Be Careful Of Implementing An ERP System

There are many companies who are persuaded by glittering SAP or Oracle advertisements championing their Enterprise Resource Planning (ERP) software. Let me share what I know and some links before our small businesses jumps onto the ERP bandwagon. Even when a company had implemented ERP, can they make better use of the data they have?

Advantages of ERP:
1. Integration of information (Finance, Manufacturing, Inventory, Sales)
2. Visibility of information
3. New functionalities
4. Standardization of data and processes

Disadvantages of ERP:
1. Loss of flexibility and creativity on the ground due to standardized processes
2. Decreases flexibility to react to market
3. Customization is expensive in subsequent upgrades

Success Factors of ERP implementation if:
1. Customer demand is stable
2. Product is standardized
3. Product is of a modular design
4. There are Frequent shipments to customers

Poor Chance of Success with ERP implementation when:
1. Aggregate demand is unstable (>10% pulses in demand)
2. You have long unavoidable leadtimes from suppliers

Further reading:
1. http://www.tech-faq.com/erp.html
2. http://www.cio.com/article/40323/ERP_Definition_and_Solutions