ERP and Supply Chain: Business Boundaries

The notion of where the boundaries occur between supply chain and other functional areas may seem an odd subject for an ERP discussion, but an accurate answer affects your ERP implementation team organization, your security design, and the decision making process. The reason boundaries are subject to discussion is because different organizations have different approaches and emphasis on supply chain management. The supply chain group at a company with a strategy of superior supply chain performance will be more empowered than the group at a company with a strategy of superior advertising and marketing.

Examples of blurring the boundaries might include: (1) supply chain, rather than finance, routinely performing product margin analysis for capacity planning (2) supply chain, rather than purchasing, constructing and disseminating the raw material forecast (3) supply chain, rather than manufacturing, responsible for inventory control or (4) supply chain, rather than sales or customer service, managing distribution centers.

Supply chain boundaries can affect your implementation team in how many resources you assign to the supply chain module(s) in your ERP system, where the resources come from, and what the scope of their responsibilities is. You have to take a holistic look at how the organization operates, and how your ERP package is organized, and make intelligent decisions about where to assign your talent. It is very possible you could have a supply chain team member assigned to purchasing, or to warehouse management, depending on how knowledge is managed in the organization.

Security can be affected because non standard combinations of transactions – supply chain operating in finance’s work space, for example - are always at risk of being segregation of duties violations, and when they pop up, there must be a process to decide whether the work will be reassigned to a different functional area, or whether a segregation of duties violation will be approved.

Further Reading: How to Create an Effective Suppy Chain with ERP

Decision making is affected, of course, because in the vast majority of cases, the final arbiter in ERP decision-making will be the same person who has subject matter authority in the pre-ERP world. If supply chain has historically had responsibility for sales and operations planning, then they should maintain that design responsibility in ERP, unless someone higher wants to reassign the work. Again, the project manager has a responsibility to communicate within the organization when ERP consultants or vendors point out an unusual organizational structure. Being different does not infer the structure is wrong, but a project manager should try to understand how any differences might impact ERP implementation and operation.

Marking the perimeter of the supply chain function needn’t be tedious or time-consuming. In most manufacturing organizations, supply chain is a communications and decision-making hub with which all other modules interface routinely. Determining the size and scope of that hub – and if it is still appropriate for your organization in an ERP environment – will avoid a lot of non value added discussion down the road.

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Phil Marshall

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Phil Marshall