Ever since their inception, ERP systems have proven to be indispensable in the fields of accounting, corporate governance, human resources and finance. With the passage of time, the functionality of ERP systems extended to supply chain operations in manufacturing concerns as well.
However, the concerns of international trade and logistics are extremely varied to say the least. If ERP systems are to accommodate the ever increasing complexities of international logistics, their efficiency and usability would be compromised for companies that have complex requirements in specific areas such as the control and execution of global supply chain management. This compromise would ironically be the result of expanding the functionality of ERP systems.
ERP systems: advantages and disadvantages
In an effort to keep pace with dedicated SCM software, ERP systems are beset with the twin problems of mobility and integration. ERP systems are great for systemizing the workflow within the warehouses of a single company, but cannot keep up once there is a shift of focus towards other processes that are of greater complexity. One of the processes is the involvement of third or fourth parties across different sites and systems, managing multiple vendors, increased variability of material handling systems.
The integration of systems for facilitating the exchange of data and collaboration between partners of different enterprises is a necessity in global supply chain management. The problem is that most ERP systems simply do not have all the necessary data to be considered an effective solution. As a result, ERP providers have created more modules to accommodate such requirements. However, for most companies, the ERP system is the core on which the IT infrastructure of the company is based. As a result, it contains sensitive information, which is the reason why business wouldn’t want to permit “outsider” access.
The processes of global trade present another dilemma for ERP systems. We can use the example of customs processes to illustrate this. The regulatory requirements for customs change constantly. ERP systems cannot handle constant updating which is a necessity in order to conform with compliance policies.
Dedicated SCM software programs are not designed to be as all-inclusive as ERP software. However the solution they offer is targeted towards specific areas in global supply chain management such as customs clearance across multiple nations, transport management and collaborative supply chain. This is the advantage that dedicated solutions like these present. However, there needs to be a platform that facilitates all part of the supply chain. Solutions dedicated to individual areas become restrictive by the very fact of their specialization, and hence cannot deliver an integrative benefit.
Therefore, deciding between an ERP system or SCM system or both, depends on a company’s individual requirements and operational processes. A company needs to be especially careful if its requirements are highly complex, and should ideally adopt a solution that incorporates both systems.