An enterprise resource planning (ERP) system that contains integrated supply chain management capabilities enables companies to optimize supply chain processes without the cost, time and effort required to integrate multiple, disparate systems. It also eliminates the need for expensive add-ons and customizations down the line. With so many functions available, company leaders need to pinpoint which make the most sense for their unique organization and draw the most return on investment (ROI).
ERP Systems: A Brief History
ERP systems were historically used for managing the transactional aspects of manufacturing operations, orders, inventory and financial business processes. As these systems evolved, distribution and manufacturing applications offering robust, best-of-breed functionality were often integrated to back-office ERP systems. While this approach introduced complexity from both an IT and business process perspective, the efficiencies gained proved well worth it. Synchronization between back-office and best-of-breed applications allows companies to begin the journey to optimally managing inventory, operations, vendors and customers from a common platform.
Not surprisingly, all major ERP companies since sought to broaden their core functionality into areas traditionally associated with supply chain software. The path often chosen by vendors to address supply chain needs was through the acquisition of another company. While sometimes complex from an IT standpoint, the goal of delivering functionality while masking complexity from end users was largely achieved. Software vendors could now endeavor to shift ERP initiatives from necessary business system investments toward projects offering considerable and tangible value to the organization.
ERP Today
The next evolution of these systems is occurring in the ERP software market today and is focused primarily in two areas: delivering more robust supply chain functionality, which rivals traditional best-of-breed solutions, and providing a truly integrated architecture.
When selecting or implementing an ERP system, there are five functions to look for in order to achieve supply chain efficiency. It may be that one or all five of the following functions can play a pivotal role in growing a business and saving money.
1. Warehouse Management System (WMS) Functionality
A WMS offers many benefits to businesses, including automating and optimizing various warehouse processes, thereby reducing operational costs, while also increasing fulfillment speeds. An ERP system with WMS capabilities offers customers more flexibility from responsive processes for inbound and outbound orders. In addition, inventory costs can be reduced, while turnover with progressive inventory distribution can be improved. Finally, users can access a single source for all business data, reducing complications in the process of collecting and acting on data.
2. Transportation Management System (TMS) Functionality
Implementing an ERP system with this built-in functionality is often worthwhile for companies that need to optimize transportation processes. It provides the support needed for the changing and growing demands associated with transportation management, while also offering the ability to manage inbound and outbound shipments, schedule and manage driver appointments, and shop freight rates with greater ease. Manufacturing, distribution and retail businesses can all benefit from having TMS functions integrated within an ERP.
3. Demand Forecasting
By having an ERP system that includes demand forecasting functionality, businesses eliminate the need for data migration and integration. In addition, this functionality offers the capability to generate a statistical baseline forecast based on historical data, a dynamic set of forecast dimensions, the ability to visualize demand trends and adjust the forecast accordingly, and more. Fully integrated demand forecasting is ideal because it eliminates the need for data migration and integration. It also allows users to predict both independent demand (from sales orders) and dependent demand (at any order decoupling point).
4. Customer Experience
Some ERP systems can be valuable for targeting customers in both business-to-consumer and business-to-business environments. For example, pricing and discounting tools are great for distributors and wholesalers looking to enhance overall customer experience by creating and executing promotions based on specific audiences. For retailers, this functionality can be used to tailor shopping experiences specifically to a customer’s unique preferences based on data collected from previous interactions. In addition, some ERP systems can enable loyalty programs to encourage customers to make future purchases, while increasing brand loyalty.
5. Third-Party Systems and Additional Enhancements
Oftentimes, businesses have existing supply chain systems that need to be integrated with a new ERP system. When this happens, decision-makers should seek out solutions that enable third-party systems to integrate with ease. Common supply chain systems include labor management systems, electronic data interchange (EDI), e-commerce solutions, and voice-picking and pick-to-light systems.
For companies looking to maximize dollars and resources, an ERP system with integrated supply chain management functionality can be utilized as an alternative to integrating multiple, expensive, disparate systems. Businesses that select an ERP that lacks supply chain functionality may very likely be forced to invest in various systems and upgrades along the way. This is not only a more costly option, but also often requires more complicated integration processes. Conversely, utilizing a single solution allows businesses to see immediate benefits related to data, financials, inventory visibility, and warehouse and transportation operations.
