Pitfalls of ERP

Enterprise Resource Planning (ERP) is an indispensable part of big organizations these days, but it is not without any pitfalls.
Enterprise Resource Planning or ERP is a computer software system that facilitates information sharing, business planning and data integration within an organization. It is popular among large as well as small-scale companies. The installation of ERP system can help a company to predict the demand of a particular product, forecast the necessity of raw materials, establish production schedule and project key financial measures. However, despite its potential benefits, there are a number of pitfalls of ERP, which are primarily because of inadequate investment in training and lack of corporate policies to protect data integrity. The complete setup of ERP is large, complicated and expensive and requires an enormous time commitment from the IT professionals in the company. Employee training at both managerial and technical levels, new process work-flow and a complete changeover in basic working policies often make the installation of ERP a slow and painful process.

Inadequate Training
Success of any organization is dependent on various factors, like, skill and experience of the workforce, optimum utilization of resources and proper planning. A proper training in ERP is very important in order to make the system work correctly. Many companies try to save money by not providing enough expenses for ERP training of employees. This results in an inadequate cognizance of the particular ERP vendor package being used. Improper training may lead to mishandling of the technology by employees, which can result in the loss of valuable information.

Expensive Software
ERP is a very expensive technology and the installation itself can dig a deep hole in the company's pocket. Its purchase basically depends on the scope of implementation, complexity of the departments and ERP vendors. Packaged ERP software may cost around a few million dollars. Besides ERP software, new computer hardware, updated network equipment and security software are also required for the implementation of ERP systems. The costs of these hardware and software depend on factors, like, the number of modules and the platforms used.

Limited Customization
The customization of an ERP setup is very limited, as it may involve changing of the entire ERP software structure. The flexibility of the setup is very much dependent on the brand of software being used. Some brands give a provision of extended customization and flexibility, which makes them more convenient to use, as compared to others. Often due to this the scope of implementation of ERP becomes too difficult and rigid, which hampers the specific work-flow of a business.

Interconnectivity of Departments
The interconnectivity of the various departments within an organization is advantageous as well as disadvantageous. As we all know, a chain is as strong as its weakest link. With the implementation of ERP package, an inefficiency in one department may affect other participants. If one of the departments breaks down or becomes inefficient, it may adversely affect the efficiency of other departments.

Very High Implementation Time
The time required for the implementation of a complete ERP system is very high. This installation and training time may disturb the regular functioning of the organization and may pose a huge risk of loss of a potential business in that particular period. The complete installation may take a year or more, depending on the number of modules that have to be installed. This time is worth spending only if the whole new setup gives significant profits in terms of time and money.

ERP is an important part of all the big organizations these days. However, it is necessary for a company to correctly weigh the advantages and disadvantages, before putting in so much money.
By Swapnil Srivastava
Last Updated: 10/8/2011
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