ERP-1 - A Foundation for Understanding Enterprise Resource...

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A Foundation for Understanding Enterprise Resource Planning Systems Objectives 1. Develop an understanding of how ERP systems can improve the effectiveness of information systems in organizations. 2. Understand the business benefits of enterprise resource planning (ERP) systems. 3. Understand the history and evolution of ERP. The Emergence of Enterprise Resource Planning Systems In the past several years, many organizations have initiated Enterprise Resource Planning (ERP) systems, using such packages as SAP, People soft, and Oracle. The ERP market is one of the fastest growing markets in the software industry. In research conducted by APICS, 34.5% of companies with revenues over $1 billion who were APICS members planned to purchase or upgrade an ERP system (Umble, Haft, and Umble, 2003). AMR Research predicts that the sales of ERP software will reach $180 billion by 2002 (Kalling, 2003). According to one study, the ERP market may reach $1 trillion by 2010 (Bingi, Sharma, and Godla, 1999). Enterprise resource planning systems are a major investment. Companies have invested between $50,000 and hundreds of millions of dollars in ERP software, using a variety of business justifications, including the replacement of numerous legacy systems, reduction in cycle times from order to delivery, and reduction in operating costs. The on-line, real-time operational data that ERP systems provide enable managers to make better decisions and improve responsiveness to customer needs (Ross, Vitale, and Willcocks, 2003). There is evidence that organizations are satisfied with ERP. Based upon a sample of 117 firms in 17 countries, the Conference Board reports that 34% of the organizations were satisfied with ERP, 58% were somewhat satisfied, 7% were somewhat unsatisfied, and only 1% were unsatisfied (McNurlin, 2001). WHAT IS ERP? ERP systems are the software tools used to manage enterprise data. ERP systems help organizations deal with the supply chain, receiving, inventory management, customer order management, production planning, shipping, accounting, human resource management, and other business functions (Somers and Nelson, 2003). According to Deloitte Consulting, an ERP system is a packaged business software system that allows a company to “automate and integrate the majority of its business processes; share common data and practices across the enterprise; and produce and access information in a real- time environment.” ERP systems are different from legacy systems in that organizations use ERP to integrate enterprise-wide information supporting financial, human resources, manufacturing, logistics, and sales and marketing functions (Shanks, Seddon, and Wilicocks, 2003). An ERP system provides an enterprise database where all business transactions are entered, processed, monitored, and reported.
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One of the most challenging issues associated with ERP systems is that the software imposes processes on the organizations that implement it. The issue of whether to make modifications or
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ERP-1 - A Foundation for Understanding Enterprise Resource...

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