ERP for Supply Chain Management

What is a Supply Chain?

Supply Chain definition: Supply Chain is a connected system of organizations, people, activities, information, and resources designed to procure raw materials, convert them to finished products, and deliver the finished product to the end consumer. Supply Chain involves all the activities and processes of transforming natural resources, raw materials, and components into a finished commercial product delivered to the end customer.

Supply Chain covers the entire gamut of an Organization and even extends to entities outside the Organization, including vendors and customers. Every activity that helps deliver the product or services to the customers is a part of the Supply Chain. .Supply Chain is ubiquitous and covers all the operational departments of an organization, including Purchasing, Stores, Warehouses, Manufacturing, Order Processing, and Dispatch. Some of the processes covered by the chain are:

supply chain management software
Supply Chain Distribution Software

Processes covered by the Supply Chain are:

  • Planning for raw materials
  • Creating a Purchase Order
  • Receiving materials
  • Manufacturing
  • Storing
  • Processing Customer Orders
  • Dispatch and Tracking
  • Warehousing

What is Supply Chain Management (SCM)?

Supply Chain Management (SCM) definition: It coordinates the activities related to the smooth flow of materials and services across the supply chain to ensure on-time delivery of products and services to the customers.  

As per the Supply Chain Operational Reference (SCOR) model developed by Supply Chain Council (SCC), Supply Chain Management focuses on five areas: plan, source, make, deliver, and return.

Supply Chain Management focuses on the following business processes as shown in the diagram.

supply chain distribution software
Supply Chain Distribution Software

What is Supply Chain Management ERP Software?

Supply Chain Management Software helps to execute supply chain processes discussed above. Customers can use disparate software to handle different business process areas based on their unique requirements. For example, they could use a Procurement System to manage their procurement processes and a Transportation Management System to handle their logistics processes.

The challenge with using disparate systems is that they tend to work as Silos, and integrating them and maintaining the integration could be a complicated task. One way to handle the challenge of silo application is to procure an integrated Supply Chain Management Software. These applications could be industry-specific and come with their inbuilt integration that helps incorporate the Supply Chain Management processes.

A good Supply Chain Management Software should support forecasting, demand planning, and materials planning. Besides, it should support the unique processes and features relating to your industry.

One of SCM Software’s challenges is that it does not integrate with the other business areas like Finance and HRMS. Organizations can accomplish this integration by using Supply Chain Management ERP.

What is Supply Chain Management ERP (SCM-ERP)?

Supply Chain Management ERP is an Supply Chain Management Software that integrates the Supply chain management (SCM) Activities to the other business areas including Financials and HRMS. This provides the management with an integrated view of the Organization’s performance. Since Supply Chain Management ERP can provide real time financial impact of the Supply Chain Transactions, they enable early identification of unprofitable transactions.

No Feature Module Industry (M/O)
1 Create vendors Purchasing All M
2 Create purchase requisitions Purchasing All O
3 Approve purchase requisitions Purchasing All O
4 Create purchase orders (PO) Purchasing All M
5 Approve PO Purchasing All M
6 Create purchase agreements Purchasing All O
7 Track PO amendments Purchasing All M
8 Close PO Purchasing All M
9 Budgetary tracking Purchasing All O
10 Receive material against PO Inventory Many M
11 Return material to vendor Inventory Many M
12 Issue materials to sales Inventory Many M
13 Process material returns from customers Inventory Many M
14 Inventory adjustments Inventory Many M
15 Material transfers Inventory Many O
16 Process physical inventory adjustments Inventory Many O
17 Record ASN (Advance Shipment Notice) Inventory Many O
18 Support costing method as applicable Costing Many M
19 Create quotes to be send to customer Order Management All O
20 Record sales order Order Management All M
21 Pick materials from warehouse Order Management Many M
22 Material Packing and Dispatch Order Management Many M
23 Process material returns from customers Order Management Many M
24 Direct shipment Order Management Distribution O
25 Consignment sales Order Management Retail O
26 Internal orders Order Management All O
27 Create and process production orders Manufacturing Manufacturing M
28 Configure Bill of Materials Manufacturing Manufacturing M
29 Integration with financial applications like receivables and payables All All O
30 Create accounting entries and transfer to GL All All M

