Paper Example on Implementation of ERP in SMEs

Enterprise resource planning (ERP) systems are essential in integrating and automating both the external and internal management of information across the whole company. This system is also useful in embracing manufacturing, sales, and service, accounting, and finance as well as customer relationship management. Incorporating ERP into the corporation promotes the flow of information among all processes of the organization internally while at the same time managing the necessary connections with the stakeholders. According to (Zach et al., 2012 p. 310), ERPs have generated significant attention in both the academic and in practical fields. Furthermore, multiple articles that are related to various issues and topics regarding ERP systems have been published. Small and medium enterprises (SMEs) have been accepted as unique environments as compared to large corporations. As such, these reviews indicate that implementing ERP systems into the SMEs would facilitate a more detailed understanding and evaluation of both the operational benefits of ERPs as well as the functioning of the SMEs (Zach et al., 2012 p. 309). However, there is little research in regards to the implementation or implications of implementing ERMs into SMEs as a majority of the research focuses more on the large companies and less on the SMEs.

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Definition of ERP Systems

The Enterprise Resource Planning (ERP) system can be identified as the incorporation of several factors that are essential in managing an organization. Furthermore, (Klaus et al., 2000 p. 141) defined ERP system as a modular software system that comprises of inventory, payment management, accounting, purchase module as well as human resources. These dissimilar are combined under one system that can effectively share as well as be managed via a centralized database to modernize and restructure the operations of an organization (Deshmukh et al., 2015 p. 221).

Both large corporations and SMEs continuously adopt ERP systems as they are useful in guiding the operations of numerous enterprises. Moreover, ERPs are identified as effective in improving the productivity and performance of employees, thus making them strategic resources for companies that further facilitates a stable market position as well as a competitive advantage for the company (Hasheela-Mufeti & Smolander, 2017 p. 6). Through its common database for a different function, the system can increase the productivity of the company as there is an opportunity to identify areas that need improvement and redirect organizational resources to the specific area (Grandhi & Chugh, 2012 P. 210). However, implementation can be complicated and expensive since it involves increased investments that are often applicable to large corporations. Nevertheless, it is possible to incorporate this system into SMEs (Grandhi & Chugh, 2012 P. 210).

Benefits of Implementing ERP Systems to SMEs

The ERP system provides an appropriate solution that will help SMEs to grow and, at the same time, ensure cost savings while improving the operations of the SME. As such, the SME will be able to thrive even during difficult economic times. The benefits of integrating EERP systems in SMEs include integrated information, cost-saving, streamlined processes, improved customer service as well as better reporting.

Streamlined Processes

ERP systems facilitate complete visibility into all the essential processes within the SME. Furthermore, this system will help by providing a unified platform that will analyze statistics across all functions in real-time (Schniederjans & Yadav, 2013 P. 364). This ability is essential, especially for senior management, as it ensures that information concerning all activities of the company is combined in one place to provide better insight and facilitate better analysis of these functions (Schniederjans & Yadav, 2013 P. 364).

Integrated Information

The ERP system will facilitate data sharing between several operational areas of the organization. This action will be beneficial to the SME as it will be able to reduce the tiresome work of manually entering data as it will provide automatic workflow as well as faster completion of organizational functions. The system will also ensure that there are proper tracking and completion of SME activities (Dezdar & Ainin, 2011, p. 919).

Cost Savings

The ERP system is capable of illustrating how SMEs can improve their productivity through effective management of their supplies. ERP systems are involved and help to interconnect functions such as inventory operations, customer service as well as product supplies to create a better flow of products from the organization to the consumer (Zhang et al., 2005, p. 56). As such, the system can be able to illustrate how an issue in one sector can impact the other operation which is real-time information that enables SME managers to analyze and understand the problem before making well-informed decisions. As such, the SME gains a competitive edge due to increased efficiency and reduced costs (Zhang et al., 2005, p. 57).

Customer Service

The ERP system helps in customer service by assisting in sales order processing, physical distribution of products, managing customer relationship as well as billing and invoicing. Moreover, the system helps to maintain essential customer information (Almahamid & Awsi, 2015, p. 155). As such, the system will be beneficial as it will help SMEs to know their clients as well as their needs as it helps them to keep track of communication history, orders, personal information as well as invoices. As such, the SMEs can improve their customer handling to facilitate consumer satisfaction (Almahamid & Awsi, 2015 p. 155).

Reporting

ERP systems facilitate improved reporting as well as better company intelligence. Reports are delivered from the system in both standardized and customized nature. These reports are useful in making the work of managers easier, which, in turn, increases productivity while at the same time, reduces work delays. The system also provides financial reports that are essential for accounting within the SMEs through metrics such as data visualization of the key performance indicators (Almahamid & Awsi, 2015 p. 165). This data is essential as it ensures that managers make well-informed decisions.

