How does ERP create value?

ERP connects various functions of the organization in an integrated fashion. Integration is the defining characteristic of ERP. Enterprise resource planning processes are cross-functional forcing the firm out of traditional, functional and locational islands. In addition, an organization's different business processes are often integrated with each other. Further, data that were formerly resident on different heterogeneous systems are now integrated into a single system.

The first most important advantage of ERP system lies in the promotion of integration. The reason ERP systems are called integrated is because they have the ability to automatically update data between related process and functions. For example, you need only update the status of an order at one place, say, in the logistics management module; all the other modules will automatically get updated. The beauty of this system is that information updating happens instantaneously. So you get up-to-the-minute information at your fingertips.

This information integration leads to better decision-making and resolution of problems. Another advantage of this integration is that the people who are involved are also connected to each other. This integration has tremendous potential for improving productivity.

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