To use the ERP system, or the SCM (supply chain management) system, that's the question.
SCM and ERP are complementary to each other, and they are fundamentally different. They have different purposes, involved in different fields, different objects, different business nature and process, and we need different solution structures and systems implementation methods. While you have to solve many very difficult issues in the process of implementing ERP, they are still the basic issues of the enterprise; in the process of implementing SCM, the people will be facing a serials of problems like who is to execute the supply chain, how to show the results of using the system, who is the actual beneficiaries of the system and who will be and how to share the burden of the system despite of the relevant internal problems of the enterprise.
The crux of the problem lies in the main purpose of ERP systems which is to address the internal management needs of specific enterprises, while SCM system addresses general and special demand of a group of enterprises involved in supply and production and sales in specific areas to satisfy the needs of information sharing and communication between the upstream and downstream enterprises, as well as logistics services providers and clients. Therefore, to adopt a SCM system, the enterprises need coordination among a variety of different systems, and it is much more complex compared with the ERP system.
Existing systems solutions and IT services system adopted by the enterprises, as well as the successful business models are all part of the ERP system services, however, services system for construction of SCM system can be said to have not yet been established, so that customers can not planning construction of SCM system or choose wrong solutions and inappropriate IT services in the process of construction.
The essential difference between SCM system and ERP system
"ERP is beneficial for the enterprise itself, and its object is to optimize the internal mechanism of the enterprise, the implementation of which has impacts on the enterprise and some peripheral units; SCM is beneficial for outsiders, its object is to optimize the whole supply chain in all aspects. SCM is a system implemented by the rule makers and rule compliers; SCM aims to resolve the issue of how to do, and the purpose of ERP is to address the question of what to do; SCM implementation is a continuous process, and ERP is more like a project." ERP and SCM are even confronted in terms of ideological conception, so the anticipation of the enterprises implementing respectively SCM and ERP should be quite different.
"ERP is an asset system; usually it is displayed in the balance sheet as assets sharing the sales management fees. Basically, the scale of the enterprise and the cost of ERP systems do not necessarily connect. As long as the business scale is large enough, the effects brought about by ERP should be sufficient enough to cover the cost of ERP systems. So enterprises should choose ERP system and service providers based on their own strength. SCM is a cost system, geographical scope of business activities of the enterprise, the increased complexity of business and increased length of the supply chain (transnational collaboration) led to the significantly increased costs for implementation and maintenance of SCM system, so the cost of SCM should be considered as business direct costs reflected in the profit and loss account."
This is somewhat "horrified"! In the opinions of many "IT persons", nowadays ERP is already a system emphasizing on integration, not only concerned about enterprise! In all the current leading ERP vendors, almost none of them will not include supply chain management to the system.
The roles in the supply chain and their requirements for the system
The effect of IT systems is to support business processes, which include internal processes and collaboration process between enterprises. Most enterprises have inherent position in the supply chain and connect with each other. We must first clearly know whether you are a rule-maker or rule complier in the entire supply chain.
A "rule-maker" needs both ERP system and SCM system. Through ERP, their internal operational and management processes are optimized to achieve a unified information management, and formed a transaction advantage compared with rule compliers. "Rule-maker" can make rules and change rules based on these advantages and force the rule compliers to comply with the rules through various forms. SCM is the tool for "rule-maker" to "rule" the supply chain.
SCM can be roughly divided into three parts: the supply chain project management system, supply chain collaboration and information management system and the implementation of supply chain business system.
As a "rule-maker", he needs a schedule management system, and the supply chain management information system which is the foundation of schedule management system provides sufficient and comprehensive information.
As a "rule complier", he will use the operation system of supply chain system in the business process. The business process it supports is not to meet the enterprise management needs, but to comply with the rules made by the rule maker and change as it changes in the chain. Supply chain operation system collaborates with the supply chain information and collaboration management system to exchange information and form an effective collaborative process. In this way, it guarantees the efficiency of supply chain collaboration and information management system. Many small and medium enterprises (including the large-scale businesses in circulation, import and export trade, logistics and other service trades) are "rule compliers", so first of all they need business execution system that is in line with customer needs and business process requirements, not the popular ERP system at present.
Another role is expected to emerge among the "rule maker" or "rule complier" in the future, that is "supply chain manager" or "integrated supply chain management services provider." This role executes supply chain management through supply chain information and collaboration management system or provides supply chain management services for the "rule maker".
In the supply chain, the enterprises as "rule complier" have three options. First, to be a good rule complier meeting the needs of customers, the second is to become integrated supply chain management services provider, and the third is a rule maker who can bargain with "local rules makers".
There is no doubt that you are either a logistic service provider of "rule maker", or the "integrated supply chain management services provider" of the "rule maker" for the supply chain management. Every enterprise represents a part of the supply chain, and no one can control others, which constitutes the entire value chain (VC).
Based on the above issues, you can accurately answer to the following questions: Do you really want to adopt the ERP system, or the SCM system? In SCM do you need the supply chain schedule management system, or the supply chain information and collaboration management system, or supply chain business Execution System?
The embarrassment of demand and reality in achieving transnational supply chain management.
Along with the coming period of variety, small quantity, short cycle, focusing on service, unpredictable changes of market, and the globalization of the business activities of enterprises, the proportion of the remaining inventory and circulating inventory of enterprises' assets and cost is becoming higher and higher.
