Activities
Activity 6.1 (P. 222)
Figure 6.2 provides a convenient tool for discussing the interrelationship between
e-commerce and e-business. Based on the definitions provided above, state which of the three alternatives is most appropriate to describe the relationship between e-business and e-commerce.
In Figure 6.2 (a) there is a relatively small overlap between e-commerce and e-business. From Fig 6.1 we can reject Fig 1.2(a) since the overlap between buy-side and sell-side e-commerce is significant.
Figure 6.2 (b) seems to be more realistic, and indeed many commentators seem to consider e-business and e-commerce to be synonymous.
It can be argued, however, that Fig 6.2 (c) is most realistic since e-commerce does not include reference to many of the transactions within a business such as processing a purchase order that are part of e-business.
In an international benchmarking study analysing the adoption of e-business in SMEs the Department of Trade and Industry emphasises the application of technology in the full range of business processes, but also emphasise how it involves innovation. They describe e-business as: ‘... when a business has fully integrated information and communications technologies (ICTs) into its operations, potentially redesigning its business processes around ICT or completely reinventing its business model… e-business is understood to be the integration of all these activities with the internal processes of a business through ICT.’
DTI (2000) – See Chapter 6 references.
So e-commerce can best be conceived as a subset of e-business and this is the perspective we will use in this book. Since the interpretation in Fig 6.2(b) is equally valid, what is important within any given company, is that managers involved with the implementation of e-commerce/e-business are agreed on the scope of what they are trying to achieve!
Activity 6.2 (P. 223)
To examine estimates of the current and future size of e-commerce trade and critically review the validity of these estimates.
No solution required.
Activity 6.3 (P. 227)
Explain the variation in online purchases for different products shown in Figure 6.6 using the Electronic Shopping Test.
Note: This activity should not refer to Fig 6.6 but to Fig 6.7.
Rather than referring to each product on a case by case basis, it could be suggested that students consider three groups. High proportion of online purchases (more than 20% of online users have purchased); medium (5-20%) and low (less than 5%).
The characteristics of products within each group can then be assessed. Within the first group the product characteristics are such that the product is standardised. It can be argued that some comparison is needed as part of the buying process, for example in selecting a book, but the reviews online are sufficient to enable this choice to be made. Books can be bought from new online brands such as Amazon or existing retailers. Consumer attributes are such that it is straightforward to purchase a book online.
Alternatively, in the group with the low proportion of online purchases (<5%) the products are more complex (e.g. financial services) or have characteristics that are less amenable to online purchase (e.g. cars, cosmetics).
Activity 6.4 (PP. 260 – 263)
For the second example of outdoor equipment, develop a matrix showing the dimensions and categories of information in the same form as that for the car sales matrix. List your assumptions where insufficient information is available.
The matrix produced will be similar to that of Table 6.5 (P. 261) except for these columns:
• Locations – this can also include retailers, mail-order and online as different channels for purchase.
• Products – Product category, from Fig 6.27, e.g. Tents, back packs, etc.
Other good areas for this analysis that students can relate to are financial services and holiday products. All are similar in areas other than product characteristics.
Case Studies
Case Study 6.1: European SME adoption of e-business (P. 228)
1. Summarise the current usage of the Internet by SMEs according to the article. Use online resources to find specific figures for your country.
2. Discuss the reasons for the lower than expected take-up of Internet services amongst SMEs.
3. Identify the factors that will be important in determining the future use of the Internet by SMEs.
1. A suitable location for finding further information is the summary of reports at Nua (www.nua.com/surveys). E-business should be categorised according to the different levels of usage described earlier in Chapter 6 (PP. 222 – 227) i.e.
• Access to the Internet • Use for sourcing products
• Use for managing buying process
• Use for buying online transactions, unintegrated systems
• Use for buying online transactions, integrated with internal systems.
We return to this topic in the chapter on e-commerce strategy (see Fig 14.2, P. 574) for a further example.
2. Some of the reasons are given on P. 228 (right-hand column) • Overestimates of demand from consumers for purchasing online.
• Technology confusing for managers in a small business who do not have the time or inclination to learn about it.
On P. 229 (left-hand column) research is quoted suggesting that smaller businesses are less convinced by the cost-effectiveness of introducing new technology.
3. On P. 230, the financial harmonisation of Europe is thought to be one driver. However, given that the Internet hype has failed to migrate many SMEs online, the main driver which will make a difference is when SMEs become convinced that they are losing business from not having an online presence.
