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:
- Finance
- Human resources
- Services
- Procurement
- 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:
Job Scheduling
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.
Managing Procurement
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.
Production Process
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.
Invoicing
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.
1. Visibility
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.
2. Streamlining
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.
5. Flexibility
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.
10. Standardisation
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.
