ERP in Supply chain management
CREATED ON : 02 Jul 2024

ERP in Supply Chain Management: A Complete Guide

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Jul,2,2024· read

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The supply chain is one of a company’s most hectic yet equally crucial processes. 

According to recent research, 97% of retailers agree that SCM consumes a great amount of their time. The supply chain process is easy to handle if managed efficiently. Here, ERP implementation becomes the only solution.

As supply chains become more complicated, an ERP may help cut through the noise, interact with other logistics systems, manage product movement, and maintain availability.

This article will explore the importance of ERP for supply chain management.

What is ERP?

Enterprise Resource System plays a transformative role in the digital evolution of businesses. ERP system is software that unifies various aspects of the company, enabling data-driven insights, improved decision-making, and streamlined operations.

With the help of ERP solutions, businesses can ensure that they constantly match user needs regardless of market fluctuations and changes in consumer behavior.

ERP is a tool designed to manage workflows and improve processes in organizations. It automates a large number of tasks and serves a centralized system for:

  • Inventory management
  • Purchase materials
  • Production and order processing
  • Customer relationship
  • Sales
  • Finances and accounting

What is ERP in Supply Chain Management?

Organizations face challenges in managing supply chain systems. The main goal is to convert the raw materials into a finished product ready for the end consumption.

The SCM process consists of a variety of order deliveries, vendors, logistics, and strict timelines. However, managing all these manually will take up a large chunk of your operational costs, including errors and inefficiencies.

A well-implemented ERP can help in this situation. It will ensure all the goods and materials are delivered to the right place at the right time. An ERP for supply chain management can optimize your business with features such as order scheduling, real-time reporting, collaboration capabilities, analytics, and security.

ERP software is a centralized database that provides a thorough, real-time view of the company’s operations.

Issues with Current Traditional SCM:

Traditional supply chain systems rely mainly on paper-based documentation, manual entry of information, and Excel-based tracking of operations. These manual procedures are inefficient and time-consuming. This makes the processes prone to errors. 

Further, traditional systems make it difficult to access and communicate essential information within departments and external stakeholders. The lack of unified real-time data management hampers effective decision-making. This can result in operational inefficiency.

Key Role of ERP in SCM

ERP provides several crucial features for managing supply chain and logistics:

1. Demand Planning: ERPs can create demand upon receiving orders. The ERP software initiates job scheduling upon the receipt of the order. This can help plant managers access real-time information on all the resources used in the processes.

Read more:  NetSuite Demand Planning Implementation and Optimization Services

2. Managing Procurement: ERP systems streamline various processes to speed up operations and increase efficiency. These processes include the transportation of materials, vendor communication, and warehouse resource management.

3. Automate production process: ERP software facilitates manufacturing operations throughout your supply chain, from creating a bill of materials (BOM) to providing real-time data for labor and mechanical resources.

Additionally, the ERP system can keep track of shipping documentation to minimize errors and ensure the timely delivery of the products. Your ERP solution makes it simple to incorporate last-minute adjustments that may be needed for certain tasks or orders.

4. Shipment processing: ERP software can create invoices and simultaneously send them to the customer when the products are shipped to them. It also keeps a log of shipment and delivery data to ensure all the orders are dispatched on time.

In addition, the ERP software may be set up to check and perform quality control inspections on packaging while resolving resource conflicts.

Key Benefits of ERP Systems in Supply Chain Management 

ERP in SCM effectively manages production responsibilities. Today’s ERP solutions strengthen each part of SCM across various departments and important stakeholders, including partners and suppliers, with increased productivity.

From product delivery to procurement, the automation of the entire workflow leads to significant save the overhead and operational costs.

Ideally, a strong ERP for SCM helps the stakeholders keep control over storage costs and meet user demands.

Some of the benefits of ERP in SCM are listed below:

1. Effective Demand Forecasting

The use of ERP in supply chain management provides accurate demand forecasting. It guarantees the reduction of inventory costs in large-batch production processes.

2. Reduce Production Barriers

Each stage in the supply chain depends on the previous stage. Inadequate planning makes it difficult to utilize proper resources. As a result, we face challenges like low inventories and barriers in production. ERP systems can assist companies in identifying the constraints. It will notify relevant teams, and allocate the required resources that are required to maintain the production capacity.

