Category: Supply Chain Management (SCM)
- Supply Chain Management and the Impact of an ERP Implementation
Supply Chain Management and the Impact of an ERP Implementation
What impact will an ERP implementation have on supply chain management? It can help to improve collaborative planning as well as enhance your supply chain strategies. Here’s a detailed look at the value of ERP software for SCM.
What Is Supply Chain Management (SCM)?
This is the management of the goods and services, from the raw materials all the way through to the finished product which is sold to consumers. SCM involves the process of moving and storing raw materials, as well as the storage and tracking of finished products. Every aspect of the business operation – including purchasing, information technology, financing, manufacturing, and logistics – falls under SCM.
Supply Chain Management Flows
- Material flow: This is the movement of the physical product – or provision of services – from the supplier through to the customer.
- Information flow: This involves the capacity, order tracking, and delivery schedule.
- Financial flow: This part of the SCM includes credit terms, invoices, and other ownership arrangements. This flow requires the highest level of co-operation between members of the supply chain.
What Are Supply Chain Management Components?
At the heart of it, all SCM consists of fundamental components that enable streamlined operations from material through to the consumer. These are the components that make up the SCM processes, (which are outlined a bit later in this post).
- Planning: The entire supply chain actually needs to be carefully crafted so that it runs efficiently, and meets business goals.
- Sourcing: This involves finding reputable companies to provide goods and services required for the end product. SCM will then monitor this contracted relationship and all associated processes.
- Manufacture: SCM managers are responsible for coordinating activities around the raw materials and manufacture of goods.
- Logistics: The orders need to be co-ordinated, deliveries scheduled and dispatched, invoices distributed and payments received. This is a vital component of SCM.
- Returns: Unwanted, defected or surplus product will be sent back to the supplier, either for repairs, replacement, or re-storage.
- Support: The administrative duties that facilitate the SCM process include Human Resources, Information Technology, portfolio management, and quality assurance.
What Is the Supply Chain Management Process?
The integration of all these components of supply chain management allows for collaboration between buyers and suppliers, and a much more streamlined process. The SCM process includes:
- CRM (customer relationship management): This is the managed approach to dealing with existing and would-be customers, gaining insights into market demand, eliciting feedback, and generally improving relations.
- SRM (Supplier relationship management): The third-party suppliers also need to be part of the SCM strategy so as to manage increased demand and supply.
- Manufacture flow management: The manufacturing process needs to allow for flexibility in product need and quantity, requiring planning and scheduling.
- Product development: Once the product has been manufactured, it’s no good sitting around in a warehouse for ages, it needs to be brought to market. This SCM process will shorten the product life cycle by analysing customer demands and working with quality suppliers, among other things.
- Order fulfillment: This is the response to customer orders, including POS (point-of-sale) to delivery.
- Returns management: No matter how good a product, returns are inevitable, and the better these are managed, the better product flow.
What is ERP?
Enterprise resource planning – or ERP – essentially integrates the core processes which effectively and efficiently, run a company. Among these are:
- Human resources
- Supply chain
What Is the Role of ERP in Supply Chain Management?
ERP software is able to facilitate a number of SCM processes through effective monitoring and integration. Some of the areas that can be automated through top-quality ERP software include:
ERP software will ensure the production policies are in line with the product demand so that as job orders are being made, replenishment is being done simultaneously. This prevents either over-or under-supply and allows for oversight in terms of what products are doing well, and which are not.
Using ERP software, businesses are able to manage the procurement and supply of goods, from manufacturing through to logistics and execution. There is also the automation of tasks related to supplier communication.
The comprehensive ERP software provides a BOM (bill of material) for products and, after production begins, keeps a record of all resources with real-time updates. Once production is completed, ERP documents the accurate shipping of items, including changing work orders if needed.
Once the product is shipped, ERP issues invoices directly to the customer, with all delivery details stored in a central system. The ERP software also assists with the method of packaging and quality control processes.
What Are the Benefits of ERP in Supply Chain Management?
As businesses increasingly understand the value of effective SCM, more and more industries are implementing ERP as a way to streamline processes and minimise error and mismanagement. Here is an overview of the many benefits of ERP in SCM.
