Limitations of Enterprise Resource Planning (ERP)

ERP (Enterprise Resource Planning) is a computerized system that makes easy information dissemination, data integration and business planning within an enterprise. It is popular among large as well as small-scale companies. The deployment of Enterprise Resource Planning (ERP) system can facilitate a company to forecast the demand of a particular commodity, estimate the requirement of raw materials, set up production schedule and predict key financial measures.

However, despite its prospective benefits, there are a number of drawbacks of Enterprise Resource Planning, which are principally because of insufficient investment in training and lack of corporate policies to protect data integrity.

Enterprise Resource Planning Limitations

The complete setup of Enterprise Resource Planning is vast, thorny 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 makes the installation of ERP a slow and painful process. Following are some of the major drawbacks of Enterprise Resource Planning.

Inadequate Training

Triumph of any organization is reliant on various factors, like, skill and experience of the manpower, optimum utilization of resources and proper planning. A proper training in ERP is very imperative in order to make the system work appropriately.

Many companies try to save money by not providing enough expenses for Enterprise Resource Planning training of employees. This results in an inadequate cognizance of the particular Enterprise Resource Planning 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 System

Enterprise Resource Planning is a very costly technology and the setting up itself can dig a deep hole in the company’s pocket. Its acquisition fundamentally 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 obligatory 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.

Degree of Customization

The customization of an Enterprise Resource Planning setup is very limited, as it may engross 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 Enterprise Resource Planning becomes too difficult and rigid, which hampers the specific work-flow of a business.

Inter connectivity of Departments

The inter connectivity 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 Enterprise Resource Planning package, 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.

Also See: Successful SAP ERP Implementation