the missing link between it and supply chain: erp
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WHITE PAPER
THE MISSING LINK BETWEEN IT AND SUPPLY CHAIN: ERP
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Historically, enterprise resource planning (ERP) systems have primarily been used for managing financial information, manufacturing operations and inventory. Beyond that, most businesses rely on separate systems for the more specific supply chain functions, such as a warehouse management system (WMS), transportation management system (TMS) or demand forecasting applications. However, for some companies, the cost and time associated with tier-one or legacy supply chain solutions prevent them from being viable solutions. The good news, especially for the mid-market, is that some modern ERP systems now include advanced supply chain functionality that makes it possible for companies to optimize key supply chain processes without implementing additional systems.
A recent survey of supply chain professionals conducted by Gartner found that 43 percent of respondents were strongly committed
to a single underlying technology platform that would improve the visibility of internal processes and enable effective communication and collaboration with suppliers and buyers in order to deal with the rising levels of integration complexity.1
An ERP with integrated supply chain management technology eliminates the need for expensive add-ons or third party modules previously required to supplement an ERP system. Savvy business decision makers should identify an ERP system that includes broad, out-of-the-box supply chain functionality that will manage warehouse operations, transportation and logistics and demand forecasting. For companies that already have a robust WMS or TMS in place, it is important to determine how a new ERP will integrate and how new and existing functionality compares so that processes are optimized and addressed in an optimal way.
A RECENT GARTNER STUDY FOUND THAT 43 PERCENT OF SUPPLY CHAIN PROFESSIONALS WERE STRONGLY COMMITTED TO A SINGLE UNDERLYING TECHNOLOGY PLATFORM THAT WOULD IMPROVE THE VISIBILITY OF INTERNAL PROCESSES AND ENABLE EFFECTIVE COMMUNICATION AND COLLABORATION WITH SUPPLIERS AND BUYERS” IN ORDER TO DEAL WITH THE RISING LEVELS OF INTEGRATION COMPLEXITY.
An 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.
1http://www.gartner.com/newsroom/id/2806917. “Gartner Says Supply Chain Management Software Revenue Is on Course to Reach $10 Billion in 2014”
SUPPLY CHAIN MANAGEMENT FEATURES IN AN ERP SYSTEM
1.) Warehouse Management:At its core, a warehouse management system automates and optimizes warehouse processes to reduce operational costs, while also increasing fulfillment speed for better customer service. Warehouse managers gain visibility across their operation and the ability to effectively control and manage receiving, put away, slotting, picking, replenishment and more within warehouse operations. Visibility and control, track and trace, and reporting capabilities extend outside the four walls to improve brand protection as well.
An immediate and obvious benefit of using an ERP system with a built-in WMS is that users can access a single source for all business data. Here are three examples of additional benefits that can be gained from using an ERP with integrated WMS functionality: • Provide customers with choice and flexibility of delivery
with agile inbound and outbound processes. A WMS enables businesses to meet customer demands and fulfill outbound orders more efficiently using advanced picking strategies. For inbound goods, users can leverage
advanced put away strategies to improve the tracking and tracing of goods with serial number registration and batch number support, all based on the expiration date. An integrated WMS should also support various other warehouse functions, such as wave picking and processing, task interleaving, cross-docking and pick/pack.
• Lower inventory costs and improved turnover with advanced inventory allocation. Having real-time visibility into inventory is critically important for supply chain managers. The warehouse management module of an ERP system can provide users with an accurate view of inventory utilizing multiple cycle counting strategies, including threshold cycle counting for picking, cycle counting plans, zero quantity on hand cycle counting and ad-hoc cycle counting using filtering. Additional features for managing inventory include: inventory replenishment based on picking, min/max and transportation load-based replenishment, and segregation of inventory based on inventory status (e.g., quarantine).
• Increase the productivity with radio frequency (RF) support and picking systems. Within modern ERP systems, functionality now exists to support handheld device capabilities out of the box. This gives warehouse workers scanning precision and enhanced performance in picking and put away processes utilizing browser-
based mobile handheld RF devices. Additionally, picking operations can be streamlined by leveraging state-of-the-art warehouse technologies such as voice picking and pick-to-light systems.
2.) Transportation Management: An ERP system with embedded TMS functionality enables global enterprise transportation planning and execution capabilities. Manufacturing, distribution and retail companies benefit from an integrated TMS with flexibility that supports changing and growing demands related to transportation planning, freight rate shopping, route management and automated and manual freight reconciliation. Additional benefits of using an integrated TMS include the ability to:
• Manage inbound/outbound shipments • Consolidate shipments • Schedule and manage driver appointments • Shop freight rates based on customer constraints,
fuel charges or toll charges 3.) Demand Forecasting: Demand forecasting within modern ERP systems lets users predict demand based on historical data, adjust predicted demand, and import values into forecast models within an ERP system. Demand forecasting fully integrated within an ERP system is ideal because it removes the need for data migration and integration. System users are then able to utilize demand forecasting to predict both independent demand (from sales orders) and dependent demand (at any customer order decoupling point). Additional key features of demand forecasting include:
• Ability to generate a statistical baseline forecast based on historical data (forecast is expressed in quantity only)
• A dynamic set of forecast dimensions • Functionality for visualizing demand trends and
adjusting the demand forecast • Capability for removing outliers • Ability to track the forecast accuracy with KPIs 4.) Third Party Systems and Additional Enhancements In some instances, prospective ERP buyers have an existing supply chain system that needs to be integrated with a new ERP system during the implementation. For these scenarios, there are accepted industry solutions that enable third party systems to natively integrate with various ERP systems. Here are a few examples of some common third party systems in the marketplace that readily integrate with certain existing ERP systems:
• Warehouse Management (e.g., Manhattan Associates’ SCALE or HighJump WMS)
• Transportation Management (MercuryGate) • Labor Management • EDI • eCommerce/Online Stores (Magento) • Payroll Services • Voice Picking and Pick to Light systems (Honeywell
Vocollect, Lightning Pick)
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BRIDGING THE GAP: ERP AND SUPPLY CHAIN MANAGEMENT COMBINEDFor mid-market companies looking to maximize IT dollars and resources, an ERP system with integrated supply chain management capabilities is the preferred alternative to integrating multiple, disparate systems. Business decision makers realize immediate benefits from accessing a single source for data pertaining to financials, inventory and warehouse and transportation operations.
If your organization is evaluating new ERP systems, an objective technology assessment and strategic IT roadmap are vital tools to determine whether a robust ERP system with out-of-the-box supply chain management functionality will meet your business needs. From a financial investment perspective, companies in need of supply chain management capabilities can leverage a single ERP system to lower the total-cost-to-ownership, while also eliminating the need for additional third party supply chain management solutions.
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