Through ERP software, data from every business department is easily accessible by management teams, which facilitates SCM oversight. The complete visibility extends to elements such as inventory levels and upcoming consignments for enhanced forecasting.
The increased visibility means that there’s better inter-departmental communication and tracking, resulting in increased streamlining of tasks. There is a much more coherent workflow, empowering managers to make quick business decisions for continued productivity.
3. Better Planning and Reporting
By implementing ERP software, your organisation benefits from a single, comprehensive reporting system that integrates data from across the business into one, coherent reporting system. ERP will generate reports – at any time – supporting the comparison of functions and identification of challenges.
4. Business Intelligence (BI) Reporting
Certain ERP suppliers will provide BI services with the ERP software, giving you an even deeper level of insight into business operations through data acquisition. This means improved clarity on emerging trends that can be used in forecasting.
The modern ERP software is fully customisable, making it perfectly suited to a range of industries and business types. Each application can either be used in isolation or integrated with other applications, thereby allowing you to choose what works for you.
6. Data Security
The acquisition of business data leaves organisations at risk of cybercrime, which is why ERP is an incredibly beneficial tool. The superior data security of ERP determines who can view and edit the data, and the collation of multiple data sources into a single repository increases accuracy and security.
7. Better Customer Service
The benefits of ERP will extend to your customers as well because ERP software centralizes customer information making it much easier to build and maintain relationships. Through ERP, you’re able to enjoy enhanced interaction as well as complete end-to-end tracking.
8. Improved Collaboration
One of the biggest threats to business is inter-departmental friction and non-communication. Because of the streamlined operation, ERP gives everyone access to centralised information which makes collaboration easier – everyone is on the same page.
9. Improved Efficiency
With ERP automating roles and diminishing the need for IT-related work and training, your staff is able to focus on day-to-day duties. This is particularly true of repetitive manual activities which can be incredibly draining on time and resources but are easily performed by ERP software through machine learning. Other technologies included in ERP are artificial intelligence (AI) and robotic process automation (RPA) for superior functionality.
ERP systems have been developed to incorporate best industry practices which means your internal processes will be standardised, thereby improving efficiency. These standardized and consistent processes will allow you to further enhance business operations.
What to Consider When Choosing ERP Software
Before deciding on the ideal ERP software to assist your company’s SCM, here are a few aspects to consider:
- Cost-to-value ratio: Price is always a factor, but opting for the cheapest ERP solution might leave you with unnecessary components and software that just isn’t suited to your company’s needs. You need to evaluate what you’re paying for in terms of ERP capabilities, and what you’re actually getting. Often the ROI will only be evident in a bit of time.
- Get IT input: Your ‘selection team’ will include key stakeholders, but it’s vital that the IT department has major input, as they will be working most closely with the software.
- Get industry-specific ERP: One of the biggest benefits of ERP is that it’s customisable, so make sure your supplier is able to provide software suited to your industry, as well as your particular company.
- Choose an experienced supplier: A reputable supplier will be able to give you a thorough overview of the best ERP for your needs, provide a live demonstration, and offer on-going support and training. Don’t make the mistake of ERP implementation failure by choosing the wrong supplier.
ERP is able to improve supply chain management, particularly for organisations that deal with physical inventory and the distribution of products. If your company is looking for ERP to boost SCM, then you’re making the right call – shortened lead time, demand forecasting, inventory management, and on-time deliveries will soon be a reality.
What are the key differences between Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) Systems?
Both ERP and SCM can be implemented to assist South African businesses in streamlining processes to improve overall effectiveness.
What is Enterprise Resource Planning (ERP)?
The 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, day-to-day enterprise resource planning is much more effective. Systems that can be integrated include:
- Taking customer orders
- Keeping inventories
- Recording financial data
ERP systems have numerous important 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 the SCM system, it’s important to understand what is meant by a ‘supply chain’. This is a connected network of individuals or 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 and concludes with the delivery of the finished product or service to the consumer.
Supply chain management, as the name suggests, is the key in 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 the SCM system, 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: The ERP system 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 (ERP and SCM)
The major difference between SCM v 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 and systems 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 the 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 that 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 the warehouse and then to the 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 a competitive edge. With Omni Accounts, you’re assured of a customised business solution that works for you.