Supply Chain Management (SCM) is a system through which distributors and manufacturers use to plan, distribute, and track the inward and outward flow of materials and products.
Inward material flow is vital for manufacturers to produce the desired goods and outflow flow of products are essential to get delivered to the end consumers on time. This role of material flow and tracking is efficiently maintained by Enterprise Resource Planning (ERP) systems.
The framework of SCM consists of several entities, such as customers, suppliers, distributors, and retailers, along with the manufacturer. ERP systems can manage the large volume of data related to all these resources.
It is observed that more than 41% of weightage is given to data analysis among the top technological priorities of SCM. It is beneficial in adding value to the entire SCM, starting with materials procurement and ending with point-of-sale customer delivery. ERP systems are an integral part of SCM because:
● ERP systems help the manufacturer to procure the required amount of goods and services for the production unit.
● The supply chain operations management takes care of the inventory for inward and outward flow of materials.
● Production unit utilizes ERP systems in calculating material flow and order.
● The finished products are organized as per rules with ERP systems.
● And the manufacturer uses the ERP system for endpoint delivery and tracking systems.
Open-source software is an integral part of almost all the industries dealing with SCM. The open-source logistics management system can exert a significant impact on the logistics and SCM of an organization in the following ways:
● The software can be easily scaled and consolidated for load balancing during an expansion. They provide higher profitability while scaling business logistics.
● Open-source software comes up with high customer service facilities. It includes maintenance and support through online commodities.
● The licencing and maintenance fees for this software is pretty low and helps the manufacturer in curbing expenses.
● The compliance for licensing facilities are highly convenient and can be used to track shipments across any location.
● It prevents vendor lock-ins and efficiently manages logistics and supply chain.
ERP can automate the internal process providing the organizations to spend more time in customer service. It helps them to improve all the forms of marketing communications and ameliorate their interaction with consumers.
70% of the industry professional believed SCM could drive customer satisfaction. Supply chain integration in ERP can be highly beneficial for manufacturing companies:
● ERP is highly functional in inventory management. Manufacturers can keep an eye on the inward and outward flow of goods. With correct quantities and details, it is easier to detect wastage or losses. Companies can reduce the holding charge for unnecessary or abundant items.
● All the organizational data and information are accessed by the ERP system. It helps in managing these data efficiently, automating the production and inventory control processes. Therefore, it gives the manufacturer the ability to improve productivity and generate revenue.
● It is estimated that 25% of the SCM spending was done on automating the process till 2020.
With streamlined inventory and higher production ability, the manufacturer can produce high-quality products in less time with sufficient cost reduction. This improves brand recognition and improves its revenue generation capacity.
In SCM, an ERP solution improves the accuracy in demand forecasting as 57% of the companies believe technological improvements are beneficial for SCM. It helps in proper inventory control with various methodologies such as FIFO (first in first out) and LIFO (last in first out).
This ensures the inventory costs are minimal. A lean inventory can be achieved by incorporating the just-in production method, where raw materials are ordered right before it is needed reducing the holding costs. ERP systems make the SCM business process more transparent by identifying bottlenecks in production and logistics.
An effective ERP system helps in the entire cycle of SCM starting from the procurement of raw materials, inventory control, and management, production, operations, logistics, and distribution of the final products to the end consumers.
ERP automates the process and thereby facilitates customer service by providing more time as per the reports of 30% supply chain professionals.