3. Break Down Silos

You’ve probably worked in a situation where a department’s failure to share information with another department resulted in unexpected problems. ERP in supply chains succeeds in this situation. It removes departmental barriers and unifies data in a single dashboard accessible to everybody.

4. 360 Degree Supply Chain Visibility

Eliminating departmental barriers will improve the performance and metrics visibility of businesses. This will help you manage critical success aspects like staff productivity, fulfilment, inventory control, and future forecasting.

5. Enhanced Data Security

Cloud ERP software offers benefits such as customized data security and accessibility. This enables quick responses on mobile devices with internet connectivity which further improves logistics and team communication.

6. Enhanced Scheduling

ERP systems improve the scheduling and provide more accurate delivery estimates. This is possible with the combination of logistics data with more efficient manufacturing plans. As a result, you will see improved customer loyalty and the company’s overall customer retention rate.

7. Save Time and Costs

Employees can focus on more strategic work and save time with automation. Automation can also speed up distribution and support regulatory compliance.

Challenges of Implementing ERP for Supply Chain Management 

Despite the evident benefits of ERP systems in SCM, the implementation process has a lot of challenges.

Let’s dive into some challenges that may affect implementing ERP for SCM:

1. Resistance to Change

Employees may be hesitant to transition into ERP systems. The reason may be the fear of job loss or unwillingness to adapt to new technologies. To tackle this, business should allocate their resources to providing training programs. This should emphasize the advantages of ERP adoption and a promise to provide support during the change. Businesses should involve employees in their decision-making to enhance their sense of ownership and reduce resistance.

2. Data Migration Challenge

Data Migration from traditional systems to ERP platforms can be difficult and may cause errors. Businesses should conduct comprehensive data audits, clean up inconsistent and unnecessary data, and create a solid data migration plan.

Engage with our experts to streamline your data migration process!

3. Financial Investment

ERP system implementation requires a considerable financial investment. This includes hardware infrastructure, software licenses, and upfront maintenance costs. To assess the long-term benefit of ERP adoption, businesses should conduct a cost-benefit analysis. Adding to this, cloud-based ERP solutions are an affordable option to eliminate the need for initial hardware expenditures.

4. Integration with Existing Systems

Choosing ERP solutions with strong integration capabilities and working closely with IT teams can help businesses ensure a smooth integration process.

Companies can adopt flexible implementation approaches for seamless integration. This will help them focus on specific business processes at a time. 

Overcoming Challenges for Successful ERP Implementation

Successful ERP implementation requires a holistic approach that encompasses strategic planning, effective communication, and collaboration across all organizational levels. Businesses should prioritize change management, making sure that employees are properly trained and engaged.

Not sure where to start? Talk to our consultants for personalized guidance.

Choosing the Right ERP Solutions for SCM

Companies must significantly increase their logistics performance to achieve total organizational growth.

As per recent research, organizations allot at least 25% of their budget to ERPs having robust supply chain functionalities.

Adopting ERP solutions as an integral part of managing Supply chain risk strengthens overall resilience to changes in consumer demand. An agile supply chain not only improves manufacturing productivity but also allows for better resource utilization, resulting in larger ROI.

Selecting the appropriate ERP solution for your company is even more crucial than implementing one. Since no two are the same, you must consider a few important factors.

Factors to Consider while Choosing an ERP System

1. Ease of Use

From shipping and receiving to production and accounting, the right ERP has easy-to-use features for every user. ERPs coordinate the supply chain, handle manufacturing and accounting functionalities and thus, automate the manufacturing operations. 

2. Total Cost of Ownership 

Calculating the total cost of ownership involves the cost of licensing, implementation, training, and ongoing maintenance projects. Ensure that the TCO for your ERP aligns with the budget of your organization.

3. Compatibility with Other Systems 

Make sure the supply chain ERP you choose is compatible with your existing systems. You might also need some adjustments to set up the new supply chain. These include data configurations, customizations, and data migration.

4. Common Data Model

ERPs and SCMs that use the same data model can function together and guarantee data accuracy.  Deploying a common and consistent data model will save productive hours, which are often lost in integrating information and data points

5. Cloud Based ERP

With Cloud-based ERP software, you can make all your manufacturing business processes and data available at any time, from anywhere in the world, from any connected device. This will provide all the immediate control and support whenever it is required.

