ERP Investment: Assured return

ENTERPRISE Resource Planning software systems (ERP) encompass a wide range of software products supporting day-to-day business operations and decision-making.

ERP serves many industries and numerous functional areas in an integrated fashion, attempting to automate operations from supply chain management, inventory control, manufacturing scheduling and production, sales support, customer relationship management, financial and cost accounting, human resources and almost any other data-oriented management process. ERP systems have become increasingly prevalent over the last 10 years.

The appeal of the ERP systems is clear. While most organizations typically had software systems that performed much of the component functions of ERP, the standardized and integrated ERP software environment provides a degree of interoperability that was difficult and expensive to achieve with standalone, custom-built systems.

For example, when a salesperson enters an order in the field, the transaction can immediately flow through to other functional areas both within and external to the firm. The order might trigger an immediate change in production plans, inventory stock levels or employees' schedules, or lead to the automated generation of invoices and credit evaluations for the customer and purchase orders from suppliers.

In addition to process automation, the ability of ERP systems to disseminate timely and accurate information also enables improved managerial and worker decision-making.

Managers can make decisions based on current data, while individual workers can have greater access to information, enabling increasing delegation of authority for production decisions as well as improved communications to customers.

A decade ago, implementation of ERP systems required a substantial investment in time, money and internal resources and is fraught with technical and business. A typical ERP installation used to cost about $15 million and costs can be as high as 2-3% of revenues. Installation takes between 1 and 3 years (21 months on average), with benefits starting to accrue in an average of 31 months.

Earlier, ERP implementations are also known to be unusually difficult, even when compared to other large-scale systems development projects. Part of this difficulty is due to the pervasiveness of the changes associated with ERP, the need for simultaneous process redesign of multiple functional areas within the firm, and the need to adapt processes to the capabilities of the software.

That scenario has changed today with time and enhanced technological advantages.

Gone are the days of monopoly of some couple of giants in the market. With the entry of some reliable and affordable home grown ERP solutions, the implementation has become much easier process and the cost involvement has come down comfortably, which is affordable to most of the small and medium scale industries in India. This effective solution helped many of these organizations yield a quick return on investment (ROI).

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