Companies gain a competitive advantage by incorporating information technology in their business operations. For example, their output is usually expected to be higher compared to those firms which have not implemented information technology in their systems or strategies. Their services are expected to be of higher quality, be more efficient, and faster, as compared to those firms which have not invested in these systems. A firm may shift focus from being highly flexible to one with consistency and accuracy by implementing some type of Information technology system (Turbit, 2010). Business information from a variety of sources can be well managed with Enterprise Resource Planning (ERP) (Katherine, 2008). An organization can ensure that all the information that flows within the firm is integrated by the means of ERP. It aims to integrate all business processes into one enterprise with a solution by having one centralized database that all business areas have access to. With the increasing need of incorporating Information Technology in management, many organizations and companies are embracing advanced management systems to achieve coordinated and efficient management of operations. Other firms are resulting to use of these advanced management systems as a competing tool against their rivals. Due to complications and challenges involved in the implementation of such systems, other firms are indifferent to the systems and have decided to take a low profile in this changing and challenging information technology environment. Firms can be able to reach more vendors in the market, therefore raising more competitive bids (ERPN, 2001).
Like other systems of information technology, ERP is considered a strategy and a competitive advantage, and not a management efficiency tool, due to the inefficiency that arises with its implementation. Such management inefficiency in businesses may arise because various businesses have different business rules, data semantics, decision centers, and authorization hierarchies (Esteves & Pastor, 2009). Large organizations may acquire the benefit of consolidating their departments. These organizational departments may be complex because they have independent resources and chains of commands, and therefore bringing the ERP may cause some consolidation.
ERP may empower a firm to effectively benefit from its application software because the software components can communicate effectively and coordinate better. Therefore, ERP is acting as an avenue of combining and expanding operations. The competitive advantage of ERP arises due to the ease that the system can be customized resulting in many benefits. The system has high consistency levels. The way similar processes are being performed amongst all the departments in an organization may be unified through ERP. The system determines how things will be done in all locations. The organization that applies ERP can cut on the cost that arises from special arrangements as well as reduce inconsistencies within the organization.
Proper communication within the firm and high productivity, are the results of the integration of various systems through ERP. Firms can communicate easily within themselves and with their customers. This enables increased productivity and hence the firm will have a production advantage over the firms that do not use the system. Many problems come with synchronizing various operations within the firm, and ERP can reduce or eliminate these problems. An example of the operations that would require to be synchronized, and which may pose challenges include those cross-functional boundaries.
ERP Systems centralize the data in one place and this provides a top-down view of the enterprise because real-time information is made available to management anywhere, anytime, and this helps them to make proper decisions that shorten production lead-time and delivery time. ERPs have also been utilized to achieve efficiency in addition to the integration of systems although they may turn to be expensive and unreliable (ITtoolbox for IT, 2006). The business could benefit from reduced risk among others too (SAP, n.d.).
Implementation of information technology comes with a lot of benefits. These include faster operations, efficient systems, flexibility, and integration among others. The organizations will have to face some of the limitations and challenges that come with the implementation of an ERP. These include delays of the expected benefits, as well as the large cost and system-complexity issues. One way of avoiding problems with the ERP systems is to ensure adequate staff training for those testing and implementing the system. Implementation of ERP results in a general improvement in the performance of the organization.
ERPN. (2001). ERP benefits are many, far and wide. ERPN. Web.
Esteves, J., and Pastor, J. (2009). Enterprise Resource Planning Systems Research: An A notated Bibliography. Communications of AIS, 7 (8). pp. 2-54.
IToolbox. (2006). ERP benefits and disadvantages. IToolbox. Web.
Katherine, W. (2008). The ERP Security Challenge. CSOonline. Web.
SAP. (n.d.). EPR Business benefits. SAP. 2010. Web.
Turbit, N. (2010). ERP Implementation – The Traps. Web.