An Analysis of ERP Systems in Modern Business Management

This report provides a comprehensive overview of Enterprise Resource Planning (ERP) systems and their significance in modern business management. It begins by defining ERP systems as cross-functional software that integrates various departments within a company, replacing the inefficiencies of multiple, disconnected information systems. The report details the benefits of ERP systems, including improved communication, cost reduction, and enhanced efficiency in customer service, distribution, and production. It also outlines the implementation process, emphasizing the importance of understanding business processes and the need for organizational commitment. The report discusses different types of ERP systems, categorized by size and complexity, and concludes by highlighting the vital role ERP plays in streamlining business activities and enhancing overall enterprise performance. Finally, the report highlights the importance of making changes in the working processes of organizations instead of customizing the software in order to gain maximum advantage from ERP.

Running Head: ERP SYSTEMS 1
Information System Challenges in Management
Student Details
4/26/2019

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Contents
Introduction......................................................................................................................................3
Enterprise Systems and Organizations............................................................................................3
Implementation of ERP in an Organization.................................................................................4
Types of ERP Systems.................................................................................................................5
Benefits of ERP Systems.................................................................................................................6
Conclusion.......................................................................................................................................7

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Introduction
An enterprise system is software that coordinates various departments of a company such
as finance, sales, inventory, manufacturing, accounting, and human resources throughout the
entire business processes. Earlier, these business functions of an organization were served by
different and multiple information systems (HQ, 2019). This resulted in dissimilarity between
business processes of each business function and thus they are not capable of exchanging
information with each other. Using different information systems for different business functions
had made it difficult for managers to organize fragmented data in order to describe the overall
operation procedure of the organization and to take firm’s decisions (Maditinos, Chatzoudes, &
Tsairidis, 2011). This report describes purpose of the enterprise systems and how they are
beneficial or providing business advantages to the organizations.
Enterprise Systems and Organizations
An enterprise system is a cross-functional system and also known as Enterprise Resource
Planning (ERP) system. It enables coordination and integration of major business processes of
the organization and facilitates resource planning of an organization. Enterprise resource
planning systems help in seamlessly stream of information across the firm as well as various
business processes such as manufacturing, human resources, sales, logistics, and production can
be integrated into wide business processes of the organization (HQ, 2019). For example, in case
when a customer places an order then it might be not possible for the sales person to tell the
customer about whether the desired product of him is in inventory or to be developed. To
eliminate these kinds of complications, several organizations choose to substitute various

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different information systems with a distinct integrated system which can maintain the activities
of business of various business functions. These systems are known as enterprise systems (HQ,
2019).
There are two common driving forces behind an ERP system: ERP software suite which
is a set of integrated software modules and a general federal database. Function of software
modules is to maintain the necessary processes of business under various functional areas and
that of database is to storing data from and feeding data to the different applications facilitating
support to the internal activities of business (Magal, 2011). Some of the business functions that
are assisted by ERP software are cash management, accounts, personnel administration, general
ledger, product pricing, time management, forecasting, billing, payroll, inventory management,
and many more (Maditinos, Chatzoudes, & Tsairidis, 2011). Initially when ERP system was
developed, its main function was automating the internal ‘back office’ business processes of a
firm but ERP systems of today have become advanced and also allow communication with
suppliers, customers, and other business partners.
ERP Implementation in an Organization
Installation of ERP systems at an organization requires a lot of efforts. Following are some of
the steps that one has to keep in mind to ensure the successful execution of ERP systems:
1. Have complete knowledge of business processes and the key requirements. Understand
all the areas, tools, and processes which are important to build the business. This step is
also known as preparation step for implementing a new system (Maditinos, Chatzoudes,
& Tsairidis, 2011).

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2. List the advantages that an ERP system can provide to the business and share this list
with team members, key stakeholders, and decision makers. It is key performance
indicators determining step (Magal, 2011).
3. Appoint a member from the team to ensure successful system implementation and
management of its implementation.
4. Grow organizational and executive commitment.
5. Prepare early plans for the implementation of ERP systems and try to avoid delays in its
deployment.
6. Focus on the migration of data in the early stages of the implementation process.
7. Always have a clear understanding about the implementation of an ERP system and
assess its benefits for the organization on frequent intervals (Magal, 2011).
Therefore, implementing ERP systems by the organizations need identification of automated
business processes and then mapping of those processes with processes provided by ERP
systems. However, it might be possible that business processes of these systems do not maintain
the business processes of organizations (HQ, 2019). This then requires customization in the
software in order to achieve the requirements of the organization. This results in decline in
performance of the system as well as compromising the process and information integration.
Hence, instead of changing or customizing the software, organizations should make changes in
their working processes and adopt the methods according to the business processes of software in
order to gain maximum advantage from enterprise resource planning software (Maditinos,
Chatzoudes, & Tsairidis, 2011).

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Types of ERP Systems
Depending upon the size and complexity of organizations, ERP systems are categorized
in Tiers as described below:
Tier 1 ERPs: These ERPs support large and global organizations to handle all
internationalization issues. SAP and Oracle are in tier1 ERPs since decades and Infor and
Microsoft are the latest competitors of these ERPs (HQ, 2019).
Tier 1 Government ERPs: These ERPs support large government enterprises. SAP, Oracle, and
PRISM ERPs lie under this category.
Tier 2 ERPs: These ERPs also support large organizations which are operational in many
countries but do not have global reach. There are around 25 to 45 vendors in this category
depending on how they are categorized.
Tier 2 Government ERPs: These ERPs focus mostly on local and state governments with little
federal installations. UNIT4 and Tyler technologies come under this category.
Tier 3 ERPs: These support mid-tier enterprises. Depending on the categorization of these
vendors, there are around 75 to 100 ERP solutions in this category (Magal, 2011).
Tier 4 ERPs: These are developed and designed for small organizations. These focus only on
accounting of small enterprises.
Benefits of ERP Systems
As discussed above, ERP systems are valuable for business activities of organizations hence
following are some benefits of ERP systems for the organizations:

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1. It enables faster communication of critical information regarding business performance of
the organization to mangers so that they can make better and quick decisions at the right
time (HQ, 2019).
2. Decreases the cost involved in software, hardware, IT support staff, and transaction
processing in a significant manner.
3. These systems enhance the efficiency and quality of customer services, distribution, and
production by integrating the inner business processes such as finance, sales, production,
custom logistics, and many more (HQ, 2019).
4. These systems help in developing a homogeneous organizational culture where everyone
uses comparable type of information and processes to do business.
Conclusion
Therefore, from the above discussion it can be concluded that enterprise systems play
vital role in performing business activities and have resolved the issues of multiple information
system requirements and coordination problems among those systems in an organization.
Enterprise resource planning systems has integrated and coordinated various functional
departments of an organization and enhanced the performances of the enterprises to a great
extent.

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Bibliography
HQ, M. S. (2019). Enterprise System (ERP). Retrieved from
https://www.managementstudyhq.com/enterprise-systems.html
Maditinos, D., Chatzoudes, D., & Tsairidis, C. (2011). Factors affecting ERP system
implementation effectiveness. Journal of Enterprise Information Management , 25 (1), 60-78.
Magal, S. R. (2011). Integrated Business Processes with ERP systems. US: Wiley Publishing.