ERP versus SCM

supply chain management (SCM) is. Traditional SCM used the telephone, fax and regular mail to keep contact between suppliers and customers. It involved lots of time and costs. With the advent of computer technologies support for supply chain relationship became Electronic Data Interchange (EDI) systems. But EDI is an inter-organisational process, so business partnerships have been shown to be very important in the adoption and use of EDI.

Supply Chain Management (SCM) in today's Internet environment, especially the e-business is important to create significant competition advantages to firms and business partners worldwide. Since the objectives and goals are essential factors in the use of supply chain management in the e-business.

ERP being a business tool that manages day-to-day business process and is usually comprised of several modules such as financial module, distribution module, production module and supply chain management module as well as many other modules. Each of these modules share information that is housed within the database structures on which the ERP system was coded. ERP helps to break down barriers between departments within a company.

At a broader context, you must understand that ERP is an integrated system which holds many modules and SCM could be considered as one of the modules.

Enterprise resource planning

has a long history of expansion with additional modules added to bring more of the company's operations and interests into the integrated application suite. Within each functional area as well, expansion of capabilities and functions are a continuing theme. Even the earliest MRP II -- the previous acronym for what is now known as ERP -- systems had customer order handling capabilities, and many have grown to become full-function customer relationship management (CRM) -- the comprehensive repository for all kinds of data supporting the customer relationship.

New applications and new functionality tend to emerge from independent "specialist" developers not associated with the known ERP suppliers. Sometime these niche applications establish a new capability that is well accepted by the market and the ERP suppliers then add similar capabilities to their product suites. Generally, however, the ERP suite capabilities are not as deep or functionally complete as the so-called "point solutions" developed and maintained by the specialist developers.

ERP developers are usually unable to keep up with the additional functions continually added by leading point solution suppliers. And this is how is has been with the SCM software applications. Focused specialists created the category and remain ahead of the ERP suite suppliers even as they have created their own SCM suites.

The need for SCM systems

Companies with existing ERP installed -- and needing the deeper functionality of SCM systems -- may find an SCM product that has built-in or available interfaces to their ERP software. That's especially true if the ERP is one of the top market players -- SAP or Oracle, for example. Alternatively, there may be implementation and support partners associated with the SCM supplier that have pre-built interfaces or experience developing the interface for past client companies. The third alternative is to develop the interface on a one-off basis using middleware tools and exploiting Web services and service-oriented architecture to get the job done.

The short answer to interfacing ERP and SCM is this: Users can choose the point of integration since the key gateway applications -- CRM, distribution inventory or warehouse management -- may be available from either the ERP supplier or the SCM supplier. The choice will depend on the company's need for the deeper functionality available from the SCM supplier, with a more complicated interface or the fully integrated functionality of the ERP system application tied to the additional SCM functionality -- warehouse management, transportation management, supply chain planning and management. That makes it a much less complex integration.