What Is a Supply Chain Management Software?

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 the 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 a Supply Chain Management Software that integrates 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 the 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

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.

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.

FAQ: Supply Chain Management ERP and Procurement

How can Supply Chain Management ERP help procurement?

ERP for purchasing automates the procurement process to ensure better data visualization, analysis, and reporting. The purchasing ERP eliminates miscommunication, inaccurate data, and poor decision-making as a centralized data source. With one data set to depend on, each procurement worker has access to a whole, centralized data source. A procurement ERP system can provide the following advantages:

It simplifies the tracking and management of supplier relationships.
It makes sourcing faster and more accurate. It enables the procurement officers to log into the purchasing ERP and retrieve sourcing data.
The procurement ERP system facilitates contract management. When contracts expire, the system sends alerts. Before signing new agreements, procurement professionals can use the software to compare options and create negotiation plans.
The ERP purchasing software helps with order management. Companies that get several orders can rely on ERP for automation and control.
The purchase ERP software connects order and payment systems. It offers this capability to help automate payment approvals. The software alerts the accounts payable team for assessment if something is amiss.
Supports project planning. The best ERP system for purchasing enables you to tackle one-time projects, repeated purchases, and seasonal projects.

What is procurement in Supply Chain Management ERP?

Procurement entails simple and complex purchase deals. Also, a company can procure goods only once or repeatedly. Purchasing ERP is the best system for managing the procurement process. In an Supply Chain Management ERP, procurement appears as a module with different features.

A company can get this module to track quote requests and related purchase orders, invoices, accounts payables, sales orders, shipments, etc. The procurement ERP module should offer the features we listed above.

What is procurement Cloud ERP?

An ERP procurement tool can be a cloud or an on-premise solution. A cloud ERP system stays on internet-based servers. Usually, the software provider manages these servers on behalf of customers. Hence, they tackle software upgrading and maintenance fees.

They also manage server downtimes on the customer’s behalf, making the cloud ERP solution the cheapest solution. Although its data security does not match that of on-premise ERP, it allows accessibility from anywhere.

What are procurement challenges in Supply Chain Management?

Every business runs a unique procurement process and encounters some challenges. Procurement challenges that most companies face include the following:

A company can face market risks, frauds, delivery delays, and other risks when running its procurement procedure. It also has to adhere to compliance policies, which pose some risks.
Uncontrolled expenses can cripple the organization’s progress. In procurement, these are known as dark purchasing. They lead to revenue loss.
Organizing data with spreadsheets when procuring goods or services can lead to transparency issues. Locating and tracking data across many spreadsheets is difficult. As data volume grows, retrieving work gets more complicated. Besides, this type of data handling can lead to security issues if workers reveal too much information.
The inaccuracy of data can complicate the decision-making process. Such a decision can lead to inventory shortages or overflow.
Lack of procurement technology is a top challenge preventing organizational success. It is impossible to create value without the appropriate technology.

What is the procurement life cycle explained?

Organizations thrive by facilitating procurement and other processes. Procurement of goods or services is a process with a life cycle. The procurement life cycle includes all steps for getting goods or services.

It should help a company obtain goods without delay to reduce operation costs. A procurement life cycle improves customer relationships. It ensures that the organization receives supplies for producing products for customers without delay. A procurement life cycle provides the following steps:

Defining and specifying your business needs
Calling your suppliers to apply for tenders or submit their bids
Assess and choose the best suppliers
Manage your contract and deliverables
Review the procurement process to see the areas that require change.

ERP for Supply Chain Management