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Erp for Small and Medium Enterprises

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Words: 1934 |

Pages: 4|

10 min read

Published: Jul 17, 2018

Words: 1934|Pages: 4|10 min read

Published: Jul 17, 2018

What is SME? The term SME is used to designate small to medium enterprises -companies that have a limited, specified number of employees. The TheUnited States call it as SMB-small to medium business. SME is classified based on a number of employees as well as the investments made, depending on the country in which it is operating. All SMEs more or less share some common characteristics irrespective of the industry. Characteristics of sees dependence on Few EmployeesSME companies have very few employees. These employees rather than performing specialized tasks like their counterparts in big companies, involved in multiple tasks. These include tasks involved in innovation, production, marketing, sales, and accounting. This can be a disadvantage if employees do not possess the necessary skill sets to perform multiple tasks satisfactorily; however, this business structure promotes long-term stability rather than focusing on short-term results.

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Most of the SMEs focus on a limited number of products and services. That is why they establish strong relationships with their business partners producing economies of scale. This provides stability to SMEs. The disadvantage of this is that the SME relies very heavily on existing relationships and may suffer badly if a relationship is terminated.SimplicityBecause SME is a simple business structure it can make necessary changes quickly and without prior permissions of shareholders and board members. This flexibility, necessarily means the company may not be observing local or national regulations that aboard or legal team of a larger organization would generally look into before making a decision.SizeThe small size of the SME can be leveraged when it comes to specialization and catering niche markets with products. But, size can be an obstacle when obtaining financing for the business. SMEs generally rely on personal assets of owners and management to finance the needs of a company. Limited funds affect marketing and the capability to reach new markets.

The ERP implementation lifecycle consists of 5 major stages as explained below, each of which is vital for the success and smooth implementation of the SME’s business operations. Feasibility StudyThis stage begins with understanding the SME's business processes and the2 | P a g requirement gathering for the best ERP solution delivery. It includes defining the scope, documentation of various modules and their requirement, approaching ERP Vendors & Implementers/consultants and budgeting. Project PlanningThis stage consists of team formation, project planning, defining phases of implementation & timelines and meetings with module owners for in-depth clarity. It also involves the analysis of critical processes and Business Process Redesign, defining roles and responsibilities, setting up configuration teams and training.ExecutionThis stage is the most important stage of implementation as it involves the configuration & customization of modules, continuous functional testing for making the final system code ready for full deployment. As SMEs have less complex processes, it is often monitored by a few top managers owning each of their modules.

Final Deployment

This phase involves data migration into production servers, proper gap analysis byUnit Testing (UT), User Acceptance Testing(UAT), and System Integration Testing(SIT) and follows a feedback mechanism at each stage to see if the implementation is on the right track with the customer business needs. Regression Testing is often done for bigger systems which have a lot of data migration involved. This is also called the-Live stage in IT terms and it is only initiated after testing signoff given by testing team so that the implementation into a production environment is a smooth process. Maintenance and SupportThe final stage in the ERP implementation life Cycle is the support. It includes proper training for employees to get used to the new environment and proper KSS integrated systems to maintain all the documentation of the process for future reference. Maintenance partner can be a different vendor altogether, but the main purpose is to support the system and client with performance optimization measurement for any issues that may arise during the normal functioning of the ERP system. This often is the project completion phase. The above stages sum up the fundamental flow of the ERP Implementation in most of the SMEs and may vary slightly from business to business requirements. Thus, ERP is nothing but a Commercial off the shelf (COTS) product which is tweaked as per the requirements of the SMEs and hence is often less costly than that of bigger companies which are often more complex to implement and take a longer time.

Low AwarenessThere is a Low level of awareness among SMEs regarding the capabilities of an ERP system and also the ERP vendors whom to approach. There is lack of clarity regarding the benefits to be gained from implementing vs. the cost of ownership3 | P a g customization most SMEs have specific business processes and for the ERP system to support these specific processes, it would need customization of the standard software. Lack of thorough project planning can act as a hindrance for successful implementation scope of Project Implementation andStrategyScope of Implementation may become vital if there are budgetary constraints. Companies should evaluate what they need from the ERP system and accordingly decide on the implementation approach–big bang (all ERP modules in one go) vs. phased roll out (one module at a time)Common PerceptionMost SMEs have the common perception that ERP is best suited for large-scale industries due to the high cost of ownership,complexity of implementation and subsequent maintenance costChange ManagementWillingness of the company’s resources to accept the change also plays a key role ineffectiveness of implementing ERP.

Proper training must be imparted to the end users to let them familiarize and understand the concept and how the system will functions/Financial OwesSMEs may have budget constraints that may inhibit them to fully realize the benefits ofERP implementationLimited ResourcesMost SMEs do not have skilled in-house resources that can provide suitable inputs and proper guidance to the implementation team. This may necessitate hiring external ERP consultants leading to added overhead in terms of cost and time of implementation being a perfect/good fit is quite necessary to ensure that efforts and investment made into it have turned out fruitful. Once ERP has been implemented ina SME I need to evaluate if it was a success. There will be certain factors that need to be reached/ fulfilled in order to ensure the success of ERPThese success factors can be unique to a particular SME, but most of the broader factors remain common for all SMEs.Examples of these are Top Management support, clear goal and proper vision, Project team competence, minimal system customization, Project team management, project champion and User involvement. Minimal customization stands an important factor because SMEs need a lot of flexibility in the business operations and customization prevents them from the future need for change.

