There are many benefits to using an ERP system in a business entity. The many benefits can be categorized into tangible benefits, intangible benefits, and also new benefits derived from the system.
In a journal by O’Leary (2004), the most common tangible benefits to an entity include inventory reduction, which reduces holding costs indirectly, and also reduction in personnel, meaning less wage expenses to be incurred by the entity. The third most common benefit would be a boost in productivity. This is probably caused by one of the intangible benefits of the ERP system, the increase in information or visibility. As the layout of the entity’s resources is clearer using the system, the wastage of resources due to miscommunication or internal uncertainties is reduced. (O’Leary, 2004)
In addition, other intangible benefits commonly reported by entities would also include process improvements, which is an increase in cost efficiency, and also a higher customer responsiveness (O’Leary, 2004). Next in line is a reduction in cost, possibly due to the higher visibility of the entire entity via the ERP system and also due to another less reported benefits, which are greater intergration and standardization. Overall, it appears the ERP system is a very good tool for reducing costs and boosting productivity, both usually as a result of finding more efficient ways to do business.
However, the ERP also has additional benefits besides enhancing the current systems the entity is using. There are also new benefits derived from using the ERP systems, also by O’Leary (2004), who claims in his journal that the most common additional benefit entities obtain from ERP systems are greater growth, a reduction in redundant data entry, and also improving comparitive advantage by changing the business model. This shows that the usage of ERP systems facilitates innovation as the capabilities and resources of the entity are well presented.
In conclusion, ERP systems has many benefits to...