In addition to that, an ERP system also comprises of modules that are specifically designed to cater to a company’s accounting, finance, human resource management, and planning purposes as well.
Integration can be considered as the core purpose of an ERP implementation in a company (Zhang, 2005). In a traditional organization environment, all the functional departments worked in isolation and were concerned only with their own performance and profits. Information flow between departments was not efficient because the need to share information was not realized. Also, departments felt that sharing information would make them lose their integrity and others could excel using their information.
With an ERP implementation, the company cashes on the data available to the company and information is shared throughout the organization. The central database, facilitated by the ERP software, is used as the hub of information of the organization. Data is no longer constrained to individual departments. Instead, all relevant information for every department is made available to them. The central database does not only make the data available, but it also reduces redundancy in data.
As the ERP software integrates all the processes in the different departments of the company and brings them on to a common platform, there is accurate and up to date information available for everyone. This availability of data results in inefficient business processes and effective decisions made on a daily basis.
The ERP system can help reduce the operating costs of the business by maintaining optimal levels of inventory and, hence, reducing inventory carrying and inventory holding costs. It can also reduce production costs, marketing costs, and product support costs. (Wagner &. Monk, 2008) .It is important to note that these cost reductions begin to materialize after a relatively long period in time.