What is an ERP System?
Discuss about the Comprehensive Literature Review of ERP Research.
Enterprise Resource Planning (ERP) System is a software system that integrates different functional units to function as a single unit of information. Functional units integrated into the system include planning, inventory, sales, purchasing, marketing, finance and human resources. In some premises, the system may extend to outside parties who include suppliers and customers (Elmonem, Nasr, and Geith, 2016).
ERP System has existed since 1990 when it was introduced in the market. It had various perspectives from the developers to business field. In the business field, the system was a beneficial product while to developers it posed some challenges to implement (Almgren and Bach, 2014). Since then, ERP Systems have been evolving to fit needs of the company. All started with an ERP System that had isolated applications such as billing, payroll, sales, purchasing and inventory in separate databases that never interacted at any point. It started proving difficult to manage the different data that an organization had to handle (Bento, Bento, and Bento, 2014).
A need to have all the data integrated into a system led to developing sophisticated and complex software that would help in managing the daily running of the organization. Developers came up with systems tailored to provide different modules such as financial, accounting, human resource and logistics according to the needs of the company (Schlichter and Kraemmergaard, 2010). The systems developed could now interact with each other through the use of common data. Such ERP systems were purchased or leased, tailored then installed in the company’s computers. An emerging trend of leasing the ERP System was adopted as more companies needed to incorporate the systems in their companies (Duan et al., 2012).
Examples of the systems include SAP, Oracle, J.D Edward and PeopleSoft which are referred to as the traditional ERP Systems. Traditional ERP Systems are classified into two categories that include: Hosted ERP System and On-Premise ERP System. As evolution continues in ERP System, the emergence of Cloud ERP System has been developed in the recent past. More companies are adopting the systems, and others are still using the Traditional ERP System (Bento, Bento, and Bento, 2014).
Companies are evolving, and there is need to adopt a suitable ERP System in the running of activities in the company. The purpose of this report is examining different ERP Systems that are used in different companies. Description of strengths and weaknesses demonstrated by each ERP system will also be outlined in the report. A case study of companies using the system will help in outlining the different system. ERP Systems to be discussed in the report will include On-premise ERP System, Hosted ERP System and Cloud ERP System. The report structure will be an introduction, body, conclusion and reference list that follow Harvard style of referencing to help in achieving the purpose of the report.
Evolution of ERP Systems
On-Premise ERP System is a traditional system that uses license model in its operation. Software is developed and loaded in organizations computers and servers then used in operations of the organization (WAC Consulting Group 2012). The software is customized according to organizations functions that are divided into modules. The modules may include finance module, a marketing module, accounting module, sales module and human resource module. All the modules are integrated to perform in computers that are controlled by Information Technology staff in their servers. The software’s installed always need to be updated after regularly to ensure current updates are used in the system (Chandra and Rastogi, nd.). The system was the first EPR to be discovered by developers, and it gained its popularity in the 1990s until date. A case study may be important in helping illustrate benefits and weaknesses in using On-Premise ERP System.
Water Corporation is a company involved in water distribution, wastewater management and offering drainage system in Western Australia. It was founded in the year 1996 and works under Western Australian Governments. Managers in the company are accountable to Ministry of Water who ensure service delivery is efficient. Their regional offices are located in Albany, Bunbury, Northam, Karratha, Perth, Geraldton, and Kalgoorlie to ensure professional service delivery by the over 2,500 employees (Shaul and Tauber, 2013).
After its formation, the company sought for management of information for a long time. In late 1997, the first ERP System was introduced to the company to manage different data in the company. The management decided to use the traditional EPR System approach. The inception of the system began in 1997 and took two years for complete adoption of the system. In the year 1999, the company had fully implemented the system (Sternad, Gradisar and Bobek, 2011). During the period, employees undertook various training to ensure that they understood the system and were able to operate with ease. More than 1000 employees undertook the training so as to ensure a smooth transition to the system. The training was beneficial to employees as they ensured good change control (Acumatica, 2010).
Deployment of the system was sequential where each part of the system was gradually adopted. After adoption of the first phase, problems began to appear. The management decided to launch the next phase as it was a sequential deployment. Problems experienced were frequent shut down of the system and challenges in transferring information from the old system. The problems caused Water Corporation Company a lot of challenges to the extent that they required urgent fixing before things would get out of hand (Grumman, 2011).
Types of ERP Systems
The company experienced a lot of challenges during the transition phase. For instance, a lot of money was used in fixing problems encountered in the system. Data losses were also experienced, and it required restoration. Contractors hired to restore the data and fix problems encountered were very expensive leading to the financial suffering of the company. Employees also suffered as they had no work to do during the period and some were laid off. The whole experience led to the company experience financial crisis, but finally, the company restored all its data and system (Shaul and Tauber, 2013).
After the whole ordeal during Water corporation inception of On-Premise EPR System, the company reaped benefits of the system. Data restored was later stored and has been useful until modern times in making decisions and evaluating the progress of the company. Experience from Water Corporation has helped in coming up with the following benefits and challenges of using On-Premise ERP System (Shaul and Tauber, 2013).
