What Is Enterprise Resource Planning (ERP) |Supply Chain Management (SCM)
ROLE OF ERP IN SUPPLY CHAIN MANAGEMENT SCM
In today’s market, companies need to adapt to new challenges and changes. Most of the large and mid- sized companies have complex organizational structure. They have to deal with both internal and external stakeholders. So they need to make sure that, right data and information is available all the time. To meet this challenge, Enterprise Resource Planning (ERP) software has been developed.
ERP plays a vital role in Supply Chain Management (SCM) as there is a need to interact with numerous suppliers. This in turn causes ERP vendors to concentrate more on solutions for supply chain integration. ERP System has various functional modules that help in various business functions. The most important function of ERP is Integration. It integrates data and process from all functions of an organization.
difference between Enterprise Resource Planning and Supply Chain Management
One of the most basic ways to describe the difference between SCM and ERP is that while supply chain management software handles data on incoming raw materials from outside vendors or suppliers, ERP software is much more focused on internal work processes.
Three types of flows in SCM:
- Material flow – This is a physical flow which represents the movement of product from supplier to customers as well as the movement of product from customers to suppliers in case of servicing, repairing etc.
- Information flow – This represents capacity, order tracking, delivery schedule.
- Financial flow – This represents the credit terms, invoices and other ownership arrangements. This flow requires highest level of co-operation between the members of the supply chain.
Benefits of ERP on Supply Chain Management:
- Improved Efficiency
- Order Tracking
- Helps in Decision making
- Minimize the Delay
- Improves Productivity
- Eliminate Errors
- Inventory Optimization
- Reduce Cost
ERP can also be executed for corporate functions like human resources, finance and accounting. ERP allows easy access to reliable integrated information, whereas its biggest disadvantage is its integration. Integration of ERP into the whole system is important as the system can yield long term benefits; else it compromises the activity of the whole organization due to poor understanding of the system. In short, ERP is a system which helps commercial areas like finance, logistics, sales, production, distribution and others which are inter-related to each other.
ERP
SCM
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