Case Study 6.2: Tesco develops buy-side e-commerce (P. 234)
1. What benefits does Tesco’s information exchange offer to the retailer and its suppliers
2. What differences have the use of TiE added over the original EDI system?
3. Discuss reasons why only two of Tesco’s suppliers have fundamentally altered the way they work as a result of TiE.
1. Benefits to Tesco:
• Reduced lead times – seven to three days
• Shifts management of supplying product to supplier this in turn… • Reduces inventory
• Improves product availability • Gives more power over suppliers Benefits to suppliers:
• Can monitor demand in real-time and then have more time to react to ensure product is delivered to customers
• Can analyse sales by store or TV region which is important for promotions (St Ivel has reduced these costs by 30%)
• Gives a catalyst to change their processes (although only two have done so) • Arguably strengthens their relationship with Tesco (soft lock-in)
2. Information flow was one-way with the original system and not real time. Now there is a two-way information flow which can be monitored in real time. This enables better forecasting and the analysis which has been used for promotions.
3. This is not clear from the case, but it can be suggested that inertia (conservatism) and the differences in links to a range of suppliers have caused this.
Mini Case Study: Retail applications of TPS by Sainsbury’s (P. 240)
1. Draw a diagram summarising the links between all the parties who access Sainsbury’s TPS.
2. What benefits will Sainsbury’s gain compared to the time before the introduction of TPS?
3. Can you think of any problems with using TPS so extensively? What can be done to counter these problems?
1. This diagram should be similar to Figure 6.12, with the following parties shown: • customers (possibly via the Internet or through checkout assistants);
• suppliers (direct and indirect via merchants);
• branch managers and departmental managers at each branch;
• distribution and logistics managers at head office and regional distribution centres. 2. Benefits at different management levels include:
Operational:
• better customer service through better availability of products for customers and better quality of perishable products;
• lower cost of managing supply chain through just-in-time ordering in response to fluctuations in demand.
Tactical:
• analysis of customer buying behaviour in response to sales promotions and loyalty card schemes;
• better matching of fluctuating demand and supply.
Strategic:
• increased customer loyalty from card schemes and better customer service; • related services such as banking can be tied into TPS;
• more choice of and competition between suppliers; • better cost management.
3. The problems anticipated are those that occur when the system fails since it is so critical to customer service. Losses in sales on the day of failure and loss of loyalty could result. The solution is the careful testing of new systems and building ‘fault tolerance’ into new systems. For example:
• ensuring the system can deal with a power failure (extra generators);
• providing dual or mirrored servers or disks that can take over in the event of failure;
• well-defined service levels with the IT and networking suppliers to agree that problems are resolved quickly;
• ensuring that the local system is decoupled from the company network, so that if the company network fails the system in the branch can continue to operate.
Case Study 6.3: Cambridge Consultants reduce costs through e-procurement (P. 265)
1. Given the scale of the purchasing operation at Cambridge Consultants, what benefits do you think e-procurement has brought?
2. Why are procurement costs currently as high as £60 to £100 per order? 3. How are procurement costs reduced through e-procurement?
4. What staff benefits occur for Cambridge Consultants as a result of e-procurement? 1. The large number of suppliers (4,000) and range of items (needed for over 120 projects) mean that many purchases are made annually. If it is possible to reduce the cost of each one, then large potential financial savings may be possible. Through using e-procurement it is also possible to reduce the cycle time for ordering items for products which will help achieve on-time completion of projects and satisfied customers.
2. Procurement costs were high since there were many stages involving identifying needs paperwork, together with hand-offs, required between up to 8 to 10 staff in the process.
3. E-procurement enabled distributed purchasing that required less involvement from purchasing staff and hence faster ordering. The use of paper has been eliminated. Combined reductions in staff time and physical resources have helped reduce purchase costs to an average of £10 per order.
4. The benefits to the internal customers at Cambridge Consultants include ordering whenever required (out-of-hours) and more flexibility in the delivery of different items meaning that urgent items can be delivered more rapidly since they are not awaiting other elements of a combined order.
Exercises (PP. 278 – 279)
Self-assessment exercises
1. Distinguish between e-commerce and e-business and explain what are meant by buy-side and sell-buy-side e-commerce.
Can best be explained by referring to a diagram of the different elements shown in Fig 6.1 i.e. • sell-side e-commerce
• buy-side e-commerce
• internal use of electronic communications to support business processes.
