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Chapter 2
THE SIGNIFICANCE AND BENEFITS OF ERP
SOFTWARE AND SYSTEMS
36
The significance of ERP lies in its many benefits. Recall that integrated information
systems can lead to more efficient business processes that cost less than those in
unintegrated systems. In addition, ERP systems offer the following benefits:
• ERP allows easier global integration. Barriers of currency exchange rates,
language, and culture can be bridged automatically, so data can be integrated
across international borders.
• ERP integrates people and data while eliminating the need to update and
repair many separate computer systems. For example, at one point, Boeing
had 450 data systems that fed data into its production process; the company
now has a single system for recording production data.
• ERP allows management to actually manage operations, not just monitor
them. For example, without ERP, getting an answer to “How are we doing?”
requires getting data from each business unit and then analyzing that data for
a comprehensive, integrated picture. The ERP system already has all the
data, allowing the manager to focus on improving processes. This focus
enhances management of the company as a whole, and makes the
organization more adaptable when change is required.
An ERP system can dramatically reduce costs and improve operational efficiency. For
example, EZ-FLO International, Inc., a family-run plumbing products manufacturer and
distributor, had been experiencing double-digit growth and needed a scalable business
platform to support its global growth. The company selected SAP Business All-in-One
customized for wholesale distribution. As a result of the integrated process capabilities,
EZ-FLO has been able to greatly improve its inventory management processes and has
eliminated its annual inventory count, which used to take 100 employees two days to complete.
In addition, the company has reduced manufacturing lead times in its domestic plants by two
weeks. These process improvements led to improved customer service, and a 20 percent
increase in the number of new customers—with a 12 percent growth in sales per customer.
Welch Foods, Inc., is the processing and marketing subsidiary of the National Grape
Cooperative, an organization of 1,200 U.S. and Canadian grape growers. In 2004, Welch’s
decided to implement Oracle’s E-Business Suite to make better decisions regarding product
mix, production, and marketing. For Welch’s, a key advantage of the ERP system is that it
provides a “single source of truth” on production costs and on customer and product
profitability, allowing Welch’s management team to make better business decisions.

QUESTIONS ABOUT ERP

How Much Does an ERP System Cost?
The total cost of an ERP system implementation includes several factors, including the
following:
• The scale of the ERP software, which corresponds to the size of the company
it serves
• The need for new hardware capable of running complex ERP software
• Consultants’ and analysts’ fees

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