Real-World Success Stories in ERP Supply Chain Management

ERP solutions are essential to agile supply chain management for many supply chain firms, including Zara, Amazon, and Walmart.

Zara, a global fashion retailer, uses agile supply chain management through ERP solutions. They track user preferences and sales data in real time using their ERP software. They use the data to plan production schedules and inventory levels quickly. Zara’s adaptability to market changes has played a major role in their success.

Walmart is one of the best examples of how ERP can transform the supply chain. They also developed an ERP system that tracks inventory levels, sales trends, and consumer demand in real-time. As a result, Walmart can avoid stockouts, cut down on surplus inventory, and optimize stock levels. This helped them improve their overall supply chain and customer satisfaction.

There is a tremendous potential for ERP in supply chain management as the technology continues to advance. The next generation of ERP solutions will provide cutting-edge features and capabilities.

Some of the major trends are:

1. AI and ML Integration 

Integration of AI and ML in ERP systems will improve predictive analytics. This will allow better decision-making, precise demand forecasting, and inventory optimization.

2. Blockchain for Supply Chain 

Blockchain technology is a secure way to track and verify supply chain transactions. This will ensure data security, integrity, and reduction in fraud. 

3. Edge Computing for Real-Time Processing 

Edge computing enables real-time analysis and decision-making by moving data processing closer to the source. This is especially helpful for supply chain operations that call for quick decisions and reactions.

4. Improved User Experience with ERP UI/UX Design

ERP solutions are increasingly reliant on advances in user interface (UI) and user experience (UX) design. Intuitive interfaces, customization options, and mobile accessibility all contribute to a more pleasant user experience.

5. Cloud Based ERP Adoption

The trend toward cloud-based ERP systems is still present because of their affordability, scalability, and flexibility. Cloud-based ERP systems give companies the flexibility to scale operations without interruption and adjust to shifting market conditions.

Empower your Supply Chain with NetSuite ERP

Integrating NetSuite for Supply chain management will:

  • Help businesses manage their operating costs while analyzing demand, allocating resources, and scheduling production to meet user demands.
  • Ensure real-time updates of production data, inventory, order information, and financial information. This will help procurement, planning, and production groups to operate with up-to-date information.
  • Businesses can precisely forecast and analyze the demand and create strategies accordingly. This will help them optimize product availability and sales.
  • With the help of personnel, equipment, and material scheduling, NetSuite ERP for Manufacturing Software helps small and large organizations alike maximize productivity.
  • Businesses with global operations can handle several subsidiaries with a single ERP system; global supplier and customer collaboration is facilitated with support for 190 currencies, 27 languages, and local accounting and tax regulations with NetSuite ERP.
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Conclusion

Companies must make significant improvements in logistics performance to achieve total organizational growth. The key to increasing operational efficiency is to reduce waste and save costs related to warehouses and distribution facilities. In this blog, we explored the multifaceted benefits of ERP systems to simplify supply chain operations. We understood how ERP addresses the challenges and enables informed decision-making.

VNMT experts are here to help you optimize your supply chain operations. From demand forecasting to logistics management, our experts specialize in customized ERP solutions.

FAQs

ERP can reduce inventory by providing: a) Accurate demand forecasting b) Real-time tracking of inventory c) Optimizing stock levels This helps in preventing overstocking and stockouts.

ERP focuses on integrating internal business processes, while SCM extends beyond the organization. The SCM manages the flow of goods, information, and finances across the supply chain network.

ERP integrates various business processes, including SCM. It provides a unified platform to manage supply chain activities and improve coordination and efficiency of the business processes.

Yes, ERP systems can help in reducing environmental impact with SCM. ERP systems optimize the use of resources. This helps in reducing waste and improving efficiency.

ERPs support multiple currencies, languages, and regulations followed by different countries. They also provide real-time visibility of all the processes anywhere on the globe.

NetSuite implements strict encryption protocols. It continuously monitors the system to protect sensitive information. NetSuite ensures compliance with industry standards and regulations. As a result, it can provide secure and real-time access to data.