E-business is generally understood to include all three elements. E-commerce is commonly used to refer to either the first one or first two of these elements, but less commonly the third. E-business is broader in scope than e-commerce.
2. Summarise the consumer and business adoption levels in your country. Outline the reasons why a business may wish to adopt e-commerce. What seem to be the main barriers to adoption for businesses and consumers?
Cyberatlas (www.cyberatlas.com) is a good source of country-specific information. For business, the main barriers are highlighted by the DTI (2000) survey:
• lack of imperative; • security risks.
For consumers, the Which report (2000) highlights fears about security and privacy as well as the lack of a perceived need.
3. Summarise the impact of the introduction of e-business on different aspects of an organisation.
One approach to this question is to refer to the McKinsey 7S framework:
• Structure – how will be the e-business change be managed? Is a separate division required or can the change be matrix managed (Chapter 10)?
• Systems – Do new operating procedures or business processes need to be introduced? Can existing IS be used to implement change or will new systems be required?
• Style – Is the current, possibly conservative, style of the company consistent with the way the company wants to project its image? Will decisions be made fast enough? Will risks be taken to trial new business models and new technology?
• Staff – Is the appropriate mix of staff available?
• Skills – Are the correct skills available internally? What training is required? Do we need to outsource some services?
• Superordinate goals – this refers to the higher goals of the company that may be encapsulated in the mission statement. In modern parlance, do the senior manages ‘get’ the significance of the Internet and will they act?
A possible criticism of the 7S model is that it is internally focused. How well the company forms and leverages partnerships with suppliers and customers is now seen as a key element of strategy. Related to this is how well the company responds to the industry restructuring that has occurred as part of e-commerce. Can it take advantage of disintermediation and reintermediation within the industry.
Alternatively, e-business can be reviewed by referring to different functional areas: • Procurement
• Production • Marketing • Finance
• Human resources.
4. Describe the purpose of workflow management and groupware in an e-business context.
Both of these solutions are used to increase the efficiency of internal processes and are implemented as intranet/e-mail systems. The type of processes include:
• Procurement – authorisation of new purchases • Production – alerts about problems
• Marketing – managing customer interactions during purchase, managing product dispatch, managing new product development
• Finance – integrating with procurement and marketing systems
• Human resources – online systems for booking holidays and training courses (administrative workflow).
5. Evaluate the role of transaction processing systems in an organisation.
TPS perform routine transactions which serve the operational level of the organisation, e.g. sales order processing. Although supporting routine transactions, TPS is often essential to the operation of the organisation.
6. How can information systems support the manufacturing process? Support for the manufacturing process includes:
• Production planning and materials management. Information is provided on the progress of work through the manufacturing system in relation to the due-date for a customer order. Enables plans to be developed for resources (e.g. labour, materials, equipment) needed for production and to schedule order and quantity of components on a day-to-day basis. Materials management approaches include MRP, JIT and OPT.
• Product/service design. A database of information required for aspects such as customer needs and material costings for the design process. CAD provides graphic design assistance. • Facility design. Software allows the use of the SPC technique for quality control.
• CIM. Provides a range of facilities coordinated over a network system using the manufacturing automation protocol (MAP).
7. Explain how decision support systems can support different parts of an organisation. Decision support systems can support the full range of organisational decisions from strategic through tactical to operational. We can draw on the following examples from different functions: • Manufacturing – see question 6, above
• Marketing – see question 8, below • Finance – identifying debtors
8. Which information systems tools can be used to support the marketing function? Marketing information systems include:
• Sales information systems. Employees involved in the sales area are required to identify potential customers, negotiate the sale of goods and services with those customers and provide a follow-up service. Systems are available to support each of these tasks. Prospect information systems provide lists of potential customers by categories such as product range or geographic area.
• Distribution information systems. Speed of delivery is often an important aspect of service to the customer. In order to ensure this, it is important that tracking systems are in place which can locate products during the distribution process.
• Sales order processing (sop) systems. The sales order processing (SOP) system is usually based in the financial area and provides a variety of data which can be used for marketing purposes such as assessing the timing and value of orders from customers. These can be used for applications such as sales forecasting which is a major input into the sales planning process. Other data supplied by the SOP system includes inventory levels. If inventory levels are high then this might trigger a discount programme for a particular product line.
