ERP vs SCM: What are the key differences between these systems?
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12/19/2019 3:00 PM
What are the key differences between Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) Systems?
Both Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) can be implemented to assist South African businesses in streamlining processes to improve overall effectiveness.
What is Enterprise Resource Planning (ERP)?
ERP refers to business software that has been designed to record and manage all enterprise data. Through the automation integration of an organisation’s core business, the day-to-day running is much more effective. Systems that can be integrated include:
- Taking customer orders
- Keeping inventories
- Recording financial data
ERP systems have numerous benefits designed to assist with overall business performance management by providing elements such as intelligence, visibility, analytics, and efficiency across all departments.
What is Supply Chain Management (SCM)?
Before breaking down SCM, it’s important to understand what is meant by a ‘supply chain’. This is a connected network of individuals, organisations, resources, activities, and technologies, all of which are involved in the manufacture and sale of products or services. The supply chain originates with the delivery of raw materials from a supplier to a manufacturer, concluding with the delivery of the finished product or service to the consumer.
Supply chain management, as the name suggests, is the management of this entire process, from the transformation of raw materials into the final product, through to customer delivery. SCM actively streamlines the businesses supply activities so as to enhance the value for customers.
In SCM, the supply chain manager coordinates the logistics of all aspects of the supply chain which are:
- The strategy
- The source of raw materials or services
- Delivery and logistics
- The return system for defective or unwanted products
What are the benefits of ERP?
If you are considering implementing ERP solutions for your business, there are certainly many benefits associated with this form of software. These include:
- Saving money: ERP will effectively reduce the administrative and operational costs of business by automating processes. This means a reduction in waste, enhanced efficiency and a resultant cost-saving overall.
- Streamline processes: ERP systems centralise all data and make them easily visible which means operations can be monitored in real-time, with inventories timeously maintained.
- Optimise the supply chain: through this aforementioned real-time visibility, ERP systems allow a company’s decision-makers to ensure the entire supply chain is running as efficiently as possible, making changes where necessary.
- Meet market requirements: the centralisation of data means makes data analysis much more efficient, with businesses able to respond to market changes almost immediately while benefitting from market forecasts.
- Enhanced flexibility: the business model is increasingly fluid which is why adaptability is absolutely key to success. An ERP system will grow and adapt to cater to a business’s changing needs.
- Improve accountability: by implementing ERP systems, businesses are able to trace stock, detect any defects or hazards, and re-call or re-evaluate stock batches where needed.
- Improve customer service: the enhanced efficiency and oversight means the end-consumer is receiving a quality product or service on time. This makes for enhanced customer relations.
What are the benefits of SCM?
For businesses seeking to streamline the supply chain, then the implementation of supply chain management software is key. Here are some of the associated benefits of SCM:
- Increased efficiency: at the heart of it, SCM software will enhance your business’s overall efficiency by integrating logistics and implementing product innovation strategies. The business is better prepared to adjust to fluctuating economies and changing markets.
- Improved communication: through collaboration with shipping and transport companies, vendors, and suppliers, SCM will improve the lines of communication.
- Cost savings: the use of SCM will improve inventory systems, adjust storage space, improve system response and enhance communication, resulting in a boost in productivity and profits.
- Minimise delays: the enhanced communication with SCM means fewer logistical errors and delays that can create knock-on problems down the production line.
- Better supply chain network: effective management makes for a more effective supply chain overall.
What are the differences between ERP and SCM?
Now that you have all the details about ERP and SCM, here is a look at how the two systems differ from each other:
1. External v internal
The major difference between SCM and ERP is that enterprise resource planning software focuses on a business’s internal work processes, while supply chain management software deals with the data of raw materials from external suppliers. ERP handles the internal administrative aspects such as product planning and production, so is effectively more in-house. SCM deals mostly with supplier collaboration and is largely external.
2. Exhaustive v Specialised
Where ERP is often used to arrange various key parts of business programming - including the production of a focal database to deal with various aspects of the business - the SCM is an itemised, more concentrated software that focuses on operations and organisations that get the crude materials into the stock. ERP is a much more exhaustive software where SCM programming is much more detailed.
3. Relationship-based v task-based
When it comes to the nature of transactions and processes handled by enterprise resource planning and supply chain management, there are also significant differences. With SCM, aspects such as shipping materials are assessed, as well as relationships with third party suppliers. This assists in sourcing supplies and inventory. However, ERP systems are more centrally focused on tasks, managing core processes of a company.
What are the benefits of combining SCM and ERP systems?
Supply chain management is an integral part of ERP solutions. Within the manufacturing industry, there is the need to interact with suppliers regarding the raw materials and resources needed to ensure the finished product reaches the consumer. This entire process involves supply chain strategies which serve to enhance the product quality and overall service.
As business operations become more extensive, SCM becomes vital, and ERP can be incorporated to support multiple modes, streamlining the movement of products from supplier to warehouse to customer. Many organisations are finding enhanced operations by choosing ERP solutions for supply chain management. These benefits include:
- Improved customer service and enhance customer retention
- Improved efficiency across multiple departments in the supply chain
- Automation of workflow and speed of transactions
- Reduction overheads and operational costs
- Resolution of potential IT issues
- A decrease in potential operational errors and bottlenecks
- Flexible supply chain solutions to meet changing market demands
- Accounting for scalability and business expansion
Omni Accounts offer both ERP and SCM solutions that allow for seamless business integration across various industries, among them manufacturing, engineering, distribution, professional services, construction, industrial services, and healthcare. To avoid implementation failure, it’s vital that you select the best ERP software solutions to enhance your business so as to give you the competitive edge. With Omni Accounts, you’re assured of a customised business solution that works for you.
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