Research in this field has shown that ERPsadapting to the process of SMEs can be rather a more viable option. Moreoverimplementation of ERP might fundamentally change the way in which the firm operates so it stands vital that the top management provides its support and be ready with a clear goal for the firm and a4 | P a g plan of making the team competent enough to adjust to the changes. This can be achieved with a consultant and assigning project champions to each team to help them cope up with issues arising in the help integrate all the functions of an organization together and improves the process of information sharing and redundant information storage at multiple locations. The integrated network ERP provides the firm to keep a proper track of the flow of information and the current situation. Benefits of using an ERP by SMEs

Increase the productivity helps various departments to share the data quickly so the employees don’t have to contact people in different departments again and again for information they need, also it improves collaboration among different departments thus helping save time and improving the overall productivity. Streamlining the data-flowers helps a company to create a proper flow of data such that the data is accessible to the entire authorized user and can easily flow between one department to another systematic way without creating any confusion.

ERP can help to reduce the operation cost as it helps to remove unwanted systems of data storing at each of the function, also as it helps increase efficiency and help various functions operate at an optimum level it saves wastes thus reducing the overall cost.Improves Decision-Making processes ERP integrates the data from all the departments it helps the manager to get a birdseye view and how things are functioning so the management team can easily understand the process and take appropriate decision.

Companies require very little assistance from ERP vendors after implementation. Hence there is a high possibility of market exhaustion for ERP vendors as most of the large companies have opted for ERPalready. The solution over this is - creating a new market which can be done through ERP services to SMEs.Indian market is very competitive and growing. Every company wants to grow rapidly. But today it’s not only hard work but also the smart work that will help SMEs to achieve competitive advantage. ERP provides technical assistance to companies to achieve this competitive advantage.According to Frost and Sullivan's research conducted in India, it has been found that due to rising competitive pressure most of the Indian companies are opting for ERP technologies. Let’s understand Navision5 | P ag which is one of the future tools in the ERP system of SMEs.ERP selection for SME - MicrosoftDynamics (NAV)/ NavisionThis is specially designed software for SMEs. An SME expects cost and time benefits from the ERP system. Navision provides a lesser time of implementation at a lesser cost. Features of Navision? Implementation of manufacturing module is one of the critical issues ofERP. But in the case of Navision, Manufacturing is its strength as it is equipped with strong MRP (material requirement planning)? Number of integration and reporting features. Navision has its presence in US, Europe and Africa market for more than 10 years; with increasing demand for ERP from SMEs in India it can enter the Indian market

Fasteners, A Singapore based firm, is a perfect example of SME who has successfully implemented ERP for its organization. They supply more than 15000types and size of fasteners such as screws, nuts, pins, bolts, rivets, clips and anchors. They have an e-commerce platform to supply products to their customers.PS Fasteners was facing a challenge in the online ordering system. Previously this was a manual, back-end process and totally relied on human data downloads for orders received and constant rechecking throughout the day to see if any new orders had come in. This often led to missed or delayed orders and it wasn’t meeting the needs of PSFasteners, their staff or their customers. To overcome this problem, they decided to implement ERP for their organization. The online ordering system synced with their inventory data and orders could be processed automatically in a matter of minutes. They were also able to leverage the best practices of SAP in standardized financial documents and sales processes and now enjoy a much more streamlined approach to their daily activities. Manual order processing is a thing of the past for this forward-thinking company! This is one of the success stories of SMEs and there are many more who have taken the benefits of ERP which has given them a competitive advantage.

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ERP system is not only for large organizations but can also be implemented by small and Medium Enterprises (SMEs).ERP system is now considered an essential management aid which may contribute to the growth and sustainability of SMEs.Therefore this study discussed what overview of ERP system for SMEs.

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Erp for Small and Medium Enterprises. (2018, April 15). GradesFixer. Retrieved May 30, 2024, from https://gradesfixer.com/free-essay-examples/erp-for-small-and-medium-enterprises/
“Erp for Small and Medium Enterprises.” GradesFixer, 15 Apr. 2018, gradesfixer.com/free-essay-examples/erp-for-small-and-medium-enterprises/
Erp for Small and Medium Enterprises. [online]. Available at: <https://gradesfixer.com/free-essay-examples/erp-for-small-and-medium-enterprises/> [Accessed 30 May 2024].
Erp for Small and Medium Enterprises [Internet]. GradesFixer. 2018 Apr 15 [cited 2024 May 30]. Available from: https://gradesfixer.com/free-essay-examples/erp-for-small-and-medium-enterprises/
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