As quoted by Mentzer Supply Chain Management is the “systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.” It helps in improvising the flow of materials in all processes and ensures a smooth production throughout. It is an integrated system which ensures that there are no glitches or halts in the day-to-day activities of the business. SCM module in ERP makes use of the speed and the simplification that the technology offers and makes the most of it efficiently. It makes the business dynamic with smart and updated business decisions which are derived by using the real-time data.
Advantages of SCM in ERP:
- Sales forecasting: Based on production numbers and the capacity of the business, the module helps to predict the overall sales of the firm. It considers several factors such as inventory, human resources, and deadlines and so on.
- Track production: The module helps the business to take into account every raw material that comes and the expected output. If the target is not reached it also helps the firm to know the root causes thereby helping the company to identify the reasons for the same and rectify it without any further damage. Apart from maintaining the records it also helps the firm to plan the production and accordingly make appropriate adjustments to leverage the production.
- Inventory management: Helps in maintaining an apt level of inventory and ensuring that the company does not spend too much of costs to procure and store the goods. This further enhances the production system by keeping the crucial goods on hand and ensure no production halts.
- Reporting: With customisations that understand the requirement of the firm, a proper application can be built which can fetch crucial reports for the firm. These reports are updated due to the real-time data that is captured at regular intervals. Based on the available information the firm can take important business decisions that can prove to be profitable and intelligent.
- It increases the pace of communication in between several departments and also amongst the vendors. Given the speed with which technology works, this has proven to be a boon to all the firms.
- Reduces the “Bullwhip effect” which signifies the inconsistency of a demand forecasting in the supply chain caused due to inaccurate information. A practical demand forecasts means a proper production planning and schedule. It also affects the overall chain of production.
- Creates a common platform for suppliers who are in similar industry creating a strong base for the business. Eliminates unhealthy competition by aligning the firms with similar objectives and common beliefs. The firms can also outsource their work to other firms in the chain based on mutual trust that has developed over time.
- It also strengthens the relationship with the customers. A good SCM module means good quality control, no production halts and on-time delivery of orders.
- The most important point is the fact with a strong SCM module the firm can reduce the costs that is involved with inventory, asset management and streamlined operational system
Applications involved in SCM:
Demand Planning: This phase is important as it helps the firm to forecast the demand for the product in the market and plan the various stages of production suitably. It also helps the management to understand and smoothen any unexpected changes on a daily, weekly or monthly basis based on the plan and schedules.
Supply network planning: This stage boosts the overall planning of products supply based on the product flow. It also integrates several key suppliers and builds a dynamic reliable system. It also makes procurement easy and efficient. It saves the costs too as the suppliers will know what goods have to be delivered thereby reducing the unexpected costs associated with immediate ordering. From production to shipping, every aspect is controlled and executed properly. It helps the firm to fulfil the production objectives and surpass the target set internally. This ensures a timely delivery of goods to the firm and also helps in maintaining long lasting relationships with the customers.
Production planning: This involves a detailed analysis of the production system and a crisp schedule for the same. It forecasts accurate details with the help of real-time data derived from the system. By using the in-built statistical tools and reports, the forecast is deduced. A compatible schedule is then chalked and the various departments are communicated about the production targets to be achieved.
Inventory management: As stated above this part does not just deal with tracking the number of goods available in the warehouse. It help in maintaining an ideal and an optimum level of inventory. It also helps the firm to make good profits by deploying smart strategies.
Logistics management: This is a crucial part of the SCM. It helps the firm to decide the ideal means of goods transportation which eventually saves a lot of expenses. With cloud computing these features are becoming simpler and user-friendly. The ERP vendors are concentrating equally on every phase of the module and are striving it make it efficient and more flexible. Once the firm understands the suppliers and customers with the help of Supply network planning, it can easily identify the connectivity between them and locate the easiest means of transportation. There are also few features which confirm the delivery of the goods, automated payments by the customers and several others.
Challenges faced while installing the module:
- As this module involves collaborating the data from several internal and external sources, the employees might find it complicated. They might hesitate to welcome the change and also might resist the whole idea of implementing this software. It is important for the management to communicate how the module will help the business to prosper in the long run and how it will prove to be easy for the employees eventually. The employees might also feel that the data of the company is at stake. The senior management must take a firm step to convince the benefits of the modules at every stage and how it can enhance the processes.
- The initial stages of implementation will prove to be challenging. The employees must extend a consistent support and the management along with the ERP consultants must not lose focus. There will be several errors which have to be identified, analysed and rectified immediately. Given the complexity of the business, every firm will have its own set of challenges. What might prove to be beneficial for one firm might not suit the nature of another firm. These factors have to be scrutinised carefully and proper measures have to be formulated.
All in all the SCM Module is one of the key sections of the ERP. A suitable module can be either bought individually or an integrated ERP with several other modules also can be purchased. The firm must be clear about the functions that it it expecting the module to perform and the objectives that needs to be delivered for an efficient working system and a smooth production.