Supply Chain Management Software: Key Modules

Core Modules

  • Purchasing Software also known as Procurement, handles the purchase of raw materials. The application takes the recording of a requisition, approval of the same, converting the requisition to a purchase order (PO) and sending the approved PO to the Vendor, and following up till the material is received at the distribution center.
  • Inventory Management Software: This module deals with the material handling and management process in the Organization and covers tasks like receipt and storage of raw material, issue of the raw materials to production, receipt and proper storage of finished products, and completion of finished products against sales orders. Inventory management also handles the physical inventory tracking process.
  • The manufacturing module handles the conversion of raw materials to finished products. The module is also tasked with tracking and consuming resources, including labor and machines, and the quality checking of finished goods.
  • Order Entry and Fulfilment: This module handles the recording of customer orders and processing the product’s dispatch to the Customer to fulfill the customer orders. The key processes are order entry, picking, packing, and dispatch. This module also handles customer returns.
Optional Supply Chain Software modules

Demand Planning Software handles the recording of forecasted demand and processing the forecast to plan for the availability of raw materials and production capacity to produce the finished product to meet the forecast demand. The module processes three planning types, including Materials Requirements Planning (MRP), Min-Max planning, and Reorder Point Planning.

Warehouse Management Software: This module augments the inventory management module and specializes in advanced storage, tracking, and processing of the material movements in the warehouses. This module enhances the accuracy of the receiving and picking process. Warehouse management uses technologies like barcodes and RFID to ensure inventory optimization.

The Transportation Management Software augments the dispatch process by providing a complete track of the finished product as it moves from the Factory Gates until it reaches the Customer’s gates. This tracking ensures in-transit material quality and helps the smooth transfer of ownership of the material to the Customer. This module uses advanced technologies like IoT (Internet of Things) and GPS to ensure quality and reduce delays.

How to Select Best a Supply Chain Management Software?

Supply Chain Software Business factors :

Meets the industry requirements

Each industry group and industry has its own unique needs from Supply Chain. For example, direct shipment, where the supplier ships the material directly to the customer, is a feature of the distribution industry. Consignment sales, where the material is stored in the customer warehouse, is a retail industry feature. Complexities of the Supply Chain are different for each industry. The ERP Application must meet the industry supply chain requirements.

Can support company-specific needs

The supply chains of two companies in the same industry could be different. Since the chain provides unique competitive advantages to the company, it must identify such critical requirements and ensure that the selected ERP satisfies the company-specific needs.

Scalability

Supply chain complexity increases exponentially with business growth. So any ERP for Supply Chain should be able to handle this complexity as the company grows.

Supply Chain Software People factors

People are technology savvy: ERP systems that handle the supply chain are complex. It needs users to be educated and technology savvy. Users should not only learn the application but also learn how to get support to resolve the issues.

Change management: ERP systems for supply chains entail process changes. A thorough change management process is required before and during ERP implementation. Since change management is inevitable, companies should select ERP systems that require the least amount of change management effort.

Supply Chain Software Support factors

Availability of quick and quality support: Uninterrupted supply chain is an essential requirement of any company. Hence ERP Vendors should ensure prompt and quality support to resolve any issues relating to the supply chain.

supply chain management software
Supply Chain Distribution Software

Other Supply Chain Software factors

  • Modular: The Organization should procure different modules of the Supply Chain ERP applications. For example, the Organization may decide to roll out purchasing and inventory immediately and phase out manufacturing and order management modules later. The modular design ensures a plug and plays interface for implementing any new modules in the future.
  • Easy to Use
  • Value for money: The application must meet the critical business requirements at the company’s lowest cost.

Benefits of a Supply Chain Management ERP Software

Accurate planning :

Supply Chain Management ERP Software supports both push and pull-based planning. By enabling accurate forecasts, the planning outputs become more accurate. It leads to improved process efficiency.

End to end tracking :

Supply chain ERP systems ensure clear visibility for management along the entire chain. It helps quickly identify bottlenecks and inefficiencies

Continuous improvement :

ERP systems provide data, used benchmarking and continuous improvement within the Organization.

Cost reduction and improvement in profitability :

Improvement in process efficiencies, increased inventory turnover, and asset utilization will lower the cost per unit of the finished product driving up the profitability per unit.

Improved inventory turns :

Accurate planning ensures regular stocking and replenishment of items. It increases the inventory turnover.