Implementation of ERP System in SMEs

The implementation of an ERP system in SMEs is reliant on several factors. Successful implementation of this system depends on the alignments of activities of the ERP with the requirements of the business (Loh & Koh, 2003 p. 3433). These activities may include customization as well as business process re-engineering (BPR) (Haddara & Zach, 2011, p. 4). This process is vital as well as resource-consuming as the SME is expected to restructure its functions to fit in with the ERP system for optimum functionality. Additionally, successful implementation is reliant on identifying the critical success factors due to the unique features of an SME that further complicate the aspect of implementing ERP systems in SMEs (Zach et al., 2012 p. 330) as such success factors indicate that BPR, ERP system quality, top management support, as well as knowledge sharing during implementations provided higher likelihood for successful implementation of the ERP system. Additionally, the characteristics of SMEs that support localization as well as adopting a vendor’s perspective are essential in ensuring that ERPs are implemented successfully (Zach et al., 2012 p. 330).

The different implementation methodologies between different SMEs due to different sizes and complexities of the corporation affect the successful implementation of the ERP system. As such, it becomes easier to implement ERP systems in more prominent SMEs is easier as compared to smaller SMEs. Moreover, implementing ERP systems in SMEs will become easier if the enterprises implement an SME specific ERP system as they will not require external consultancies, thus reducing their investments dramatically (Zach et al., 2012 p. 331). As such, the SMEs will be able to save resources such as time and high cost of training that are typically associated with ERP packages. Therefore, SMEs should ensure that the ERP systems are customized to match the company’s niche and not the other way around since the SMEs are likely to lose competitive advantage if they implement a standard ERP system.

Features of an Effective ERP System

The trendiest ERP integrations include e-commerce, which is useful in handling order processing and tracking. However, SMEs can incorporate other systems with the ERP via the Application Programming Interface (API) (Ruivo et al., 2013 p. 84).

An effective ERP system should have customization capabilities such that it can be customized to fit different functions within the corporation (Ruivo et al., 2013 p. 84). Customization can be measured in contexts of flexibility such that the system can adapt an upgrade quickly; moreover, the system should be scalable in terms of its ability to handle an increased amount of work and accommodate the growth of SME. Moreover, a customized ERP should b able to integrate with other systems within the organization easily (Ruivo et al., 2013, p. 84).

An effective ERP system should also be modular such that it can implement more than one module based on the necessities of the SME. As such, the employees can be able to use different modules that best suit their needs within the same organization (Ruivo et al., 2013 p. 84). Additionally, and effective ERP system should be multi-facilities such that it incorporates multiple languages, locations as well as currencies. Finally, an effective ERP system should have automatic functions that will help to reduce delays and, at the same time, increase productivity (Ruivo et al., 2013 p. 84).

Reference

Almahamid, S., and Awsi, O., 2015. Perceived Organizational ERP Benefits for SMEs: Middle Eastern Perspective. Interdisciplinary Journal of Information, Knowledge, and Management, 10, pp.145-172.

Deshmukh, P., Thampi, G. and Kalamkar, V., 2015. Investigation of Quality Benefits of ERP Implementation in Indian SMEs. Procedia Computer Science, 49, pp.220-228.

Dezdar, S. and Ainin, S., 2011. Examining ERP implementation success from a project environment perspective. Business Process Management Journal, 17(6), pp.919-939.

Grandhi, S. and Chugh, R., 2020. Implementation Strategies for ERP Adoption by SMEs. Springer-Verlag Berlin Heidelberg, 350.

Haddara, M. and Zach, O., 2011. ERP Systems In Smes: A Literature Review. [online] ResearchGate. Available at: https://www.researchgate.net/profile/Moutaz_Haddara/publication/224221441_ERP_systems_in_SMEs_A_literature_review/links/0c96052abf76c71780000000/ERP-systems-in-SMEs-A-literature-review.pdf?origin=publication_detail [Accessed 28 August 2020].

Hasheela-Mufeti, V. and Smolander, K., 2017. What are the requirements of a successful ERP implementation in SMEs? Special focus on Southern Africa. International Journal of Information Systems and Project Management, [online] 5(3), pp.5-20. Available at: http://www.sciencesphere.org/ijispm/archive/ijispm-050301.pdf [Accessed 28 August 2020].

Klaus, H., Rosemann, M. and Gable, G., 2000. What is erp?. Information Systems Frontiers, [online] 2(2), pp.141-162. Available at: https://www.researchgate.net/publication/220199006_What_is_erp [Accessed 28 August 2020].

Loh, T. and Koh *, S., 2007. Critical elements for a successful enterprise resource planning implementation in small-and medium-sized enterprises. International Journal of Production Research, 42(17), pp.3433-3455.