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How does an enterprise resource planning system support a company’s value chain?
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An enterprise resource planning (ERP) system supports a company’s value chain by integrating the various functional units of an organization—such as sales, marketing, production, finance, and human resources—into a single, cohesive system.1
By centralizing these processes, an ERP system enables the seamless execution of the entire sequence of activities through which a firm adds value to its products. Key ways it supports this include:1
- Process Integration: It automates and synchronizes workflows across departments. For example, a customer order submitted via the web can automatically trigger just-in-time production, update financial accounts, and initiate delivery logistics and billing.1
- Operational Efficiency: By facilitating mass customization, the system allows companies to meet specific customer requirements while coordinating with warehouses and suppliers to ensure input materials arrive exactly when needed for production.1
- Data Consolidation: ERP systems accumulate data in databases and data warehouses, providing the necessary information for higher-level management functions and strategic decision-making.1
Ultimately, by linking these primary and secondary activities, an ERP system helps a company maintain a competitive advantage by improving the efficiency and responsiveness of its value-adding processes.21