Improved resource utilization :

Accurate capacity planning that ERP systems enable will lead to better utilization of machines and labor.

Increased customer satisfaction :

An ERP for Supply Chain Management helps companies assure the firm promised date and deliver on (or before) the promised data. ERP helps provide relevant information to the Customer promptly. The clarity in communication and promptness in delivering products and services leads to increased customer satisfaction and repeat & referral orders.

Cloud-based ERP Vs. On-Premise ERP in Supply Chain

In an On-Premise ERP, the Customer manages both ERP Software and the technology infrastructure (Hardware). This level of control enables the Customer to customize the software to suit their unique supply chain processes. This flexibility comes at the cost of managing the unfamiliar terrain of managing the IT infrastructure.

In a Cloud ERP, the ERP Vendor manages Cloud based ERP, both software and hardware. The Customer can configure the ERP Software to meet their business requirements. There is limited flexibility in customizing the application to meet the unique business processes. In some cases, the Customer will need to modify their business processes to suit the operations supported by ERP.

The main benefits of Cloud ERP are reduction in cost and complexity of managing the IT Infrastructure. Irrespective of Cloud or On-premise ERP, the key is to understand the critical business requirements and ensure that the ERP system that you choose can quickly meet those requirements.

how to implement supply chain management system
Best Supply Chain Management Software

How is Supply Chain Management ERP Software changing wholesale distribution business?

  • The traditional Wholesale Distribution Business is at an inflection point. Advanced technology and digitization negatively impact the conventional Wholesale Distribution business’s foundations at the supplier level, competition level, and customer level. Digitization has enabled its suppliers (manufacturers) to sell directly to the end customers, bypassing the distributors and retailers. It has also enabled traditional B2C players to target B2B and vice versa.
  • Digitization has also changed the nature of the competition. Online stores like Amazon have made many Wholesale Distributors redundant. Many ‘Internet Only’ distributors can offer better deals to the customers without any investment in physical warehouses.
  • Transparency in prices available through the internet has shrunk traditional margins. Besides, the information availability has also ensured the customers can identify ideal Distributors. The market has become very competitive.
  • The only way the business can thrive is by embracing digitization. The primary objective of the digitization strategy should be to reduce the supply chain costs and improve efficiency. The other digitization strategy identifies new revenue models made available through digitization, e.g. value-added services.
  • A Supply Chain Management ERP is the core of the digitization strategy. ERP helps automate the planning process and creation of purchase orders. Warehouses can be equipped with bar codes, RFID, and QR codes, and the same is integrated with the ERP Application.
  • Analysis of ERP information will help identify fast-moving products, product groups with high profitability, new customer groups, and changing trends of the existing customer groups. ERP can also help the Distributor to move into E-Commerce. Integration of E-Commerce with ERP will ensure automation of Order Creation and the respective downstream transactions like available to promise, inventory planning, and procurement.
  • ERP can also create and track Drop-shipment orders and automatically reconcile the transactions. By integrating with the customer data, ERP can plan better, leading to improved inventory optimization, warehouse space utilization, and inventory turnover ratio.
  • Wholesale Distributors should embrace technology to handle digitalization challenges. Supply Chain Management ERP is the backbone of the digitization strategy.
Supply Chain Software Future (2022 -2025). Next Generation of ERP.

New technology will upend the way Organizations are managing their Supply Chain. Technologies like Blockchain, Industrial Internet of Things (IIoT), and Robotic Process Automation (RPA) will fundamentally alter the way businesses operate and will have a profound impact on the Supply Chains of the Future.

ERP for Supply Chain as a foundation to build a platform for future technologies. It means that ERP for Supply Chain is no longer a luxury but a necessity for an Organization to transform the Supply Chain of the future.

Gartner has coined the term ‘Postmodern ERP’ to describe how advanced technologies like Artificial Intelligence (AI), Machine Learning (ML), and other technologies will impact ERP of the future.

ERP For Wholesale Distributors – Software Selection Criteria

• Does your ERP Software meet your Business Needs?
• Does your ERP solution aligns with company goals?
• Will ERP Software Integrate/compatible with existing systems?
• Have partner Network/Availability?
• What type of training/support options offered by the ERP Solution provider?
• Have references and recommendations from customers?
• Does your ERP provider invest in tomorrow’s technology?

 

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