How does ERP create value?

LEGACY information system have been functionally based and not integrated across multiple locations or functional areas. The same information was captured multiple times, in multiple places and was not available in real time. Jobs and processes were narrowly defined in concert with the division of labour and the industrial revolution.

As a result, some information never made it out of different pockets of the corporation. Processes and job definitions saw to it that information remained a local good. When information did go global, often there were different informational reports of the same events. Thus, there were information asymmetries between the different local and functional groups and top management. Enterprise resource planning systems provide firms with transaction-processing models that are integrated with other activities of the firm, such as production planning and human resources.

By implementing standard enterprise processes and a single database that spans the range of enterprise activities and locations, ERP systems provide integration across multiple locations and functional areas. As a result, ERP systems have led to improved decision-making capabilities that manifest themselves in a wide range of metrics, such as decreased inventory (raw materials, in-process and finished goods), personnel reductions, speeding up the financial close process and others. Thus, ERP can be used to help firms create value. In particular ERP facilitates value creation by changing the basis nature of organizations in a number of different ways, such as:

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Common ERP Myths

ERP means more work and procedures

ERP will make many employees redundant and jobless

ERP is the sole responsibility of the management

ERP is just for the Managers/Decision-makers

ERP is just for Manufacturing Organizations

ERP is just for the ERP implementation team

ERP slows down the organization

ERP is just to impress customers

ERP package will take care of everything

One ERP Package will suit everybody

ERP is very expensive

Organization can succeed without ERP



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