maximum one week to reach in the store. This information can be share with
order maker and will build strong relationship between customer and Wal-Mart Company.
ERP provides error-free information related with transactions and production to
management if implemented properly. This system works maximum on AI’s (Artificial
intelligence) which works according to input information’s and coding functions through
running variety of hardware and network configurations programs. It is a centralized system
that facilitates with integration between various enterprise activities like planning,
procurement, sales, customer relations, finance and analytics through one single application.
So it is also known as Centralized Integrated System (CIES). Latest ERP software named
SAP ERP is mostly applied by small scale enterprisers; as it is available for 25 different
industries, in 37 languages and 45 localization and over 50,000 customers have implement
this software. Some of the tools of ERP systems are:
 Inventory Management: This ERP tools help Wal-Mart in proper management of
inventory through efficient method such as KANBAN and Just In Time (JIT) to
avoid unnecessary stock in store room. It helps big malls in keep updated about
available items, time taken by supplier to deliver particular item to store and average
movement of inventory within Wal-Mart. This ERP software is configured with
calculation of EOQ (Economic Order Quantity) model.
 Accounting Management: This ERP system is related with accounts department; it
keeps records of daily sales revenue and expenses. It also presents financial
statements like Income statement, Balance sheet and Cash flow statement at any
time without any error in data.
 Customer Relationship Management: Today customer are the precious assets for
any company; Customer Relationship Management tool helps Wal-Mart in keep
attached with customers through flash messages on customer’s mobile, auto
feedback submission, google rating tracing, etc.
Benefits of ERP systems in a real life business:

Here the benefits of ERP cover the case study of Wal-Mart using ERP system and solving its
many issues. Wal-Mart has big stores; it is the first company who converts warehouses into
giant retail stores. It has competitive advantage of selling product at very cheap price all
over the world; Company able to achieve this through efficient use of ERP systems. Some of
the benefits of ERP systems in a real life business (Wal-Mart) are discussed below:
 Helps in communicating between different departments: ERP system helps
company in communicating between different functional departments like finance,
procurement, billing, store manager and supplier.
 Processing transactions records: Through Effective ERP system name SAP HANA;
Wal-Mart able to handle and process billion transactions records successfully; as report
says that company handles 250 million customers in a week over 11000 global locations
through e-commerce channel. HANA’s huge hard disk server helps company increasing
data processing capacity to assemble data from various departments of organization.
 Effective supply chain management: As Wal-Mart facilitates more 11,000 online and
offline stores all over the world; it is necessary for this innovative business typhoon to
use an IT system named Retail Link; this helps company in to provide facility to
suppliers tracking accurate products on every shelf and store of the company and deliver
product when there is alert shown by system (Zach and Munkvold, 2012).
 Effective Inventory management: Wal-Mart uses vendor managed inventory model;
in which supplier’s access data from company’s data information system regarding
current inventory level and rate of current products sold. This helps suppliers to deliver
additional supply to avoid shortage of supply situations. This provides advantage to
company to transfer the load of placing order on supplier itself.
 Helps in securing data and information: Wal-Mart is huge company which requires
highly secured software to safe its confidential data and information. ERP systems
provide tight security and confidence to the company that its information is safe.
Company uses Oracle security system which decrypts firm’s data to synch directly to
HANA hard drive. This IT company secured Wal-Mart information through
programming and changing codes of information so that it cannot be hack by outsiders.

CONCLUSION AND RECOMMENDATIONS
After analyses of whole report; it can be concluded that ERP systems plays a major role for
developing industries through many ways. It helps in removing older system of data
processing and recording in which usually errors corrupt whole information and messes-up
the result. Today information is the key to success; organization having huge information
has no competition in the market. Large data provides power to any company to modulate
and manipulate existing company’s policies and strategies. Only that firm can win the
competition race having art of managing this important and useful information’s effectively.
Skill of interpretation of this data is also important for any conclusion. Besides having
advantages of ERP systems; there is risk which can make the situation worsen any time.
This risk includes leakage of information through cracking of codes and chance of virus
attack which can format all the information from main server. But get override from this
situation Wal-Mart uses customized software which works online as well as offline to
process the data; company has also adopted strong backup system to restore data in case of
system crash.
It is recommended that organizations should update its ERP systems regularly to fix bug and
error by service Provider Company. Merely using ERP system cannot make any enterpriser
successful; a deep knowledge and art of using these systems in innovative way required.
New alternate software’s provide competitive edge to company but sometimes cheap
systems could result in disaster. Hence it is suggested that before adopting any new tool;
complete analyses and testing should be done; to avoid any crash situation later. Once
implemented, it’s hard to change or modify system; because it can consume lot of time and
wastage of resources.

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.