Combining supply chain management (SCM) and enterprise resource planning (ERP) through specialized software can lead to increased efficiency, cost savings, and customer satisfaction. SCM reduces costs and streamlines the flow of goods, while ERP improves information flow and integrates all functions within the enterprise. The combination creates an efficient supply chain with centralized activities and seamless connections between functions, resulting in an efficient flow of materials, products, information, and funds.
Supply chain management (SCM) is the organization of the supply chain from initial procurement and manufacturing to final sale to a customer. Enterprise resource planning (ERP) is about integrating the resources of the enterprise to ensure that processes and organizations are connected and communicate effectively. The combination of ERP and SCM, usually organized by specialized software, can lead to gains for the enterprise through greater efficiency in purchasing, inventory control and material handling. Another result of combining ERP and SCM could be increased customer satisfaction through faster order response time and better customer service.
Good supply chain management is essential to ensure that the flow of goods through the system from origin to sale is efficient and streamlined. The introduction of SCM reduces costs that might otherwise arise from unnecessary transportation costs, over-stocking, or losses caused by late delivery, theft, obsolescence, or defective goods. The end result of a good SCM could be increased customer satisfaction and increased sales.
The position of each function within an international organization depends on factors such as proximity to raw materials or markets, local regulatory requirements and management costs within each location. The company could choose to locate production activities in low-cost areas and set up distributor companies close to the final destination of the goods. Implementing SCM could streamline business by centralizing functions such as accounting, pensions, legal, and human resources. Intellectual property may be owned and maintained in a location to ensure it is efficiently managed and used.
ERP improves the flow of information within the organization by having one department report progress to another department and report exceptions to management. Different departments that may be in different locations can work together efficiently thanks to the constant flow of information normally controlled by sophisticated software. Efficient procurement systems, inventory tracking, and customer response times lead to cost savings and increased sales. The ERP system does not allow any particular function within the enterprise to isolate themselves with their own goals other than those of the enterprise. Each function is integrated with the company, part of the information flow and connects seamlessly with the other functions and departments to which it must report.
The combination of ERP and SCM therefore leads to a logical and efficient supply chain supported by central activities that are fully integrated with each other and with the supply and sales functions. The result is an efficient flow of raw materials, finished products, information and funds throughout the company. Provided the enterprise chooses software that fits its industry and size, the combination of ERP and SCM will likely lead to increased efficiency, customer satisfaction, and sales.
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