Sunday, November 23, 2014
ERP Technology and Global Supply Chains
“The Only Thing That Is Constant Is Change” is a famous quote by Greek philosopher Heraclitus, and it very much applies in today technology dependent business world. Every company ranging from small to Fortune 500 is working every day to implement new technological solutions or keep their existing technology solutions running effectively. This is just with a goal to increase their customer outreach, run their business operations effectively, run their internal operations, or optimize their supply chain processes.
In this article, we will look at ERP solutions that companies implement to collect, store, manage and interpret data from many business activities, including:
· Product planning
· Marketing and sales
· Inventory management
· Shipping and payment
Personally, I worked in the technology consulting industry focusing on SAP ERP implementations and was a part of four lifecycle projects. The exposure was a considerable one because all the implementations were for fortune 500 companies. ERP is key business management software that has been running large businesses under varied industries such as Consumer Products, Healthcare and Life Sciences, Transportation.
The SAP solution provides different modules to manage processes such as Procurement to Pay, Order to Cash, Finance and Controlling, Material Management, Inventory Management, and Warehouse Management. Let us look at the ‘Procurement to Pay’ module and how is it implemented by SAP to support business operations for large fortune 500 clients.
Procure to pay (purchase to pay or P2P) is the process of obtaining and managing the raw materials needed for manufacturing a product or providing a service. The P2P process involves the management of the vendors, get the best quotations, place an order based on the customer needs, and pay the vendor (P2P module interfaces with the Finance module). This entire process becomes very complex when we talk about global fortune 500 clients. Thus, companies need to use sophisticated but well integrated ERP solutions.
Whenever a manufacturing company receives a Customer Order, the system checks for the available stock. A request is sent to the Inventory Management module of the integrated system. The module checks if the order can be served using the given inventory or a new order needs to placed to the vendor. If the order can be served using the available stock, then Warehouse Management module is used to find the respective Storage Bin and start the Distribution/Delivery process. Warehouse Management module is used to manage warehouse in terms of good movements, storage and planning, storage bin management, and optimize storage. Otherwise, if the inventory is not available, then system generated Purchase Requisition document is sent to all the available vendors on the system. In response, Vendors send their respective Quotations and best Quotation based on key parameters (such as Cost, Delivery time) is selected by the company. Once the Vendor is finalized, a Purchase Order is created and sent to the vendor.
On the agreed delivery time, the company receives the goods to their warehouse with a Good Receipt document and an Invoice. On receiving the goods/raw materials, the company uses Warehouse Management module to figure out storage bin for the material storage. This mapping of good in the warehouse is based on factors such as optimization, speed of delivery, storage type.
After receipt of goods is verified, the system uses the received Invoice and creates a Payment document against it. This process recalls the integration of Finance module of SAP. The payment is either done using a Check, Credit card or ACH payments (as per the agreement between Vendor and the company).
This entire cycle uses various modules of SAP and is automation of a key business process in manufacturing companies. Similarly, SAP provides automation of various other key processes such as Order to Cash, Material Management, Asset Management, etc. Scalability of SAP helps these global companies to run their businesses effectively and efficiently.