Global supply chain management: ERP vs best-of-breed SCM
ERP systems have established themselves in areas such as accounting, finance, human resources, and corporate governance. But over time, their scope has been extended beyond the business administration, and now also includes, for example, supply chain management (SCM) functionalities.
International logistics processes are both highly individualized and complex. ERP systems with more sophisticated logistics features are likely to become technically more challenging to work with. As such, their usability and efficiency may be unsuitable for companies looking to meet complex demands in specialized areas like international supply chain management execution and control. This is largely because – or despite – ERP systems’ ever-expanding functionality and their goal to deliver it all.
ERP-integrated SCM solutions: the pros and cons
ERP systems that try to keep up with best-of-breed SCM software often struggle with integration and mobility demands. They generally tend to do well in, for example, warehouse management, but they may be unable to offer adequate support and functional depth once the focus changes from standard operations to more demanding processes. These can include third or fourth party involvement across various systems and sites, increased complexity of material handlings systems, integrated facility workflows including vendor management inventory (VMI), and internal and external transparency. And mobile devices have become practically indispensable in logistics, be it for picking, shipping, or goods receipts and alerts on performance and capacity levels on all applicable devices in, for example, the warehouse, are nowadays expected.
Cross-enterprise collaboration with partners and integrating systems to exchange data throughout the supply chain has become an elemental requirement in global supply chain management. But most ERP systems simply don’t contain all the data that would need to be consolidated to deliver this. To try and bridge this gap, some providers now offer additional modules. However, in many companies, the ERP system forms the core of the IT infrastructure and holds data that isn’t actually meant to be shared, which is why many businesses don’t want to give “outsiders” access to it.
Global trade processes expose another weakness of ERP systems with logistics functionality. Take customs processes, which are subject to constantly changing regulatory requirements. ERP systems are not designed to accommodate daily – or even transactional – updates as required for global trade compliance.
What best-of-breed SCM software can offer
Best-of-breed SCM software, on the other hand, offers a less broad approach and focus on serving rapidly-evolving fields in logistics, such as supply chain collaboration, transport management, or multi-country customs clearance. These dedicated systems may provide a powerful alternative to modeling logistics processes in ERP systems. At the same time, it is crucial to look for end-to-end supply chain platforms, not just a standalone software solution. On their own, such solutions are in danger of turning into silos for the respective area, such as procurement, warehousing, shipping, or customs, without delivering the overall integration benefits that the business requires for efficient and transport supply chain management.
The right IT strategy for businesses in international logistics clearly depends on a company’s individual processes and strategic priorities: Generally, the more complex a business’s logistics requirements are, the more carefully it needs to consider its options and prioritize functional flexibility and integration capabilities accordingly.
Technology has become increasingly important and integral in all areas of our digitized business world. Companies aiming to improve their IT landscape and supply chain performance should thoroughly scrutinize the requirements of all involved business units. Any decision and any new solution should support all areas efficiently and provide enough flexibility to also facilitate future change and growth in today’s dynamic markets.
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