How to Distinguish Between ERP & SCM Software
ERP, or enterprise resource planning, is a software system that covers company business processes including purchasing, inventory, planning, sales order management and financial management. SCM, or supply chain management, can also refer to a software system or an area of management. SCM software can overlap with ERP business processes, but tends to be focused on flow of supply, value added processes, and distribution of product including warehousing and distribution centers. Depending on the industry served by these software systems, they can be confused because degree of overlap varies, and one can be viewed as subordinate to the other. The clearest separation and understanding of ERP and SCM software functions occurs when considering companies with manufacturing plants and extensive supply and distribution channels.
Other People Are Reading
Instructions
-
-
1
Determine the business processes that the software focuses on. Identify business process areas that emphasize planning and execution of supply planning, warehousing, distribution and intercompany control of supply chain processes to find those that apply to SCM software. Use the business process focus to avoid misidentifying software and also to clarify exactly what the software actually does.
-
2
Determine the project scope, in terms of people, departments and processes, to be served by the software. Determine if your project is focused on these areas within the "walls," or outside the "walls," of the company. For example, a manufacturing company may have plants with supply, demand and financial processes. This within the walls situation tends to be served by ERP. Outside the walls areas in that same company can include warehouses, distribution centers, and vendor inventories. These outside the walls areas tend to be served by SCM.
-
-
3
Determine complementary technology that may be required. Study the ERP and SCM software from a specific software vendor to see if it is missing functionality. Determine if product life cycle management software (PLM), which can overlap with both ERP and SCM in the design and product introduction areas, is required. Determine if customer relationship management (CRM) software, which can also overlap in the sales order management area, is required to complement ERP and SCM.
-
4
Consolidate the business process, project scope and potential complementary technology information to help identify what the software being considered actually does versus trying to label it as ERP or SCM. Determine potential integration points by considering the best method, and cost, of implementing the software to enable specific business processes.
-
1
Tips & Warnings
Knowing the business processes that require automation and then analyzing the software functionality available to satisfy those processes is more important than deciding whether or not a given software system is ERP or SCM. With a business process focus, the software will quickly be proven to be useful or not useful in satisfying the challenge of automating the business processes.
There is a tendency to include SCM within the boundaries of ERP in many software companies' presentations and websites. Some avoid the ERP acronym and emphasize SCM because it can be viewed as being broader in scope and covering ERP. The bottom line is the business processes being considered.
Resources
- Photo Credit compact discs image by tim elliott from Fotolia.com
