ERP in Supply Chain Management: Its Role In the 5 Stages of SCM & Why Manufacturers Prioritise It

What Is the Role of ERP In Supply Chain Management?

Supply chains are the lifeblood of all businesses, especially for producers and manufacturers. They’re also complex and sensitive to change. Consider recent events, from global health crises, political and military conflicts, and a jammed Suez Canal.

Even local supply chains need flexibility as prices fluctuate and transport links struggle to evolve. Keeping the supply of raw materials, parts, and finished products flowing.

Whatever your business size, to maximise supply chain efficiencies, companies seek digital solutions to replace legacy systems, spreadsheets, and paperwork.

This is why 65% of businesses are prioritising improvements to supply chain disruptions, and why 46% have planned or started to implement ERP in supply chain management.

Integrating ERP in supply chain management operations provides manufacturers, distributors, and retailers with the tools to track raw materials, parts, and stock inventory through a detailed and integrated system. This addresses visibility concerns, mitigates supplier risks, and keeps a lid on rising costs.

A connected system with live updates across the supply chain enables organisations to:

• Accurately deliver demand and planning scenarios based on ingredients, materials, and labour
• Predict disruptions in real-time to enable faster responses to changing market conditions
• Ensure supplier quality by monitoring and measuring supplier performance
• Manage the procurement of materials and the choice of suppliers with MRP modules
• Gain granular accounting oversight of BOM and logistics costs
• Improve inventory and warehouse management with greater organisation and control when recording product movements

Use our finder tool to select and implement the right ERP in your supply chain management processes.

How Integrating ERP In Supply Chain Management Impacts the 5 Stages of SCM

1. Planning

• Demand Forecasting: Predict product demand based on user and sales data to align supplier procurement planning.
• Sales & Operations Planning: Align supply and demand data across sales, inventory, manufacturing, and distribution departments.
• Predictive Analytics: Predict supply chain performance and disruptions that will impact planning decisions.
• Advanced Planning and Scheduling (APS): Manufacturers integrate ERP in supply chain management to optimise production schedules around material usage, resource availability, and warehouse constraints.

2. Sourcing

• Procurement: Automate purchasing processes to ensure timely sourcing at the best costs and to align with product demand.
• Supplier Relationship Management (SRM): Store and track supplier performance and quality data to ensure reliable sourcing and avoid risks or disruptions.
• Spend Tracking/Accounting: Used to enforce budget control and track supplier spending.
• Contract Management: Store, access, and update supplier quality agreements, renewals, and pricing information.

3. Production

• Integrated Manufacturing Execution System (MES): Track production and manufacturing in real-time to ensure on-time delivery and completion.
• Bill of Materials (BOM): For manufacturers to list all parts and components required for accurate planning and assembly.
• Materials Requirement Planning (MRP): Integrating MRP or ERP in supply chain management accurately calculates materials needed for production based on demand and inventory.
• Supplier Quality Management (SQM): Monitors supplier performance and quality of materials to ensure supplier agreements are met and to guarantee consistent production.

4. Distribution

• Warehouse Management: Manage picking, packing, storage, and shipping movements.
• Inventory Management: Prevent stockouts and overstocking by tracking stock levels that align with demand.
• Transportation Management System (TMS): Integrated TMS helps optimise, plan, and execute shipping procedures.
• Order Management and Fulfilment: Combines orders, sales, processing, and delivery information to accurately execute fulfilment requirements.

5. Returns

• Returns Management: Automate returns processes to resolve product returns as quickly and efficiently as possible.
• Reverse Logistics/3PL Management: Monitor and manage the flow of goods returned by tracking, sorting and refurbishing, as well as working with third-party logistics.
• Inventory Management: Reintegrate returned goods into available stock or flag for the disposal of goods.

Across the supply chain, operators and managers can identify delays (and potential problems down the line) along with production bottlenecks faster. One benefit of implementaing an ERP in supply chain management is to balance supply needs with spikes or falls in demand.

Purpose-built supply chain management functionality in leading ERPs also streamlines everything from purchasing to warehouse operations to order delivery. As ERPs add more features, they integrate the likes of warehouse management systems (WMS) and yard management systems (YMS) to improve logistics and performance.

Why Manufacturers & Distributors Benefit Most From Integrating ERP In Supply Chain Management

Supply chain management scales in importance as those chains grow in complexity and volume. Using ERP systems can boost the performance of warehouse management, while greater visibility into SKUs helps firms communicate with their customers, partners, wholesalers and retailers.

In terms of delivery, optimising your supply chain can yield:

• 25–30% reduction in inventory carrying costs
• Improvement in inventory turnover by up to 20%
• Increase in inventory accuracy by 30%
• 22% higher on‑time delivery rates for manufacturers

At the other end of the supply chain, SCM delivers benefits for quality control, checking failures and quality issues, supporting aftermarket care, customer service and retention, and support with product returns.

Growing use of ERP in supply chain management processes creates supply chain and production flexibility to deliver multiple levels of value, including:

• On-time and live data enables streamlined and cost-efficient buying
• Optimisation of inventory and stock levels through improved forecast models
• Automation of manual order processing and stock tasks
• Design and deliver custom products that add premium value to sales, be it a unique colour combination or finishing process
• Integration of quality control, customer service/returns/upselling and communications through the ERP

3 Successful Examples of ERP In Supply Chain Management Optimisation

1. Terex

Challenge

Using a sticker system for inventory management was costing each employee six minutes every time they located a unit. Physical inventories and stock takes also took a considerable number of hours per month.

Solution

Implement an RFID tracking solution and integrate it with their ERP system. This provides an accurate daily inventory count via the ERP’s business intelligence module, which has saved them 70 weeks per year in labour costs.

2. Green Rabbit

Challenge

A desire to ship globally was hindered by the impact of shipping chocolate food products during hot periods and summer months. This led to the team researching temperature-sensitive supply chain logistics.

Solution

Green Rabbit replaced their QuickBooks system with an ERP Software to build out a heat-sensitive supply chain workflow. This allowed them to ship chocolate food products as well as frozen food goods.

3. John Deere (Deere & Company)

Challenge

A slow, costly replenishment process caused shipping and inventory issues in high-seasonal sales periods. The company set about achieving a 10% reduction in supply chain costs within four years.

Solution

Launched a supply chain network redesign program and consolidated shipments during seasonal peaks. They also increased the use of 3PL logistics providers to achieve an inventory decrease of $1 billion. This also reduced customer delivery lead times from 10 days to 5 or less, and saved 5% annually on transportation costs.