Role of ERP and SCM software applications in supply chain

In today’s era, we cannot think of Supply Chain Management without ERP and SCM applications. ERPs are essential as supply chain applications depend on ERP applications to get all its data. For example, in my previous company, I used to manage a logistics application (Oracle Transport Management), a SCM application that automates and optimizes the logistics, derived all its information from sales order management application (SAP). Essentially, ERPs form the backbone of all the SCM applications. So, it is better to install ERP before SCM application. Nowadays, ERP vendors are offering ERP applications with SCM modules to save the cost and time spent on integrating ERP and SCM applications. For example, SAP has recently released SAP TM (Transport Management) that integrates well with other SAP ERPs.

There is indeed a very crucial role of SCM applications. They are responsible for better visibility, cost reduction, and better connectivity with third party logistics and suppliers. It is now possible for companies to connect their supply chain with the supply chains of their suppliers and customers. This has led to better visibility and hence better inventory management. Manufacturers could get just enough materials for production as necessary from their suppliers (Just in Time), thus overcoming the cost of storing extra raw materials in their inventory. This is one of the reasons responsible for the low-cost products available at Wal-Mart. It linked its distribution centers with P&G's manufacturing units through software applications. Now, P&G could look directly into the shelves of Wal-Mart to have a real-time information of Wal-Mart's inventory. So, whenever there is a shortage of any product at Wal-Mart, a trigger would be send to P&G to start manufacturing for replenishment. This saved a lot of inventory costs for P&G, and hence it made available its products to Wal-Mart at low costs.