Enterprise resource planning (ERP)—software that helps automate, streamline, and enhance essential business processes—is a key tool for collecting an organization’s financials, supply chain, operations, commerce, reporting, manufacturing, and human resources activities in one place. This allows an organization’s leaders to easily see a full picture of their business without the need to consult many different sources and piece together how the components may affect one another.
Using ERP in supply chain systems is particularly important because it can save time and money by streamlining operations, which eliminates the need for employees to manually update information. Modern ERP supply chain modules also incorporate digital solutions, such as dashboards, business intelligence, and Internet of Things (IoT) technology to further simplify processes such as inventory management.
Benefits of using ERP in supply chains
When you move to an ERP system for supply chains, you’ll be able to see the big picture of all that’s happening in your supply chain in one place, allowing you to make more informed decisions and analyses, communicate better with different departments, save on costs, and focus on the best ways to grow your business.
- Gain real-time insights. Using AI-informed real-time metrics means your business’s distribution system is constantly being evaluated to improve your supply chain's effectiveness and ability to quickly respond to operational disruption or market changes.
- Save time and money with automation. By reducing time-consuming daily tasks, such as invoicing, through automation, you’ll not only free up employee time for more strategic work but also accelerate distribution and help maintain regulatory compliance.
- Break down silos among departments. At some point, you’ve likely experienced a work situation where one department not sharing information with another department caused an unexpected problem. This is where using ERP in supply chains truly shines by breaking down those departmental barriers and unifying information in one place for everyone to see.
- Increase visibility. When departmental silos are eliminated, you’ll gain better visibility into metrics and performance, which helps control important success factors such as inventory control, fulfillment, employee productivity, and future forecasting.
- Grow your business. Once you’re up and running with a modern ERP system and have all the previously listed benefits in your toolkit, your business is more strongly positioned to focus on growth. With ERP supply chain modules, you’ll be able to create new business models, such as subscription programs. This allows you to enter new markets, win customers with alternative buying patterns, and ultimately grow your business.
How ERP affects supply chain management efficiency
To better understand what efficient supply chain management in ERP looks in real life, consider the following case studies of companies that found success using Dynamics 365 Supply Chain Management.
Toyota Material Handling India switched from manually entering inventory data into spreadsheets to using cloud-based ERP in its supply chain, which allowed the company to see a single view of inventory across multiple locations and warehouses. As a result, employee productivity increased, turnaround time decreased, and resources were optimized.
Leading fashion retailer Aubainerie, which creates roughly 6,000 new products each year, needed a way to accurately manage its massive amounts of inventory data. By switching to using ERP in its supply chain that continuously updates with real-time data, the company was able to personalize shopping for customers, leading to improved customer experiences and a 25 percent increase in conversions.
Once it transitioned its legacy system to a modern ERP system, Alterra Mountain Company deployed an asset management solution that gives total visibility to the state of assets and the costs to maintain them. This resulted in simplified preventative maintenance that drives asset uptime as well as in quicker and better-informed asset investment business decisions.
Integrating ERP software into your supply chain
Knowing the best route to take as you begin the process of integrating ERP software into your workflow will help ensure a smooth change and minimize snags.
Gather your team. Having a representative from each department to share their unique perspectives and needs is a crucial first step to making sure that your new ERP software does what you need it to do. When you meet, discuss your current processes, what you’d like to improve, and which software solutions seem like a strong fit.
Get familiar with your new system. Once your team has chosen ERP software that suits as many of your wish list items as possible, have each team member conduct a thorough review of its features and capabilities.
Prep your data for transition. Be sure to check and clean the data you plan to migrate before compiling it into spreadsheets, where you’ll collect and segment it into logical tables to help streamline the conversion to the new system.
Test, test, test. With your team, use a test database that contains actual transaction data to validate output, test accuracy, and check if the integrations and interfaces are all working as they should. Think of this step as similar to beta testing—you’ll have a chance to work out any kinks that you come across before fully implementing the system across your organization.
Train your employees. Consulting members of your ERP team, discuss the types of training that make the most sense for employees who’ll need to use or understand the new system.
Roll it out. Make a checklist before you go live to stay organized and prepare for how you’ll handle aspects such as communication protocols for system downtime, network speed and reliability checks, and data backup processes. Once you’re live, expect to make some adjustments as necessary—it’s impossible to plan for every single scenario that could arise.
Frequently asked questions
1. What does ERP stand for, and what is its role in supply chain management?
ERP stands for enterprise resource planning, which is a software system that helps automate and streamline essential business processes. Supply chain management in ERP is structured to simplify operations to save time and money, grow your business, respond to market changes, and keep your business compliant with regulatory factors.
2. What’s a business scenario example of ERP supply chain management?
One real-life business scenario example of how ERP was successfully used to improve supply chain management is with water and process treatment company ChemTreat. Before switching to a modern supply chain ERP system, the company manually tracked incoming materials and some manufacturing processing with spreadsheets. After the switch, ChemTreat gained end-to-end visibility encompassing its vendors, stock, and customers. As a result, the company can now clearly and quickly see what it's spending on which vendors and directly tie those expenditures to customer consumption and demand.
3. What’s the difference between ERP and SCM systems?
ERP is enterprise resource planning, and SCM is supply chain management. Although ERP and SCM systems are related, an SCM system focuses specifically on supply chain planning and execution, whereas an ERP system takes a big-picture approach to including all related functions that affect a supply chain, such as financials, operations, commerce, reporting, manufacturing, and human resources activities.
4. What are the benefits of ERP?
Some benefits of ERP include:
- Delivering a more complete, omnichannel commerce solution that combines back-office, in-store, and digital experiences.
- Increasing profitability while driving compliance.
- Managing company data and streamlining employee management tasks, such as payroll and hiring.
- Improving business communication.
- Automating daily processes using robotic process automation, which saves time and money.
- Fulfilling customer needs and managing resources through real-time data.
5. How do ERP systems work?
ERP systems work by compiling an organization’s financials, supply chain, operations, commerce, reporting, manufacturing, and human resources activities in one place for simplified, better-informed management. ERP systems in supply chains also use digital tools, such as IoT components and AI monitoring and automation, to further enhance data and analysis.
6. Is ERP software easy to learn?
Because ERP software is built to make organizational decisions, strategies, and operations simpler and reduce time spent consulting multiple data sources, learning to use ERP software will likely be a straightforward process. However, migrating to an ERP system should be a thoughtful, unrushed process.
7. What’s an ERP system in manufacturing?
An ERP system in manufacturing focuses on improving business communication, automating daily processes with robotic process automation, and fulfilling customer needs and managing resources through real-time data. Additional focuses include optimizing project management, cost management, and production planning.
8. What’s an ERP system in logistics?
An ERP system in logistics refers to when all primary components of a business—for example, financials, supply chain, operations, commerce, reporting, manufacturing, and human resources activities—are viewable from a single source so that business leaders can make better-informed decisions companywide based on how the different components affect one another.