ERP vs. SCM – What Differentiates One From The Other

By 2027, the worldwide ERP software market is expected to be worth over $86 billion. Having grown at a CAGR of over 10%, enterprise resource planning (ERP) solutions are now commonplace among organizations of all sizes.

Global supply chain management (SCM) is expanding at a CAGR of 10.4%, which is almost as rapid. Forecasts predict that by 2027, the market will have grown to about $42.5 billion.

As the SCM industry accounts for over half of the ERP market, it is clear that although they are similar, the services they provide to organizations are distinct. Their variances underscore the unique value that each offers and why both are essential to success.

In this blog, we’ll explore ERP vs. SCM differences.

What exactly is ERP or enterprise resource planning?

An enterprise resource planning (ERP) system is a business-wide computer application that may be used in many different ways to help many other divisions. Here are a few illustrations:

Accounting
Organizational Knowledge (BI)
Relationship Management With Customers (CRM)
Manufacturing
Operations Research and Management of Supply Chains (SCM)

Because supply chain management is a subset of enterprise resource planning software, its market is much smaller.

The following are some of how ERP systems contribute to the management of company performance:

Analytics
Efficiency
Intelligence
Visibility

There are several ERP advantages.

Businesses that use an ERP solution reap several rewards. One is enhanced teamwork. Accounting is at the heart of enterprise resource planning (ERP) systems, which are comprehensive, integrated platforms for managing all elements of a production- or distribution-based company. Additionally, the system offers real-time updates, ensuring that everyone is constantly up-to-date.

The centralized nature of this system allows for a decrease in operational and administrative expenses. This results in cost savings and increased productivity for enterprises.
Businesses benefit from more openness, responsibility, and service to their clientele.
With ERP software, businesses can streamline their supply chain and quickly adapt to changing market conditions. This adaptability is critical for the development and meeting of ever-evolving company requirements.
Additionally, an ERP system helps grow firms because of the many tools it provides for expansion.
Keeping up with regulatory requirements is another benefit of using an ERP system. As needs evolve, the software adapts to keep your business in compliance.

What is “supply chain management” (SCM)?

Supply chain management, on the other hand, is characterized as an answer that controls the supply chain process. Raw ingredients arrive from a supplier, and the chain continues until the final product is delivered to the customer.

SCM is not as comprehensive as an enterprise resource planning (ERP) system, which may be used in several industries. Essential components of SCM include:

Controlling Orders
Logistics Planning
Supply Chain Reporting and Analysis
Profit Control

From order receipt to production and shipping, Order Management keeps track of every process step. Warehouse management includes all employees, orders, picking, and receiving. Everything that has to do with the supply chain is maintained by logistics, and that includes:

Employees
Fleets
Machinery
Warehouses

Supply chain key performance indicators will be managed via analytics to guarantee optimal performance. Using graphs and charts, you may identify inefficient processes and improve them.

Finally, insurance claims, product recalls, and other types of returns are processed by return management. When developing brand-new goods and services, SCM software may help manage strategy and planning.

Advantages of Supply Chain Management

The use of an SCM system has a few significant benefits. As a first step, we’ve worked to strengthen our connections with our suppliers. If you want to keep tabs on your vendors’ progress and evaluate how well you work together, the system has the information you need.

Shipping and transportation businesses, among other business partners, may be more easily spoken with.

Data openness and security are both improved by SCM. KPIs, or key performance indicators, are simple to track and include:

100% Accurate Order Fulfillment
It takes an adequate number of days to sell a customer order for transported goods.

A more secure financial footing is another benefit of using an SCM system. This information is helpful in cutting down on wasteful spending and improving automation’s accuracy. Reduced downtime and increased productivity result from increased efficiency across the supply chain.

The Distinctive Features: ERP vs. SCM

Let’s take a deeper look at ERP and SCM systems, even though there are noticeable distinctions between the two.

On the other hand, ERP is primarily concerned with a company’s internal operations, such as its management, product development, and manufacturing. In-house ERP systems are more thorough and operate more efficiently. Still, SCM focuses on the outside world. Information gathered from external raw materials suppliers and supplier cooperation is the main point of interest. As a result, the data in an SCM system is more specific and detailed.

ERP systems are also very task- and management-oriented. According to this logic, it must be task- or transaction-based, as others have argued. In contrast, supply chain management (SCM) platforms concentrate on external stakeholders, including vendors and business associates. Rather than just focusing on internal operations, it prioritizes building relationships and working with external stakeholders.

Of course, a supply chain management system is something to think about if your company is actively searching for such solutions. However, an enterprise resource planning (ERP) system is the best option if you need support for several divisions. Now you know the core differences between ERP vs. SCM.

The Role of ERP in the Supply Chain

Most ERP solutions currently include SCM within their offerings, as was previously indicated. However, the ERP software’s supply chain management (SCM) module’s scope and depth might vary widely. You must be prepared with the necessary resources to implement both options.

However, these tools may be combined to provide an ERP with SCM capabilities. Training times may be cut down, and IT optimized in this way.

Stock levels may be more efficiently managed using Financial Data Accounting for Employee Time Evaluating Productivity Plus. Consequently, some businesses find that integrating ERP and SCM gives them the edge they need to dominate the market.

Closing thoughts

Enterprise resource planning (ERP) and supply chain management (SCM) are two complementary business processes essential to every company’s success. However, your company’s specific needs will dictate the kind of system that’s most suited for your operations. As a growing business, whether you need supply chain management solutions or CRM development solutions, choosing wisely between ERP vs. SCM is a tough choice.