Supply Chain Management (SCM) is defined as the management of the flow of goods and services, involving the movement and storage of raw materials, of work-in-process inventory, and of finished goods from point of origin to point of consumption. For manufacturers, managing the supply chain is extremely important and can even be a ‘make it or break it’ type of situation. That being said, ERP software plays a vital role in SCM and has gained immense popularity within organizations. Research from Emerald Insight shows that there is a positive and significant relationship between ERP systems (integration, material management, production planning, and controlling), and SCM performance.
The findings of the Emerald Insight study imply that the successful implementation and the effective usage of ERP software can contribute toward enhancing SCM performance in many ways such as, integration of internal business processes, enhancement of information flow among different departments inside the company, improvement of the company’s relationships and collaboration with outsourcing suppliers, customers, and supply chain partners. Below are some more ways ERP software can boost your supply chain management.
To begin, ERP systems that have a SCM integration benefit from having a comprehensive inventory tracking system to help business control and manage their inventory / product stock. With integrated SCM/ERP, businesses can organize and categorize their inventory, better manage detailed warehouse data, and record various product movements. This provides supply chain managers with a greater understanding of what inventory is on hand, what has been shipped out, what hasn’t and where the inventory is at all times.
Since ERP systems act as your “one-stop shop” for all of your tracking needs, having an ERP to provide a holistic, consolidated view of the entire supply chain allows companies to make better-informed decisions around ordering and purchasing. By providing manufacturers with details about how and where the inventory is location throughout the supply chain, it gives them the ease of talking to customers with greater confidence about their orders. Plus, managers and upper management executives have a greater oversight into every part of the supply chain with an integrated SCM/ERP solution so they can identify issues and find solutions much faster.
Reporting manually always runs the risk of less frequency because of the labor intensive and manual process required to gather data. This leads to poor decisions because they are made on on out of date and/or inaccurate information. When you move to an integrated SCM/ERP system however, you get access to relevant, real-time data about the company’s (and supply chains) performance. This allows decision-makers to keep better track of the movement of products/inventory, and the ability to use this streamlined data to improve operational efficiencies.
ERP systems make it easier for organizations to measure quantitative and qualitative factors of respective vendors through metrics such as: cycle time, cost, bottlenecks, error rates, etc. In turn, it helps in making better, more-informed business decisions and performance improvements within the current market.
Materials Requirement Planning
Materials Requirement Planning (MRP) refers to the planning, scheduling, and inventory control system to manage manufacturing processes. An ERP system is seen to be an extension of this, and having a SCM module integrated into your ERP can only make the MRP feature stronger. An integrated SCM/ERP provides this comprehensive management system that allows for integration of transactions, material planning, and other functions into a single system.
Risk and Fraud Prevention
A good ERP system can prevent fraud and theft by giving you total visibility into operations, and facilitates user-based roles to access and modify data. It also helps to ensure compliance with legal requirements and rules. Along with the benefits listed above, an integrated SCM/ERP can also increase the flexibility of your supply chain, easily link important information with other business applications, therefore increasing integration, and can reduce costs.
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