• Sales and campaign management information systems. The sales management information system provides information in support of decision making at the tactical level. It will hold information on such aspects as sales performance by geographic area, by product group and by sales person. This information can be used to determine sales effort in different areas and products and level of bonus payments to an individual sales person. The data can also be used to investigate the strength of relationship between such factors as customer types and product sales. This information can be used as the basis for a marketing plan based around an advertising and promotion scheme aimed at a particular customer segment, (e.g. targeting of designer label drinks at people in the 18–25 age range).
• Product pricing information systems. The price of a product will be dependent on a variety of factors such as the cost of producing the product or providing the service, the required profit margin and the price of competitors’ goods. The price may also be affected by a marketing strategy to build market share by lowering the price. The product pricing information system will collate information on costs and predicted market demand at different price points and discounts in order to support the pricing decision. More sophisticated software in the form of a pricing model enables the user to input various market and product attributes and based on relationships formalised in the model provides a suggested price.
• Sales forecasting information systems. At a strategic level it is necessary to provide sales forecast data in order to help form the long-range strategic plan. Sales forecast data is essential in order that demand can be met and resource employed in the correct areas. For instance, marketing needs to inform other functions such as operations of predicted demand so they can organise their resources to meet this demand. The information system is required because of the range of data that goes into the forecast and the need to continually update the database in order that the forecast is as accurate as possible.
• Marketing Research and analysis information systems. In order to ensure that there is a demand for the goods and services of the organisation it is necessary to undertake market research. For a new product this may include information on demographic changes and customer feedback from questionnaires and interviews that indicate customer preferences. • Competitive tracking. Knowledge of competitors’ prices, products, sales and promotions is an
important factor in the development of a marketing strategy. For example, the organisation would need to consider its reaction to a competitor move to build market share.
• Telemarketing software. This software is designed to dial potential customers automatically based on customer files maintained in a database. The software will also allow notes to be stored on customer requests, generate follow-up letters and display information gathered on the customer for reference as the call is taking place.
• Geographical information systems (GIS). GIS are used to display information on maps. Performance of distribution channels such as branches can be shown by colour coding them. Colour-coded areas on the map can be used to show variation in the demand of customers for products or the characteristics of people living in different areas such as average disposable income.
9. Explain the reasons for the adoption of enterprise resource planning systems by organisations.
ERP provides a single package which replaces a number of separate packages. This allows better integration between modules and simplified support and maintenance. The ERP system typically supports several functional areas or different parts of the value chain such as inbound logistics, manufacturing, distribution, sales and finance.
Discussion questions
1. Discuss the following statement with reference to how an organisation should react to the Internet. ‘Is the Internet a typhoon force, a ten times force, or is it a bit of wind? Or is it a force that fundamentally alters our business?’ (Andy Grove, Chairman of Intel).
Suggested approach:
This statement is useful in that it indicates the impact of the Internet will vary according to the type of business that an organisation is in. Students should look at a range of industries from those where the impact is high, e.g. media and information services to low e.g., retailer. The ES test referred to on P. 277 can be used for consumer industries. Examples can be taken where those that have reacted e.g. EasyJet or General Electric in comparison to those that haven’t. The analogy may also be apt since the Internet phenomenon may be transitory. This can also be considered.
2. Data warehouses are only the latest in a long line of reporting tools. They will not make a significant impact on business. Discuss.
There is a strong argument that data warehouses are simply a repackaging by marketers of existing technologies. Since companies started storing operational transactions there has been a desire to analyse this data. Software has been available to achieve this and is has been referred to as decision support systems, executive information systems, or more recently OLAP. If the functions of these systems are reviewed they are similar; providing summary reports, graphs and drill-down to view more detailed data. Data warehouses themselves are now being re-branded as business intelligence systems.
The counter argument would be that data warehouses have introduced new features such as data mining. They have also introduced a different approach to how businesses approach data analysis. Differences include:
• The scale of data warehouses – all operational data is stored for a long time period; • The offline storage of information separate from the operational system;
• The storage of data from different functional parts of the organisation; • The detailed breakdown of data into dimensions and categories; • Different analysis techniques such as data mining.
On balance, our opinion would be that data warehouses have introduced new techniques and raised the profile and expenditure on decision support systems.
