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Enterprise Resource Planning: Using ERP to Integrate Business Processes

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  • 0:05 Enterprise Resource Planning
  • 1:42 Advantages
  • 2:55 Challenges
  • 4:28 Software
  • 5:16 Examples
  • 5:48 Lesson Summary
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Lesson Transcript
Instructor: Paul Zandbergen

Paul has a PhD from the University of British Columbia and has taught Geographic Information Systems, statistics and computer programming for 15 years.

Enterprise resource planning is a set of integrated program to manage the critical operations for an entire organization. Learn about the advantages and challenges of implementing ERP.

Enterprise Resource Planning

Let's say you are the CEO of a major airline. Your company has about 100 planes that fly to more than 50 different cities all over the world. You have approximately 10,000 employees in 12 different countries and more than 20 million customers every year. Just think for a moment about what it takes to run a company like that. Are you up for the job?

The latest quarterly financial reports are in, and the news is not good. Costs are up, and profits are down, and this has been a trend for the past two years. How are you going to turn things around and make your company more profitable? Just fixing one thing is not going to be enough. You're going to need to make improvements across the entire company, from plane maintenance and safety to marketing and customer loyalty. What you need is an enterprise resource planning system.

Enterprise resource planning, or ERP, is a set of integrated programs to manage critical operations for an entire organization. At the center of the ERP system is a database that is shared by all users. This makes it possible for all units in the organization to have access to current data to support operations and planning.

ERP has emerged as an important tool in controlling costs and product flows through a complex enterprise. One of the defining characteristics of ERP is that it integrates real-time information from across the entire enterprise.

Advantages

ERP has a number of advantages. These include:

1. Improved access to data to support decision making

ERP systems use an integrated database to support all business functions. This facilitates operational decision making across the enterprise, resulting in seamless integration of various units.

2. Elimination of legacy systems

Legacy systems are those computer-based systems that have been in place for many years but are no longer supported and don't interface reliably with newer systems. ERP replaces multiple systems on different platforms into a single set of integrated software applications.

3. Improvement of work processes

ERP systems are designed to implement best practices, which are the most efficient and effective ways to carry out a particular workflow or process.

4. Upgrade of technology infrastructure

The implementation of ERP presents an opportunity to bring all information technology in an organization up to speed in an organized manner rather than gradually upgrading individual components when they need fixing.

Challenges

Implementing an ERP system can be very challenging. Not only does it require substantial resources, it also requires strong support from management as well as the effective collaboration of many units across the entire enterprise. Some of the specific challenges of ERP systems are:

1. Cost

Implementation of an ERP system can be very costly, with a typical system for a large organization running in the millions of dollars.

2. Disruption of upgrades

An ERP system needs to be integrated with existing systems, and this may temporarily disrupt regular operations.

3. Long implementation time

Implementation of an ERP for a large organization can take several months to over a year.

4. Difficulty in managing change

An ERP system often requires an organization to do certain things differently in order to integrate processes and become more efficient. This may not always be received well by long-term employees.

5. Software customization

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