Question

Explain the purpose of enterprise resource planning systems, and identify four advantages and four drawbacks to implementing an ERP system

Answer 1

The purpose of ERP is to manage the business effectively and efficiently using technology which helps in knowing the customer needs , the requirements of the business and in tracking customer orders. It enhances the operations of the business and provides a better return on investment.It helps to integrate all the functions of the business which aids in the proper management of activities.it promotes team work and enhances the growth objectives of the firm.

Advantages :

• ERP helps the business provides better service to it's customers. Due to the automated nature of the activities , it becomes easier to track and fulfill customer orders without delay. So, it helps in customer acquisition and retention.
• The use of automated technology improves efficiency and reduces cost and increases return on investments.
• It helps in integrating all information in one place, which helps the business work as a team. Teamwork is an essential part of any success and ERP helps the business achieve team work and collaboration.
• It helps the business achieve its growth plans through it's planned and structured process. This process can efficiently accomodate the plans for the growth of the business in the future.
• It provides a safety and security for all the customer data and information which is fed into this software and minimizes the risk of data theft.

Disadvantages:

• Setting up an automated software for integrating the business processes can be very costly in terms of cost. The cost of purchasing the software and its implementation can turn out to be a costly affair for any business.
• The ERP software can provide the business with a number of advantages but it can also be complex. The employees would require proper training to be able to run this software successfully. Some business fail to implement it successfully which leads to a low ROI.
• Customizing this software can also be very costly and a tedious process.
• The cost of maintenance of this system and also be very costly as there might be maintenance fees involved in addition to the license fee of this software.