An Enterprise Resources Planning is a system that integrates the flow of information among different functions of an enterprise. It integrates all departments and operations across an organisation through a computer based single system that can cater to the specific needs of all those different departments'.
The system helps to develop effective communication and information dissemination, leading to significant raise in productivity, speed and performance. The best model for ERP system will link all the organisational processes which are manufacturing, marketing, finance, human resources, Sales, supply chain management, customer relationship management and data warehouse.
That is why The ERP system implementation is crucial for any enterprise since it affects the whole organization. ERP system solutions should be open, simulate reality and also be comprehensive in terms of coverage and scope.
Every organization which is planning to implement an ERP solution must perform an honest and thorough assessment of business needs and alternatives. This is an important factor of taking ownership in the ERP or any alternative solutions.
In this global competitive market, enterprises need to keep abreast with latest technologies. SMEs’ lack of internal competence and resources, while most of large companies have been investing time, money and human resources to modify their strategies and exploit the opportunities related to the business use of information technologies.
To deal with those large organization SMEs (Small and Medium Enterprises) need to work on a similar type of technologies. In order to face globalisation challenges, one of the solutions for Small and Medium Enterprises is ERP system to improve productivity and overall business performance.
After serving the large enterprises for a long time, now ERP vendors have been moving their attention towards small and medium enterprises (SMEs), by offering simplified and cheaper solutions.
An ERP system would allow SMEs to integrate their business functions. It would provide for a transactional system, which provides for a disciplined way of doing business. Thus SMEs would be able to increase their efficiency and productivity by implementing a suitable ERP system. Some of the factors to be considered before starting an ERP system implementation are:
These factors help SMEs’ to understand their level of preparedness for an ERP implementation.
For the SMEs to remain competitive there has to be much greater interaction between customers and manufacturers. ERP (Enterprise Resource Planning) is a strategic tool, which equips the enterprise with the necessary capabilities to integrate and synchronize isolated functions into streamlined business Processes. It also optimizes the resources available to strengthen the core competencies of the enterprise. The benefits offered by ERP system are as follows:
Though the market for ERP seems to be growing, there are several issues and challenges one has to contend with when implementing an ERP system in the SME segment. A number of important aspects likely to affect ERP implementation differentiate SMEs from large companies, such as lack of resources (in terms of finance as well as human), insufficient IT competence.
It has also seen that in many cases, SMEs’ are not willing to commit a huge fraction of their resources due to the long implementation times and high fees associated with ERP implementation.
Business complexity of an SME also plays a significant role in adoption and implementation of the ERP system. Factors like company size, market area, level of diversification, degree of functional extension etc are the main deciding factors for ERP implementation that an SME needs to assess before investing in the system.
Some of the challenges faced by SMEs for adoption and implementation of ERP are lack of awareness among SMEs for ERP applications benefits etc., many SMEs have the perception that ERP systems are only meant for the large enterprises mainly owing to high costs of acquisition, implementation and maintenance, implementation being considered as an automation project instead of one that involves change management.