3. Workflow systems are currently mainly in large organisations. This is likely to remain the case. Discuss.
To answer this question adequately requires a distinction between large-scale production workflow systems and smaller scale administrative and ad hoc workflow systems. The former tends to be for functions such as operational processing of customer services such as issuing a loan or processing an insurance claim – these tend to be the preserve of the large companies. The latter are e-mail enabled administrative applications for purchase order processing or in travel
claims for example. These could be used by small companies since the expenditure will be justified by the cost. Given the above, the arguments against the first statement are weak, but there are stronger arguments against the second statement. As more small companies use e-mail and intranets and as the cost of administrative workflow falls, adoption in small companies will grow. This is less likely to be the case with production workflow which is likely to remain expensive for small to medium organisations.
4. Neural networks, fuzzy logic and genetic programming are some of the latest artificial intelligence ideas. Are they likely to remain lab-based products, or is there potential for their use in industry?
This question is difficult to answer since there are relatively limited applications of these technologies. Their development has tended to be in academic labs, albeit in partnership with companies. There are no examples of mass-market applications for these products, rather they are used in niche markets such as assessing financial risk. However, it is an oversimplification to suggest that they are solely lab based – they are widely used within this and other niches. A full answer will review how each of the techniques can be used after reviewing what is meant by each.
• Neural networks. Hardware or software that attempts to emulate the processing patterns of the biological brain.
• Fuzzy-logic. Rule-based AI that tolerates imprecision by using non-specific terms to solve problems.
• Neural networks. Most widely used in industry, genetic algorithms are a relatively recent development.
5. Enterprise resource planning software is likely to replace packages used in a single area of the organisation, such as accounting, logistics, production and marketing. Discuss.
ERP is likely to be restricted to larger organisations due to the cost of customisation of the software for the client. Mass produced and thus cheaper off-the-shelf packages are likely to be the most suitable option for the small organisation. Enterprise resource planning (ERP) software is a single system which gives applications for all the major business functions discussed in this chapter such as production, distribution, marketing and sales, finance and human resources management. It is normally purchased as an off-the-shelf package with modules for each major business process or business function which are tailored by a consultant. A single package typically replaces many different previous packages. The benefits of this approach include: • reduced cost of buying from a single supplier;
• better transfer of information within the organisation since all the modules of the system are compatible;
• simplified support and maintenance through a single supplier; • use of “best of breed solutions” employed by other companies.
shortages. The other disadvantages of ERP systems are shared with all off-the-shelf systems, namely, that the business often has to change its processes or way of working in order to fit the way the software works. This may not present a problem if a company is looking to re-engineer its processes since then the ERP software can provide a framework.
Owing to the high cost of ERP solutions only large companies can afford the cost of the software and the consultants, which will often be measured in millions of pounds. Smaller companies can take advantage of the features of integrated accounting packages which now provide modules beyond those of the basic accounting package.
In summary, there is overwhelming evidence that ERP will replace functional applications in large organisations. In smaller organisations the role of ERP applications is likely to be assumed by integrated accounting packages with similar functions.
Essay questions
1. Write a report on how an organisation can evaluate the impact of the Internet on their business
Suitable frameworks to use are:
• How appropriate are: buy-side, sell-side and in-side applications (P. 221)? • What is the demand for different types of e-business services (P. 222)? • Assess drivers and barriers (P. 232) and benefits (P. 234)
• Assess suitable e-business applications (P. 237 and subsequent)
2. Review the changing tools available for decision making at a strategic level within the organisation. What does this mean for senior managers?
There is a move away from EIS to the use of OLAP to interrogate data warehouses. Question 2 in the Discussion questions section discusses whether or not this represents a genuine change in facilities available to users. For senior managers there is now a greater choice of tools available. The data warehouse provides the facility, in a single system, to analyse data from across an organisation and to drill-down to identify the source of problems. Such facilities were not always available in earlier generations of EIS.
3. Was the promise of expert systems in the 1980s delivered in the 1990s? Justify your answer.
Expert systems have not widely replaced human experts in many fields as had been envisaged. It has been found difficult to match the flexibility of humans. Expert Systems are most relevant to complex problems in a well-defined subject area, such as assessing the credit risk of a loan applicant. The justification is that ES are not used in the majority of businesses.
4. How must transaction processing systems be managed, given their mission-critical role in many organisations?
TPS are usually essential for achieving sales and providing customer service. It is important that they perform well. This means:
• Availability throughout the time customers place orders. • Good performance so that customer details cannot be accessed. • Good quality data.
