Financial implications of ERP software implementation in small and medium industries in Karnataka

Abstract

The way the business is being done has undergone a sea change in the newlinelast three to four decades globally. Business organisations are facing newlinechallenges for growth and survival. The changing trends and preferences of newlinecustomers, regulations from regulatory agencies, environmental concerns for newlinesafer tomorrow etc. have exerted pressure on the business organizations. The newlinebusinesses organizations should have the latest and upto date information for newlineefficient decision making to reduce cost and improve profitability. Enterprise newlineResource Planning (ERP) is a software which monitors information and newlinedataflow across various functions and coordinates between them. It streamlines newlinethe flow of information across all functions cutting departmental barriers. ERP newlineenables the managers to take decisions in short period of time under existing newlineconstraints. newlineIt is a fact that large scale industries are successfully implementing newlineERP software. They are able to afford the huge cost involved in newlineimplementation of ERP software. Equally important are small and medium newlineindustries in Indian economy. In terms of value, this sector along with micro newlinebusinesses contributes for 45% of manufacturing output and 40% of total newlineexports of the country. This sector employs about 69 million persons in over newline26 million units throughout the country. Micro, medium and small enterprises newlineprovide maximum opportunities of jobs. newlineI newlineFinancial Implications of ERP Software Implementation in Small and Medium Industries in Karnataka newlineERP software brings benefits in terms of cost reduction, improved sales newlineand quality. Small and Medium Enterprises (SMEs) find it difficult to spend newlinehuge amount on the implementation of ERP software. ERP software vendors newlineare coming out with latest versions to suit the needs of SMEs. newlineHere a study of thirty firms in manufacturing sector in Karnataka state newlinewhich have implemented ERP software are considered for the study. Out of newlinethirty firms, there are fourteen small scale and sixteen medium scale units. The newlineunits are located at Bangalore, Belgaum, Shimoga, Hubli and Hospet. Seven newlinefirms have developed their own ERP software and twenty three firms have newlinepurchased ERP software. newlineThe financial performances of these firms are assessed using the newlinefinancial parameters. Their sales and profitability are found to have improved newlineto a great extent after the implementation of ERP software. The lead time has newlinealso reduced considerably. It is also found that ERP implementation resulted in newlineimprovement in non financial parameters like quality, information flow, newlinecustomer satisfaction and capacity utilization. newline