Understanding the role of ERP in Supply Chain Management

1. Introduction Enterprises rely on different types of information systems (IS) for managing day-to-

Enterprises rely on different types of information systems (IS) for managing day-to-day business and making decisions such as customer relationship management systems (CRM), enterprise resource planning (ERP) and supply chain management (SCM) systems. Businesses rely on ERP systems to automate business operations, replace their legacy systems, and integrate core business processes and to help adding value and visibility. SCM systems help organizations to enhance relationships with supply chain members and stakeholders.  Therefore, the integration between ERP and SCM systems is a key to accelerate business performance.

SCM - Supply Chain Management and ERP - Enterprise Resource Planning have been gaining popularity among organizations over the last few years, across a number of vertical industries in India and globe. Software development companies in India have started their focus into developing software like SCM, ERP and business solutions.

An ERP system focuses on the management of business information by integrating disparate systems across functional groups such as inventory control, procurement, distribution and finance.  A Supply Chain Management system links in supply chain partners who help a company find the raw materials it needs to assemble/manufacture the products and services and deliver it to its customers.

The integration of Supply chain management and ERP system allows distribution and manufacturing organizations the capability to gain greater visibility of its operations. Also increasing speed, efficiency and overall customer satisfaction.

Need of Supply Chain Management (SCM) System

  • Managing contractual obligations that ensures a continuous supply and avoiding a service company’s delivery disruptions during business hours
  • Strengthening supplier relations for systematic synergy with suppliers and different lines of businesses
  • Managing risk and compliance to abide by organizational as well as industry specific compliances and regulations
  • Enterprise spending management that ensures procurement happens through the right suppliers and reduces overall costs
  • Establishing a single comprehensive supplier view and deriving insightful procurement analytics

Software development companies have developed many applications for TMS, WMS etc. to manage supply chain of the organization.

Supply Chain Management-Key Elements

Supply Chain Management consists of four phases viz. design, planning, execution, control and monitoring of supply chain events with the aim of creating value to build a competitive infrastructure. This enables the organization to leverage worldwide logistics. It not only synchronizes supply with demand, but also measures performance globally. A Supply Chain Management (SCM) system provides real-time perceptibility into operations, and integrates activities through improved supply chain relationships. This enables organizations to achieve a sustainable competitive advantage. Following are the four key elements for Supply Chain Management.

a) Supply Chain Planning

Supply chain planning is done to determine the set of policies and procedures that govern the operation of supply chain. Planning also includes the determination of marketing channels, promotions, respective quantities and timing, stock level and replenishment policies and production policies. Planning majorly establishes the factors within which the supply chain should operate.

b)  Supply Chain Execution

Requirement of Execution-oriented software applications for effective procurement and supply of goods and services throughout a supply chain. It covers manufacturing warehouse and transportation execution systems, and systems that provide visibility across the supply chain.

c) Supply Chain Monitoring

Monitoring is the ability to review the supply chain activities in real-time. It can be either to identify the status of specific activities or review overall performance.

d) Supply Chain Measurement

Measurement is evaluation of the actual activity against planned targets. This is often used with scorecards of benchmarks so that unfamiliar or undesirable variances can be identified and investigated.

Integration of ERP and SCM

ERP (Enterprise Resource Planning) and SCM (Supply Chain Management) systems provide various benefits to an organization in terms of capabilities and functionalities. The integration provides both intra-organizational and inter-organizational advantages. It also provides substantial leverage over competitors. The integration of ERP and SCM systems can be made easier with the following considerations:

  • Business priorities: Which one to implement first: ERP or Supply chain? In most cases, ERP starts with financials and business workflow, and companies build on from here.
  • Technology issues:If the ERP and SCM systems are on similar technology platforms, integration is easier to execute. Hence, decreasing time to ROI (Return On Investment).
  • Cost of implementation:Companies must consider and evaluate the cost impact of both systems being integrated.
  • Total cost of ownership (TCO): There may be cost savings and also better user experience if both systems processes are merged to reduce the points of data capture.

Benefits of Integrating ERP and Supply Chain Systems

Software development companies play a major role in integration of ERP and supply chain systems. If most projects follow some simple rules, companies can increase the chance of its success, deliver on time, and proudly involve the relevant group of users who utilize the system to maximum gain. Some benefits of integration of ERP and Supply Chain Management system are as follows:

  • Improved efficiencies, lower costs and improve productivity
  • Increased customer retention as it has the ability to provide better services to customers
  • Increased capability to manage resources through a streamlined process or an automated workflow
  • Enhancement of speed of tasks and increase in production by leveraging IT
  • Enabling organization to compete more effectively by providing ability to deal with with business changes in the future and to adapt to changing rules and regulations

Conclusion

ERP and Supply Chain Management systems offer various benefits to an organization in terms of capabilities and functionalities. The ERP system provides intra-organizational and Supply chain provides inter-organizational advantages, integration of both systems will provide a company with substantial leverage over competitors. This will also enable the organization to stand globally in the market as the organizations gets inter as well as intra organizational advantages.

