Enterprise resource planning (ERP) systems is one of the most popular things in the business world of today. Fortune magazine has revealed through a recent survey of them that seventy percent of top global pharmaceutical and petroleum companies, ninety percent of top global computer companies, and cent percent of top ten global chemical companies are using the ERP through SAP’s R/3. In a different study it has been identified that more than 60 percent of Fortune 500 companies have been using the ERP process within their organization.
According to Joseph Brady, Ellen Monk and Bret Wagner, the software programs of Enterprise Resource Planning (ERP) are amongst the most advanced form of information systems technology. ERP, which is pronounced as “E-R-P”, programs are instrumental in managing and monitoring different business processes of an entire company. The system uses a common database spanning across the company and reporting tools for management which are shared as well. The software dedicated for ERP supports the operations of business processes to be run efficiently by merging business activities which include sales, marketing, manufacturing, accounting and staffing.
ERP can be defined as an information system which works enterprise-wide and helps in integrating and controlling all the business processes within the organization as a whole. According to Nah and Lau (2001) ERP is “a packaged business software system that enables a company to manage the efficient and effective use of resources (materials, human resources, finance, etc.) by providing a total, integrated solution for the organization’s information-processing needs”. The ERP software, if implemented efficiently helps the company to a great deal for integrating all the information flows, specially the functional information, within the organization into a single package which has a common database and information are thus accessible to everyone. Hence it can be said that an ERP system enables easy and instantaneous access to different data related to product or customer data, inventory statistics etc.
At the outset ERP used to cover only the routine transactions which occur within an organization. But with technological advancements, it later became so efficient that now it can cover suppliers and external customers as well. According to Nah and Lau (2001) all the ERP systems more or less these days possess the functionality and the capability for helping in proper flow of information across all the business processes which are internal and external to the business organization. They have further said that ERP systems are able to “reach beyond their own corporate walls to better connect with suppliers, distributors and customers to engage in e-business”.
According to Nahapiet and Ghoshal, ERP system, in its own way makes sure that a firm is able to create and share information and knowledge and this in turn helps immensely in creating chances for various innovations. The resources which are based on knowledge and innovations will eventually help in the organization for building a long term competitive advantage which may not be easily emulated by the competitor companies.
Through various researches it has been identified that, different kinds of risks in those get generated while managing an ERP implementation are caused by the internal dependencies among the business processes which are closely related as well as relational databases and process reengineering.
Umble & Umble (2002) has opined that three of the most important factors which may be accountable for failure of ERP system are:
- Poor planning or poor management
- Shift in business goals during the process of the project
- Less business management support
It has been understood through the process of literature review that most of the organisations who are implementing the ERP, expect it to generate better performance in the organization. Grabski and Poston are of the view that this is the main reason why several organizations representing different industries have been interested in implementing ERP projects in their organization. But as observed by Davaenport, quite a few of these projects for implementing ERP have caused adverse financial effects in the companies.
