Increasingly, businesses are discovering the internal benefits of Enterprise Resource Planning (ERP) to manage business data, maximize systems and working processes while gaining substantial operational efficiency. Externally, Supply Chain Management (SCM) enables businesses to better interact with various suppliers and partners and access the raw materials and resources necessary to bring their products to market. The integration of both systems yields more significant advantages, bringing high-quality products to market faster. When ERP and SCM combine, there is also a substantially greater ability to provide all parties with data enabling immediate decision-making throughout every segment of the supply chain.
ERP and SCM—What’s the Difference?
Looking at them individually, ERP involves the collaboration of all company segments to plan to acquire and use resources. The multi-function capabilities of an ERP include the ability to have complete access to each process across the business so that total data is available in real-time.
When a task-based ERP system is used for supply chain management, it involves:
- Production policies that align with demand
- Resource replenishment
- Effective scheduling
- Cross-platform visibility
- Production planning
- Inventory management
- On-time delivery
- Accurate tracking
- ERP systems predominantly help businesses standardize their systems, enhancing employees’ productivity and efficiency of the company. Standardization can be a great tool to improve the operating procedures of companies. Not only are products delivered to market faster, planning and standardized reporting also dramatically, improve and problems are visible early, where they can be rapidly handled.
SCM systems, in comparison, address the external, spanning manufacturing to shipping, from ordering raw materials to the delivery of product or service to the customer, and even product returns. It includes:
- Supply chain relationships
- Raw-material ordering
- Receipt of goods
- Demand planning
- Quality inspection
- Delivery and logistics
- Product returns
Combining ERP and SCM Systems
The combination of ERP and SCM provides both a feature-rich internal ERP environment and SCM’s greater efficiency and real-time operational information across multiple departments and organizations within the supply chain.
As automation and simplification of processes become even more critical in today’s supply chains, ERP and SCM combine relevant information and techniques from all operations and benefit adaptability. The combination enables closer monitoring of transactions, provides information for better strategic decisions, reduces errors, and bottlenecks, and increases the enterprise’s sustainability.
The bottom line, it’s all about risk. When considering external and internal supply chain risks, external threats include miscalculations in product demand, raw material disruption, economic, governmental, and environmental hazards that affect timing. Business risks are those such as mergers or acquisitions of suppliers or even business failures.
Internal risks, typically more manageable, are still unavoidable and include such risks as manufacturing, business risk involving management and personnel, planning and estimating, and even the lack of contingency plans.
The combination of ERP and SCM provides a comprehensive system that will enable greater risk identification and collaboration to mitigate it, provide enhanced product and shipment visibility, higher product quality, and the consolidation of data for easy access along the supply chain.
The current reality of supply chains is that there is a likelihood that disruptions will continue well into the future. This truth demands that companies put in the required effort to understand precisely where they are and what they can do to ensure operational efficiencies so that product finds its way into the hands of its customers. Surprisingly, some companies are still doing so little, but that can change.