Reference

http://archive.thoughtsoncloud.com/2014/06/need-supply-chain-management-system-today/
http://searchmanufacturingerp.techtarget.com/tip/SCM-systems-vs-ERP-systems
http://www.compudata.com/connecting-erp-and-supply-chain-management-implementation-strategies/
http://www.compudata.com/the-role-of-erp-in-supply-chain-management/

Difference between CRM and ERP

1. Introduction Software outsourcing companies in India have witnessed that business are adopti

Software outsourcing companies in India have witnessed that business are adopting CRM and ERP systems these days to accelerate business growth. CRM and ERP are two important technology acronyms that businesses need to know about. Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) are similar in many ways, as they are both used to enhance the profitability of a business.

(solutions, 2015) says, these systems are similar in some areas, and can be completely integrated with other. However, as their central functionalities are completely different, it’s best for a business to first look at them as separate entities i.e. stand-alone systems. When viewed independently, it’s easier to see how ERP and CRM each play a role in improving efficiency and increasing sales.

What is CRM?

CRM is an abbreviation for customer relationship management. It is a phrase used to describe all facets of interaction that a company does with its customers. The interaction may be either sales related or service related.

CRM at its simplest is a system with processes for managing a company’s interactions with existing as well as potential customers.

CRM is developed to include all sectors of the customer experience so as to keep the customer happy and in turn making them loyal and more valuable to the business. It is the process of identifying potential prospects, nurturing them and guiding them through the sales process to improve the business. CRM systems like Microsoft Dynamics CRM and Salesforce provide a standardized technique for collecting and sharing customer data and classifying customer interactions.

Since all of the data is standardized, it is easily shared across the business. Various activities that CRM performs are:  used by executives to create sales projections, by sales reps to maintain communication with clients, by shipping clerks to verify addresses, and by the billing department to create invoices. This lets the executives, managers, and developers to share data in software development companies.

What is ERP?

ERP is an abbreviation for enterprise resource planning. ERP software is used to manage the business. It integrates all aspects of an operation for product, including planning, development and manufacturing processes, human resources, finance and sales and marketing.

Like CRM, ERP allows for the rapid sharing of standardized information throughout various departments. Executives, managers, and other employees all enter information into the ERP system, creating a real-time, enterprise-wide snapshot.

The prominent feature of ERP is the shared database that provides an array of functions which is used by almost all of the departments of the organization. Implementation of this software enables all the departments of the organization to access up to date information. In addition to this, the entity is also able to analyze the performance, profitability and liquidity at any point of time.

The most important benefit of this software is that as it is integrated software the redundancy of data is minimized. The software also provides standardized procedures, processes and reporting as well that are common in the industries.

Key differences between CRM and ERP

According to (S, 2015), following are the major differences between CRM and ERP:

    1. CRM is defined as software that lets the organization to trace every transaction between the clients and a customer. Whereas, ERP refers to a software program that helps the company to manage its business processes going on across the company.
    2. ERP consolidates the information provided by different functional groups of the organization through systems like CRM, Supply Chain Management (SCM), and Human Resource Management (HRM) etc.ERP was developed earlier than CRM.

    3. The CRM is mainly utilized in conducting back office activities, whereas ERP is used to accomplish back office activities.
    4. CRM is oriented towards the management of relationship with customer of the enterprise while ERP is majorly concerned with planning the resources of the organization to ensure its best possible use.

    5. CRM focuses on increasing sales, but ERP gives emphasis on reducing costs.         

Consolidated comparison chart of CRM and ERP

Basis for comparison CRM ERP
Definition It is Computer software that ensures companies to record each and every transaction and interaction with the existing and prospective customers is CRM. It is Integrated pre-packaged computer software that lets the organization to manage and control the on-going processes in the organization.
Subset/Superset Subset Superset
Focus Increasing Sale Reducing Cost
Developed in 1990 1960-1970
Orientation Customers Enterprise
Utilization Front office activities Back office activities

Conclusion

Customer Relationship Management helps the organization to maintain a long term relationship with its customers. Software development companies in India are also leveraging this benefit. In addition to this, it is also useful to know about the preferences of the clients and develop trust. CRM enables the organization to know the preferences of the clients. On the other hand ERP combines various functional units of the organization together so that they can freely share the information. It lets the various functional units to communicate with each other on a real time basis through a centralized computerized system. Apart from the above differences there is commonality among the two softwares and that is, they both aim to enhance the profitability of the company.

 Bibliography

S, S. (2015, September 11). Differences Between CRM and ERP. Retrieved 04 21, 2016, from Differences Between CRM and ERP: http://keydifferences.com/difference-between-crm-and-erp.html

solutions, S. S. (2015, June 11). CRM vs ERP. Retrieved 04 21, 2016, from CRM vs ERP: What’s the difference?: http://www.sysco-software.com/crm-vs-erp/
 

Challenges faced in merger and acquisition for Information System like ERP

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Most mergers and acquisitions are decided upon at the management or group level without the involvement of IT in view of software outsourcing companies in India. But these decisions have a direct impact on the IT landscape. This leads to increase in complexity of integration – particularly data migration and integration.

