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April 27, 2012

Impacts of ERP on Supply Chain Integration

ERP, which originated from MRP in manufacturing industry, has enjoyed a great popularity in recent decades. Meanwhile, the scope of ERP has been expanding in different sectors and there are increasingly more ERP vendors start concentrate on the ERP solution for supply chain integration.

Supply chain integration, which reduces the overall costs, improves efficiency and effectiveness, shortens lead time, develops customer satisfaction, plays a vital role in most industries nowadays.

With regard to the way how ERP helps the entire supply chain to gain competences, I think the most important function is the real-time information exchange. It refers several aspects.

First is inventory management. Based on the real-time sales transactions and the production and schedule plan of suppliers in ERP, inventory level can be appropriately controlled. The real-time sales data also helps develop forecasting plan so as to enable companies be prepared. Furthermore, the relationship with suppliers is developed as well. There is a trend that it is better for buyers to cooperate with fewer but more reliable suppliers. The information sharing with suppliers?? delivery and production plan makes buyer company works closer with its suppliers.

Secondly, customer service satisfaction is improved. Since companies are able to access real-time data of customer requirements and all the resources of operational process through ERP system, the reaction time is shortened. Also, with the control of operational activities, better quality of products can be achieved. Furthermore, ERP system is able to support mass customization by translating a specific order from a customer into production so as to achieve assemble-to-order or make-to-order.

Thirdly, ERP system contributes to more smooth and streamlined operational process. With all the integrated data available, it is much easier to fulfill and replenish orders, organize production plan and purchase raw materials. Accordingly, the overall costs are reduced.

Even there are many benefits that ERP contributes to supply chain integration. Some obstacles still exist. For instance, the standardization of data among partners throughout the supply chain, the resistance of information sharing in order to keep confidential and overwhelming available data for decision-making.

To conclude, ERP does bring loads of benefits to supply chain integration. The obstacles need to be further tackled and supply chain members should also pay attention to these obstacles when integrating.

References

Kelle, P and Akbulut, A. (2004). The role of ERP tools in supply chain information sharing, cooperation, and cost optimization. International Journal of Production Economics. 93 (8). pp. 41¡§C52.

Akkermans, H, A., Bogerd, P., Y¡§?cesan, E and Wassenhove, L, N, V. (2002). The impact of ERP on supply chain management: Exploratory findings from a European Delphi study. European Journal of Operational Research. 146(2). pp. 284¡§C301.

Sua, Y. and Yanga, C. (2010). A structural equation model for analyzing the impact of ERP on SCM. Expert Systems with Applications. 37 (1). pp. 456¡§C469.


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