On-Premise ERP system is safe and reliable. Data, information, and resources are managed in a centralized system that is managed by staff in the organization. For instance, information Water Corporation Company system includes financial data like balance sheets, profit and loss accounts, and ledgers. Purchasing information may include current inventory, tenders given and invoices. Human resource information such as a number of employees, salaries earned by employees and positions held by different personnel in an organization. Such crucial information is held in traditional systems and accessed by staff and relevant people who need information about the organization (Schlichter and Kraemmergaard, 2010). On-Premise ERP System, therefore, encourages privacy and is reliable as information may be accessed by limited people and those known to the organization.
Another benefit experienced by Water Corporation Company in using the system is a mature system with the ability for greater customization. Centralization of information is one of the characteristics of the system where data is stored in a specified system. It offers benefits as such crucial information is not easily modifiable by any party without their consent (Shaul and Tauber, 2013). Economically, the company benefits by selling information to other parties who would like to use information. An example is when a company carries out research or has information about a happening, and other companies would need to use it. The company sells the information as the information is limited to the given company. Nowadays information has become priceless as many companies post data online and are accessible to all people, therefore, rendering it available in real time to any consumer (Sternad, Gradisar and Bobek, 2011).
On-Premise ERP System
The initial phase in adopting the system requires training that may be time-consuming. Software’s designed to operate on different computers require employees have prior training to ensure smooth operation of systems. In Water Corporation Company training took two years to ensure all staff was equipped with knowledge on how to handle the system. It is, therefore, time-consuming as most time is spent in learning the system instead of working (Scavo, Newton, and Longwell, 2012).
Installation and maintenance of the system are expensive. Installation requires the purchase of software, hardware, facilities, and servers required in its operation. Such equipment is very expensive considering that they are all required before the system can run. Maintenance is also expensive. Retention of IT staff to operate the system in case of any failure may, in the long run, turn to be expensive for the company. Regular updates are required in the system. Some updates may require on to start afresh as the previous system is outdated (Glenn, 2008). Such challenges discourage users of the system and prefer to remain with the outdated version.
Hosted ERP System is commonly referred to as Infrastructure as a Service (IaaS). It entails a computing power that outsources some services to an external provider. Computing power includes storage space, processing power, and computing infrastructure. Its main target is the administrators who are the consumers of the services. A company purchases licenses then install it at a third party infrastructure mostly in the cloud (Fripp, 2011). The system is essential as it promotes usage-based pricing structure that entails customer payment for the amount of capacity used
Scottish Fire and Rescue Services (SFRS) is an emergency response organization operating in Scotland. Formed in the year 2013 it unites more than 9000 firefighters drawn from different fire station across Scotland. Its main duty is rescuing people in collapsed buildings, motor vehicle accident and fire mitigation to save lives and property (Scavo, Newton and Longwell, 2012).
One of the mandates of SFRS is the reduction of duplicate services and cost reduction. After being assigned the mandate, the first challenge was the integration of the eight backup solutions to a single platform using IT infrastructure. SFRS first used Microsoft Exchange 2010, SQL, SharePoint and Oracle to have a data backup but it never solved the challenge. They carried thorough environmental assessment on existing systems that would integrate the data they had. SFRS found solutions in using Commvault Simpana software a hosted ERP System in data management. Its simplicity and functionality have been successfully implemented by the company for the last five year, and SFRS reports positive feedback about the software (Rong et al., 2012).
Case Study: Water Corporation Company
The system is easy to use and access. Information is hosted in Commvault Simpana which is easy to operate therefore business can easily transfer information on their operations easily to the cloud. No codes required for the activity. The only important requirement is the stable internet connection. Accessibility is easy as users work from any part of the world. Local and global offices can always operate therefore boosting productivity in employees (Karabek, Kleinert and Pohl, 2011).
Reduced physical equipment is required. Operating the system does not require complex hardware, software, computer systems or servers to operate compared to an on-premise system. Commvault Simpana system requires an internet connection and minimal equipment in its operation. Backup is essential to ensure storage of data in case of internet disconnection, but the device does not necessarily have to be a complicated system. A normal computer or laptop can be used in storage of information for back up reasons (Jlelaty and Monzer, 2012).
Reliability, flexibility and cost saving are other benefits experienced by companies using IaaS System. The system is reliable as the data is hosted online. In case of any issues, they are easily sorted while having minimal interferences to company’s operation. Iaas is cost-effective to the company. For instance, Commvault Simpana cloud services do not require any specialized manpower to operate. It requires minimal training, and most employees can understand its operation (Kuyoro, Ibikunle, and Awodele, 2011). Finances are saved as there are less manpower and fewer breakdowns that would require professional help. Such funds are channeled to other projects of the company. Flexibility is enjoyed in the system. Business operates in the system according to their convenience. They can upscale or downscale resources in the clod depending on the revenue made or in response to market changes. Such benefits make it easy for companies to adopt and operate hosted ERP Systems (Karabek, Kleinert and Pohl, 2011).
