Modern ERPs Impact on Supply Chain Management

It is estimated that most companies spend up to 25% of their budget on supply chain management costs. The flow of information, materials and dollars across a complex supply network presents many challenges. Efficiently managing activities and processes to meet customer demand can be difficult. And, most companies realize that there is a huge opportunity for improvement in managing their supply chains. Today’s ERP solutions offer many benefits that can help address these issues. Let’s look at modern ERPs impact on supply chain management through automation, integration and access to real time information.

A modern ERP solution integrates related business functions, resulting in improved information flow and better decision making. Real time information and improved communication between Sales, Production Planning, Scheduling, Purchasing and Finance allows an organization to respond quickly to changes and capitalize on new opportunities.

When a customer order is recorded in the ERP system, demand is created. The real-time data and integration features of the ERP system allow Customer Service to determine product availability and provide an accurate shipping/delivery date to the customer. Production Planning then responds to the demand by creating and scheduling jobs. Because the ERP system supplies accurate, real-time information, Production is easily able to determine if materials are available.

Purchasing communicates with the supply base via the Electronic Data Interchange (EDI) feature of the ERP system, providing material and component requirements to suppliers. They also send feedback to production on any potential delivery/lead-time constraints. This results in accurate purchasing plans and delivery schedules, ensuring the right quantities of materials and subassemblies are on-hand at the right time to complete the customer’s order.

Raw materials and components are received at the appropriate times and inventory levels are updated so that goods can be produced in time to fill the order. The ERP system records production as it happens, creating and tracking Work in Process (WIP), while depleting raw materials and component inventory in real time. The ERP system creates production and labor records, along with quality data records to ensure standards are met. Finished goods are then labeled and shipped to the customer in time to meet the promised delivery date. Accounts payable invoices are created, matched and paid. Supplier performance is calculated and reported, and the system updates other internal metrics such as Overall Equipment Efficiency (OEE), inventory turns, and cost of quality.

The information generated and shared in the ERP system provides a distinct competitive advantage by reducing costs across the organization:

• Inventory costs – reduced through increased inventory accuracy
• Manufacturing costs – reduced through planning and scheduling efficiencies that result in fewer setups and fewer change overs.
• Material costs – reduced by managing supplier lead times, stock and order quality
• Transportation costs – reduced by load sequencing, scheduling and integration with 3rd party logistics
• Back office costs – reduced because processes are streamlined and more efficient

A modern ERP solution allows you to easily communicate throughout your network, bridging the gaps between supply chain partners and helping your supply chain run smoothly. In the end, a good connection with your trading partners keeps your supply chain aligned with your business strategies, improves your performance and helps you achieve your goals.

Our highly-skilled ERP consultants have been working with manufacturers for over 20 years to help them maximize the value of their supply chains. If you would like to find out why Revolution Group is a trusted ERP consulting partner, give us a call at 614-212-1111. We would love to change the way you think about ERP.