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Managing Return On ERP Investment F-05-04 “Managing For Return on Investment – Attributes for Enterprise Resource Planning Success and Failure” By: W. Stewart Thomas March 15, 2004 1
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Managing Return On ERP Investment Abstract Enterprise Resource Planning (commonly known as ERP) is a system that integrates key business and management processes to provide a top level view of what is going on in an organization. Aiming to serve as a backbone for an entire business, ERP tracks company financials, human resources data and (where applicable) the manufacturing information such as where inventory is located and where it needs to be taken from for order completion. This could be from the parts warehouse to the shop floor or from one global warehouse to a regional warehouse in another country depending on the depth of ERP used as well as the size of the organization. Software has existed for decades to manage the aforementioned (and other) business tasks. These individual software packages are typically provided by a different software vendors and usually do not interface to one another. For example, the accounting system did not exchange data with the manufacturing system; the manufacturing system did not interface with the human resource system, and so forth. While interface can be accomplished, it usually does not happen without a great deal of rewriting from expensive software technicians in information systems. Even when interfaced, the newly developed custom code was not easily upgraded upon new software releases. The idea behind ERP is that the software needs to communicate across functions and operate from one single database. With an ERP system, the financial software can cut an accounts payable check as soon as the loading dock clerk confirms that the goods have been received in inventory and an automatic match process takes place between purchase order, invoice, and receiver. Similarly the accounts receivable module can generate an invoice as soon as the shipping clerk says the finished goods are on the truck to the customer. ERP aims to replicate business processes (how do we record a sale, how do we verify hourly workers' paychecks) in software, guide the employees responsible for those processes through them step by step and automate as many procedures as desired. 2
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Managing Return On ERP Investment While ERP sounds great there is considerable downside. ERP systems are expensive (often multimillion-dollar projects), have a high degree of complexity, and huge risk for failure. The promise of ERP is great but so is the expense in terms of time, effort and money. Implementing the software in a company usually involves changing business processes and the way people do their jobs. With careful planning and an extensive properly managed work effort, ERP can provide huge returns on investment and make organizations function more effectively and efficiently.
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This note was uploaded on 11/05/2010 for the course FCBA MBA608 taught by Professor Dr. during the Spring '10 term at Baptist College of Health Sciences.

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