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What Is an ERP System?

Operating an online ERP system may be cheaper than maintaining on-site servers.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 16 November 2014
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Also known as an enterprise resource planning system, an ERP system is a type of computer-driven strategy that makes it possible to manage a wide range of company resources using a single platform. Systems of this type are often focused on enhancing efficiency in regard to managing any tasks associated with customer orders, beginning with the receipt of those orders and ending with the successful delivery of the goods and services ordered to the customer. In order to accomplish this goal, the ERP system must have the ability to effectively manage the acquisition and usage of resources from outside the business enterprise, as well as manage assets within the company structure.

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The use of an ERP system is based on the concept that all business functions have the ultimate goal of generating a return from the enterprise. In order to achieve this goal, the company must produce goods and services that are attractive to consumers and in turn generate sales. This means managing every component that has to do with controlling production costs, the costs of raw materials, and even the expenditures that are incurred in collecting customer orders and delivering those products to customers in a timely manner. From this perspective, an effective ERP system not only has the ability to aid in arranging the production process so that little to no waste is produced, but also to manage every cost from the selection of raw materials to the mode of delivery of the finished product to the customer.

At its best, an ERP system equips the business with a method of establishing checks and balances that prevent wastes of company resources, whether those resources be the materials used in the production process or the time invested by employees in carrying out essential functions. At the same time, an effective ERP system will make it possible to provide consumers with simple and efficient ways to place orders. This often means the inclusion of automated features that allow consumers to know when the order has been accepted and possibly provide periodic updates on the order fulfillment process and even when the order is shipped and is anticipated to be delivered. Many online businesses use comprehensive systems to provide this level of support to customers, even as those same systems keep costs down and efficiency high within the structure of the business itself.

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