THE EFFECT OF ENTERPRISE RESOURCE PLANNING (ERP) USAGE ON SME PROFITABILITY IN SOUTHWESTERN NIGERIA
Keywords:
Small Medium Enterprises (SME) Profitability, Enterprise Resource Planning (ERP),Abstract
Small and Medium Enterprises (SMEs) play a crucial role in fostering economic growth, job creation, and poverty reduction worldwide. Despite contributing approximately 46.31% to Nigeria's GDP and employing over 60 million people, SMEs in the country face challenges such as technological disruptions, and shifting consumer preferences. To mitigate these challenges, adopting (Enterprise Resources Planning) ERP System has emerged as a critical strategy. This study investigated the effect of Enterprise Resource Planning (ERP) usage on the profitability of Small and Medium Enterprises (SMEs) in Southwestern Nigeria. A descriptive cross-sectional design was adopted. The population comprised 1,390 owners, managers, and junior staff from seven selected companies: Rom Oil Ltd, Nampak Nigeria Ltd, Premier Feeds Mills Ltd, Belloxi Ltd, Drury Industries, Comestar Company Ltd, and Sunsteel Industries Ltd. A sample of 310 respondents was selected using the Taro Yamane sampling technique. Data were collected through a structured four-point Likert-scale questionnaire and analyzed using mean scores for the research questions and ANOVA for hypothesis testing. The findings showed that ERP usage had a significant positive effect on profitability, with a p-value of 0.000. Respondents agreed that ERP systems improved profit margins, financial performance, cash flow management, and sales target achievement. However, the study also revealed implementation challenges, including high costs, inadequate staff training, technical difficulties, poor IT infrastructure, and employee resistance to change. These challenges hindered the full benefits of ERP adoption. The study concluded that while ERP systems significantly enhanced SME profitability, their successful implementation required overcoming key organizational and technical barriers. The study recommended employee training, proper budgeting for ERP-related expenses, and improved IT infrastructure supported by change management strategies.
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