SCM and ERP Integration
What is ERP? Enterprise resource planning (ERP) is a Software / application used by company to control and integrate the most critical aspects of their business. Many ERP software systems benefit organizations because they help them implement resource planning by combining all the activities needed to run their businesses into a single system. ERP software system integrates planning, purchasing inventory, sales, marketing, finance, human resources, and more.
Whereas Supply Chain Management (SCM) is the administration of the movement of goods and services that includes all procedures that turn raw materials into finished commodities. It is a conscious effort on the part of supply chain companies to create and manage supply chains effectively and efficiently. Product development, sourcing, production, and logistics, as well as the information systems required to coordinate these operations, all of them are covered by supply chain activities. A lot of companies implement SCM in their business because of the benefits that they will get. One of the benefits that they will get is Cost Reduction, because the SCM can act as the company’s digital nerve center, saving huge amounts of money in order fulfillment and other back-end support procedures.
Both are bringing benefit to the company but, if both are integrated it will give Company more benefit. To get the raw materials and resources needed to bring finished goods to market, companies must deal with a variety of suppliers and partners in Supply Chain Management (SCM). ERP is critical for eliminating inefficiency, minimizing waste, and guaranteeing that employees can better direct their efforts. Both systems’ integration may present some distinct problems. Manufacturing and distribution companies may get more insight into all processes and boost speed, efficiency, and overall customer satisfaction by integrating supply chain management with ERP. But integrating Supply Chain Management with Enterprise Resource System isn’t an easy task since each supply chain member may use various hardware and software.
Although there are difficulties in integrating Supply Chain Management with Enterprise Resource System, the struggle that company went through will be worth it. There are a lot of benefits from integrating both of them, such as:
- Improvements in supply chain efficiency across different departments and organizations
- Improved customer service results in higher customer loyalty and more chances for repeat business.
- Workflow automation that will reduce overhead and operating expenses.
- IT challenges and issues that are less likely to cause efficiency bottlenecks
- More flexible supply chain solutions that can quickly adjust to changing conditions or future business growth and expansion.
For companies that have previously established an ERP system, the collected data and macro-view of the company’s current workflow and procedures may be utilized to build a more effective and efficient SCM process. Companies which already use several stand-alone supply chain management systems will get benefit from the integration and installation of an ERP system that provides cross-platform access to the inventory, financial, and manufacturing data required to build a high-performing SCM process. When it comes to deciding which system to deploy first, there are no specific rules, and the unique demands and circumstances of your company must be thoroughly examined and analyzed before deciding.
The example of successful integration of ERP and SCM is Dell Computers. Dell used technology that enabled supply chain management to create value for its customer. Dell provides its consumers precisely what they want, and as a result, its stocks have been cut from three weeks to six days sales. Dell has been able to drastically cut the quantity of inventory it requires to store by boosting the amount of information it has about its customers. This information shared by Dell to their supply chain Member. Dell website also give access to supplier to see Dell’s Customer and what they buy. That information gives tier one supplier’s information to plan their production appropriately. As an outcome, all supply chain participants collaborate to minimize inventory, improve quality, and add value to customers. Hence, because of the SCM and ERP successful integration, it brought Dell into becoming the no 1 maker in the world in 2001.
Sources :
Enterprise Systems for Management second edition (2014) Luvai F. Motiwalla; Jeff Thompson Pearson Education Limited, England ISBN: 978-1-29202-348-9 Chapter 11
https://www.investopedia.com/terms/e/erp.asp
https://www.investopedia.com/terms/s/scm.asp
https://scm.ncsu.edu/scm-articles/article/what-is-supply-chain-management-scm
http://epsilon.uprrp.edu/aniel/SCM-ERPIntegration.pdf