The global giants who are the rule-makers have greatly improved the operating efficiency of enterprises' internal operation through global operation, non-core business outsourcing and shifting production. But when seeking for "zero inventory", the risk of inventory is pushed to suppliers, distributors and other service providers. In fact, the rule-makers don't grasp a lot of inventory information; the information is in each aspect of international trade supply chain, logistics, sales processing and etc. of international supply chain. A large number of business outsourcing and transnational collaboration result a range of issues of quality management and monitoring, flow track and enterprise management, the recall issue of Chinese toys in the United States and the poisonous dumplings are the typical examples. To solve these problems, the information visualization and enterprises' collaboration management are imperative.
The implementation of international ERP system in large and medium-sized enterprises has been basically completed (to the optimization stage), implementing SCM through integrating the overseas businesses, improving the related collaboration process and mechanism of enterprises in supply chain tach and achieving inventory sharing (that is to achieve the optimization of enterprises through supply chain management), especially in the big environment of the rising in price of resources and the awareness of environmental protection, enterprises implementing SCM will get great effectiveness in the future. But in fact, the SCM system construction of international giants is only just beginning and there are seldom successful cases.
Why is SCM construction hard? Fist, the traditional IT service mode has greatly improved the cost of enterprises application IT, and make the cost of implementing SCM high, even for very large enterprises; secondly, enterprises which are the "rule-followers" cannot afford the cost or get any benefit from implementing supply chain implementing system; thirdly, many enterprises don't have clear orientation, they cannot differ ERP and SCM, that is why they adopt wrong system solution and wrong IT service providers.
The IT application industry of enterprises has several decades of history, it should be counted as traditional industry, but the rapid growth of industry, rapid development of IT technology and the lack of talents make the IT industry have no time to reflect itself, the price of service is still raising. Sometimes, the cost of employing an ERP consultant is as same as the salary of a general manager in one year and the salary of ten workers in one year. If the object of implementation system is ERP, enterprises can recover the input from the effect of system implementation; but if the implemented system is cost SCM, the input cost will fully be reflected in the cost of enterprises, the higher the IT cost, the weaker the enterprises' competitiveness. Originally, the implementation of SCM is in order to enhance the enterprises' competitiveness, but the result is the implementation of SCM leads the descending of enterprises' competitiveness. This is why many enterprises (including international giants) are terrified by the sight of implementing SCM.
The upgrading of ERP is the management capacity of enterprises, SCM enhances the ruling capacity of enterprises' external resources. The management capacity (ERP's effect) and the quality of adopting solution (total IT cost) are proportional, but the ruling capacity (SCM) and the price of adopted solution (the unit price in terms of satisfied quality) are inversely proportional.
Even the rule-makers are terrified by the sight of implementing SCM, so the expensive IT service price is more unbearable for the enterprises which are the "rule-followers". Although many IT enterprises provide relatively cheap ERP system to small and middle-sized enterprises, but there also are ASP, SaaS and other solutions coming out, these cannot fundamentally solve the problems. The "rule-followers" have to adapt to the rules made by rule-makers on business process, this makes the "rule-followers" cannot be separated from IT services, at the same time, the high cost of IT services makes them cannot afford the cost to let the system to adapt the external changes.
If there is no "rule-followers" using the implementing system which is adapting to the demand of supply chain management, then, the other systems of SCM will become a castle in the air, a deaf or blind, and they cannot achieve the desired effect.
Is this fantasy? No, it is possible. If Dell's distributors are willing to share the inventory, sales, and other information, then it is good for optimizing the scheduling and logistics management, Dell is possible to give 1% more benefit to the distributors.
The necessary conditions to establish trans-national supply chain management system IT service system.
Even the rule-makers pay the IT cost for rule-followers, it is necessary to have the IT developers to create an IT service mode adapting to SCM system construction requiring principles, so as to reduce the cost of IT service integrated cost.
The following conditions are necessary for constructing this kind of new transnational supply chain (G/SCM) service model:
First, it can substantially reduce the IT cost. In terms of SCM system's cost, reducing IT cost is the essential condition. Only to substantially reduce the IT cost, it is possible to change the current situation which SCM construction only belongs to large enterprises, and then gradually transfer to medium-sized enterprises.
Second, the accumulation of talents and experience. G/SCM is establishing information coherent mechanism among logistics service functions, business flow and logistic flow, international and related departments in enterprises. The talents cultivation in G/SCM system field need to be well up in the live business and have a high degree understanding, as well as good communication skills (business knowledge, multi-language responding capacity) and the force to visit around the world. It is necessary to enable the talents to accumulate experience, and it is a must to provide opportunities and stages to talents. To take full advantage of experience, management process of service quality and the establishment of training system are the necessary conditions to service providers. In order to enable the talents to pay a role for clients, the rich pool of talent and the relative cost competitiveness are indispensable.
Third, the transnational responding capacity (especially important in China and Southeast Asian). Since the enterprises using the system are around the world, as a service provider, to establish G/SCM mechanism must have the ability of transnational responding capacity. At present, the biggest problem of clients is the production, sales, trade and logistics network's systematic correspondence in China and southeast Asian. Apart from importing system, as a service provider, he/she must remain the system maintenance and operating ability with the perspective of globalization.
Fourth, the system architecture, implementation methods and solutions system adapting to the demand of SCM. The purpose, use pattern and technical framework of the current solutions for ERP system construction are different from SCM's requirement. Hence, it is necessary to create a new SCM solution to achieve effective responses with aiming at SCM's nature, the new system implementation, service management and technical architecture are also necessary.
