As any experienced business owner or administrator can tell you, resource planning is vital to the success of any company, large or small. In its most basic definition, Enterprise Resource Planning (ERP) refers to managing activities within a company. One of the most basic tasks of an ERP, as well as being the most important function of the software is to ensure the timely flow of data between departments. Although that may sound a bit vague, it really is the backbone of an ERP – communications.
Isn’t That the Same Thing as Supply Chain Management?
In order to answer that question, let’s take a step back for a moment to take another look at what an ERP software actually does. ERP platforms collect, organize and distribute information across all departments so that processes can be seamlessly integrated and completed with minimal interaction between employees at all levels. It’s automated distribution of information on a ‘need to know basis’ at its very best. Rather than utilise a variety of applications from department to department, ERP software integrates functions of all so they work together as a cohesive whole.
Supply Chain Management software, on the other hand focuses on incoming materials needed to get the job done. A good ERP will employ key features of an SCM, but the key SCM & ERP differences can be better understood if you look at the one as organizing internal functions within a company (ERP) while the other focuses on external factors working their way in towards the internal operations (SCM).
Where Is the Focus
When discussing the key differences between SCM and ERP platforms, you can perhaps understand it better by looking at the line of communications. Supply Chain Management deals primarily with communications with outside parties such as vendors and suppliers. Enterprise Resource Planning platforms organize internal functions between departments. However, even that doesn’t tell the entire story because it is becoming more and more common for good ERP solutions to incorporate many of the functions SCM platforms used to perform.
While SCM software may undertake such tasks as evaluating costs associated with the various aspects of running a business, especially materials, an ERP seeks to put best practices into play. ERPs provide the best and most cost-effective path for a workflow, whereas the SCM provides the most cost-effective sourcing of materials and equipment.
One Final Key Difference – Automation
The one final key difference between SCM and ERP software is automation. An Enterprise Resource Planning suite virtually automates many functions within an organisation. A SCM platform will analyse costs, but it will not seek to automate a change in suppliers. An ERP is intelligent in that it will reroute information as needed to get the job done efficiently and in a cost-effective manner, but SCM software only provides the information needed to assess what needs to be done next. ERPs can reroute processes as needed but SCMs await input before making those changes. SCM software, then, is not as heavily reliant on artificial intelligence as would be an ERP.
Although they have major differences, both are important in the smooth and cost-effective operations that keep businesses realizing a profit.