In an acquisition, a target company is acquired and absorbed by the bidding company and after the deal only the bidding company exists, while the target company goes out of existence. A merger differs from an acquisition in that two companies join to form an entirely new organization. This involves integration of all of the components of the two companies to form a new company. In practice, the terms mergers, acquisition, and consolidation are often used interchangeably, because they differ only in terms of legal aspects. Software development companies or IT vendor whom company is in contact faces number of issues and challenges in integrating information systems of two different companies owing various reasons.

Globalization has contributed to an increase in the number of mergers and acquisitions of technology applications and services. Also the increasing rate of adoption of SaaS and Cloud computing had led to the need of merging and acquiring in companies.

Challenges prior-Merger or acquisition

The first challenge is selecting a right company that can extend the portfolio of the acquiring company. The next challenge then is to prepare businesses to address existing issues surrounding finance, compatibility, management, and legal areas. The other challenge deals with the difficulties that arise when trying to integrate people, systems, and business processes. Challenges surrounding integration of systems and business processes arise and overcoming them can be quite difficult if not done right.

Challenges post-Merger or acquisition

Organization must overcome the challenges arising post a merger and acquisition in order to achieve its business goals efficiently and effectively and to get a competitive edge in the global market. It is rare to find two companies with identical systems and applications especially when they run different business. This distributed structure of organizations makes it critical to deal with the shortcomings in order for that to be a successful merger or acquisition.

It majorly covers 3 aspects for implementing a successful integration of two different businesses for software development companies or external vendor or company’s internal IT department. These are: - 1) Strategic Aspect, 2) Organizational Aspect and 3) Technical Aspect. Each of these is elaborated in following section.

a) Strategic Aspect

For any Merger and Acquisition, first of all, the company must define its strategy and relating growth objectives. Second, the company must evaluate whether the business of the acquired company is identical to its own functions. After this assessment the company should carefully evaluate the IS of both the companies. The final step is the selection of the IS integration strategy with the choices of total, partial or no integration.

b) Organizational aspects

Organizational Fit and compatibility with the acquired or merged organization is the major organizational challenge that must be catered for successfully integrating the functions of both the companies, merged or acquired.

c) Technical Aspects

The major technical challenges that companies face following the merger and acquisition are as follows:

  • Insufficient IT integration

A lack of synchronization throughout the IT infrastructure can cause difficulties with everyday business processes creating complications and reducing the overall efficiency of the business.

  • Lack of visibility

With merging of two similar businesses can lead to duplication of customer information. This emphasizes the need of single view of customer information by implementing a proper integration of customer data information system.

  • Data integration

It is necessary to have access to updated information regardless of whether data lies on premise or in the cloud. Without proper integration of the information system of two organizations retrieval of information scattered across various systems, applications and services becomes complicated.

  • Compliance regulation

This challenge arises when two businesses have different compliance levels. Policies, procedures, guidelines are crucial for the business to run smoothly. Moreover, when the acquiring company is global, there is a need of imparting training and education about new compliance policies to its employees.

  • Data migration

When there are different information systems that are to be integrated after merger or acquisition there may be challenges for migrating data due to different formats. This leads to a need for converting the data in a common format to make the data migration accurate.

  • Cost of transition

The integration of Information System and data migration leads to incurring extra cost.  Costs from interdependent projects are rarely accounted for. Hence the cost estimation should be planned efficiently so as to make optimized use of resources and implement the transition in minimum cost.

  • Time to market

Low experience of what is to be done, how to do and what it would take - can lead to delayed visibility of enhancements in the company. The benefits that company gains after merger or acquisition should have a quick visibility and quicker time to market to obtain greater profitability.

  • Customizations

Customization may lead to low source data quality, inconsistency in data and gaps in expected result and actual customizations. Customization becomes necessary when two different companies are merging but at the same time customization should be implemented only where it is necessary.

  • Adverse change impact

When there is no communication, training or adoption plan for technology changes, this can have an adverse impact on the functioning of the company. Also the unanticipated changes can lead to adverse change impact on its legacy employees.

Conclusion

The integration of two Information Systems is a complex project which involves several challenges. The important things to be kept in mind are :

      • A large benefit can be achieved by high degree of integration of the different systems
      • A flawless communication strategy is important
      • Maintaining competitive parity in technology usage is essential
      • Focus should be on gradual IT cost reduction

Reference

https://www.infosys.com/Oracle/white-papers/Documents/enterprise-maturity-model.pdf
http://www.pacis-net.org/file/2008/PACIS2008_Camera-Ready_Paper_065.pdf
https://www.mulesoft.com/resources/cloudhub/mergers-acquisitions-it-integration
http://www.palgrave-journals.com/ejis/journal/v24/n2/full/ejis20152a.html