Companies using Hosted ERP System only experience less control over their data. Business data is normally given to a third party cloud host who manages data. The system may pose a challenge especially when a problem is experienced. Its nature of operation would mean communication with the host company first who would help in fixing the problem. In some instances, the company may not be in a position to offer immediate support, therefore, leading to inconveniences in business operations (Popovic, 2010).
Limited functionality and bandwidth are other challenges experienced while using the system. Cloud services vary in services offered. Some companies limit functionality as they may not be in a position to offer customization or support services essential to a business. Some host companies who offer the services may charge more, therefore, making the services limited. Bandwidth plan is an essential component a company needs to know about the host. Some host system has limited bandwidth. Therefore, companies need carefully allocate a date to servers to ensure cloud hosting plan bandwidth is not exceeded (Jlelaty and Monzer, 2012).
Benefits and Challenges of On-Premise ERP System
Cloud ERP System uses software that integrates functions of a business to provide services from the cloud storage. Companies’ functions which include inventory, accounting, human resources, order management and customer relationship management (CRM) are integrated into one system and stored in a cloud system (Glenn, 2008). Cloud ERP is deployed using the following model: public cloud which is a model that is open to general public for usage, private cloud that has private ownership by a company, third party or a combination of both, community cloud that has infrastructure designed to suit specific consumer communities that share same concerns (Jonathan, 2012). Examples of concerns are security requirements, missions, and policies. It can be owned and operated by one or more companies, a community or third party. Another model is hybrid which entails a combination of one or more cloud model that is bound together by propriety or standardized technology for data portability.
SARMED is a logistics company located in Greece. Founded in 1955, the company was among the first logistics companies in Greece. It is a privately owned company that mainly deals with supply chain services. In its daily operations, the company offers third-party logistics that include bulk and cold cargo handling. Growth has been experienced over years, and in the year 2012, the company developed 3PL activities to meet increasing demand for supply chain services in the country and beyond (Armbrust et al. 2010).
To ensure consistency in business growth, the company had to adopt a cloud ERP to ensure the smooth running of the business. This led to the adoption of Nubis Cloud ERP a cloud system that helped in the creation of a comprehensive ERP and consumer relation management (CRM) processes used in documenting, analyzing, processing and reporting its sales, accounting and service operations (Rong et al., 2012). The cloud system also helped in integrating its functions into four components that included sales and accounting, warehouse and human resource. Integration of the system has helped the company achieve better management of customer relations and a comprehensive ERP.
Cloud EPR helps in lowering operating cost for maintenance and IT staff cost. SARMED uses Nubis Cloud software in warehouses where the software helps in monitoring supplies and procedures involved. It offers information on employee attendance at the warehouses and monitors workers on overtime to help inform decisions on outsourcing more workers or not (Forrest, 2009) The system also does not require IT staff to operate the system, therefore, saving on cost that would be incurred in hiring a specialist. Its ability to provide comprehensive information helps in saving cost, therefore, channeling it to important ventures.
Hosted ERP System
Another benefit of using the system is the achievement of customer relations management. Incoming calls are always recorded in the system and are saved as support cases. Clients are also provided with information on the orders made, services made by the company and other helpful materials clients would wish to know. Such features help in building confidence in the organization and retention of customers (Jlelaty and Monzer, 2012).
Other benefits of using the system include improvement in time management during document processing, enhance business scalability, sales automation, easier integration with cloud services and rapid updates and upgrades (Marston, Li, Bandyopadhyay, Zhang and Ghalsasi, 2010).
Challenges faced in Cloud EPR System are security risks. A lot of data is present in cloud system, therefore, poses a risk of having data deleted, forged or infected with viruses. Nubis Cloud operates a lot of data, and there is a risk for data violation especially with advancing technology. Control over the cloud is also a risk posed to data stored in cloud. Data is outside the premises, and there is risk for violation and distortion especially if not handled well (Kuyoro, Ibikunle, and Awodele, 2011).
Other weaknesses in the system include performance risk especially when employees are closely monitored they become anxious therefore affecting their performance. Customization and integration limitation. This is experienced when a company’s operations are not compatible with the cloud system (Popovic, 2010).
Conclusion
In conclusion, the paper examines different ERP Systems that are used in different companies. Case studies of companies have been used in outlining the three ERP systems a company may use in its premises. They are on-premise ERP System which is a traditional approach where a company purchases licensees and install in their computer systems. Benefits from system include safety and reliability and mature system with ability for greater customization. Its challenges are that it is expensive to maintain and requires employee training before operating thus time-consuming. Hosted ERP is outlined as when a company uses a third party to manage organizations data in cloud. Benefits are that it’s easy to use and access, reduced physical equipment are required and reliability, flexibility and cost saving. The weaknesses of the system are less control of data, limited functionality, and bandwidth. Cloud ERP System is designed to operate purely in the cloud. Subscription is required to grant access the system. Benefits outlined include lowering of operating cost for maintenance and IT staff cost, achievement of customer relations management, improvement in time management during document processing, enhances business scalability, sales automation, easier integration with cloud services and rapid updates and upgrades. Weaknesses in the system are data risk, performance risk and customization and integration limitation.
Cloud ERP System
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