To achieve good availability:
• The network connections must be reliable. • The software must be reliable.
• Good support arrangements with suppliers must be in place.
The benefits that are provided by data warehouses were described in Discussion question 2. In this question, the importance of data warehouses as a management tool could be contrasted with TPS which are often mission critical for the large organisation. In this context data warehouses can be considered to be less important. Data warehouses are less relevant for small and medium organisations unless they have a wide variation in customer segments, product variants or sales territories. In this case spreadsheet and personal databases will not be adequate.
6. Do you believe that the advantages of enterprise resource planning applications outweigh their disadvantages? Illustrate your answer with reference to company examples.
The benefits of ERP include:
• Reduced cost of buying from a single supplier.
• Better transfer of information within the organisation since all modules of the system are compatible.
• Simplified support and maintenance through a single supplier. • Use of ‘best of breed solutions’ employed by other companies.
The main disadvantage of the use of ERP systems seem to be the high costs charged by suppliers due to the demand for this type of system. This high demand has also given rise to skills shortages. The other disadvantages of ERP systems are shared with all off-the-shelf systems, namely, that the business often has to change its processes or way of working in order to fit the way the software works. This may not present a problem if a company is looking to re-engineer its processes since then the ERP software can provide a framework.
Owing to the high cost of ERP solutions only large companies can afford the cost of the software and the consultants which will often cost millions of pounds. Smaller companies can take advantage of the features of integrated accounting packages which now provide modules beyond those of the basic accounting package.
In summary, for large companies, the advantages of ERP systems would appear to outweigh the disadvantages, but they are too costly for smaller companies.
Examination questions
1. Explain the relationship between the concepts of e-commerce and e-business.
E-commerce is generally understood to be a subset of e-business. E-commerce refers to financial and non-financial transactions between organisations. These transactions are often considered in the context of a supplier organisation distributing and selling its products to consumers. E-business includes transactions from a buy-side and sell-side e-commerce perspective and also the use of communications technology to improve internal process efficiencies.
2. Distinguish between buy-side and sell-side e-commerce and give an example of the application of each.
Buy-side e-commerce refers to electronic transactions concerned with the purchase and inbound logistics of goods such as a supermarket coordinating purchases from its suppliers. Sell-side e-commerce concerns transactions related to the sale and distribution of goods such as a supermarket selling direct to its customers.
3. Summarise three reasons why a company may wish to introduce e-commerce.
• Cost reductions in purchasing or selling through less human involvement and lower resource costs.
• Increased efficiency enabling faster cycle times for purchasing or sale of goods. • Capability to sell to overseas markets or previously untargeted markets
4. Describe three of the main barriers to adoption of e-commerce by consumers and suggest how a company could counter these.
• Security fears – fraudelent use of credit cards.
• Privacy fears – personal data held by companies or criminals. • Cost of access devices and online costs.
• Lack of perceived need (costs do not exceed the benefits). 5. What is the purpose of data warehouses?
Data warehouses are large database systems (often measured in gigabytes or terabytes) containing detailed company data on sales transactions which are analysed to assist in improving the marketing and financial performance of companies. This can be achieved through identifying the most profitable customers and targeting them or optimising the product mix to fulfil customer needs better.
6. How can workflow software and groupware assist in re-engineering an organisation? Both technologies can support the restructured organisation that often occurs as a consequence of
communication. Workflow software can be used to support a process by managing the subtasks that make up a process. It can also manage routing of information between staff and provide statistics on the efficiency of a process.
7. What special precautions need to be taken when using IT for managing human resources?
It is important that security measures are taken for human resource IT systems to protect the privacy of such information as salary details.
8. Define an enterprise resource planning application. Name two main disadvantages of this type of approach.
Enterprise resource planning software provides integrated applications for major business functions such as production, distribution, sales, finance and human resources management. It is normally purchased as an off-the-shelf package which is tailored by a consultant. A single package typically replaces many different previous packages.
The main disadvantage of the use of ERP systems seems to be the high costs charged by suppliers due to the demand for this type of system. This high demand has also given rise to skills shortages. The other disadvantages of ERP systems are shared with all off-the-shelf systems, namely, that the business often has to change its processes or way of working in order to fit the way the software works. This may not present a problem if a company is looking to re-engineer its processes since then the ERP software can provide a framework.
