ERP system takes a lead role because of some of the following reasons:

Many large corporations use several different and separate information systems, often because they have merged with and/or acquired other companies with varied systems. An ERP system integrates these separate information systems and results in improved data reliability and processing efficiency. ERP systems are not only used by large corporations but becoming popular with small to mid-sized companies also.

Simplify business transaction processing and thus work load is reduced.

Some of the main advantages of using SAP R/3 are listed below:

SAP’s R/3, introduced in 1992, is the most used ERP system in the world.

The R/3 software package is designed to allow businesses to effectively and efficiently operate a variety of business processes within a single integrated information system.

The software is customizable using SAP’s proprietary programming language, ABAP/4. R/3 is scalable and highly suited for many types and sizes of organizations and runs on six different platforms.

SAP’s R/3 has been designed to be the best ERP system in the four areas of human resources, financial, supply chain management, and marketing. R/3 is also an international product, and meets the local fiscal, language, and tax requirements of most countries.

SAP’s R/3 is very versatile, as it will operate on six different platforms, including the recently added Microsoft NT.

The R/3 package includes several very attractive features like it has a three-tier client/server system. Providing three tiers offers scalability and easier adaptation to the specific needs of large companies and fast-growing companies.

SAP’s R/3 is available in 14 different languages (German, English, Spanish, etc.) and also incorporates multiple currency features that provide essential information processing capabilities for multinational corporations.

R/3’s modules are organized by the functional areas of financial, human resources, supply chain management, and marketing. While information is entered separately for each specific module, the modules are fully-integrated and provide real-time applications. This means that data entered into one module is immediately and automatically updated and reflected in all oft the functional areas.

R/3 is composed of a single, virtual file structure with no subsystems.

In addition, SAP has released “MySAP.com” which is software that provides for data interaction and processing connections with the Web.

Financial and managerial accounting tools in SAP R/3 are contained in the financial accounting (FI) and the controlling (CO) modules. The General Ledger function in the FI module provides a comprehensive record of all information needed for external financial reporting. The accounting data is complete and accurate because the SAP system fully integrates all business transactions that were entered from all the operational areas of a company. In addition to the FI and CO modules, the SAP system includes the Investment Management (IM), Sales and Distribution (SD), Materials Management (MM), and Human Resources (HR) modules.

Management accounting tools in SAP R/3 are cost center accounting, internal orders, product costing, and activity based costing, profitability analysis and profit center accounting.

SAP R/3’s accounting features are modeled on German approaches to accounting, and thus they are well-organized and very efficient in processing accounting information and providing accounting statements and financial reports.

As stated previously, R/3 offers multiple currency features and a three-tier system that is capable of meeting very high demands from the accounting system for either transaction processing or financial reporting.

SAP was the first to implement integrated treasury capabilities. This attractive feature allows a corporate treasury department to function as an in-house bank by automating the control of cash flow, investment trades, and portfolio management.

R/3 provides check writing capability in its Accounts Receivable component which very few other programs offer.

Additionally, there is equal access to all data in the system. This means that personnel can access financial data directly from a computer screen rather than physically meet with the treasurer, controller, or some other similar person. In other words, R/3 offers real-time, immediately updated reporting.

R/3 also provides for a "single data entry point" where the data entered from any location is instantly sent to all other appropriate modules in the ERP system.

The accounts payable component of SAP R/3 contains four types of transaction blocks namely:

● The audit block
● The receiving block
● The vendor block
● A manual block

These blocks make it much less likely that improper payments will occur.

SAP R/3 is organized with the concept that a business operates as a series of processes, which means that the company implementing R/3 may have to change and reorganize itself to properly fit with R/3 and use it effectively.
Thus SAP R/3 on the whole as stated above gives:

Significant cost and time savings.

Minimum operating costs: no retention of redundant data in the back office.

High level of stability and performance: response times are consistently under one second.

Good user interface available which makes system user friendly and requires no training for the end user.