During the initial phase of the 2020 pandemic, widespread supply chain disruptions arose due to government-mandated closures of non-essential businesses. In an attempt to curb the spread of the virus, only essential services continued to operate, aided by emergency financial assistance provided to homeowners and businesses. The Federal Reserve was compelled to act in reaction to the inflation spike that began in early 2021 and got worse until 2022, which included boosting short-term interest rates.
How can companies survive such unforeseen supply chain crunches? Having an effective Enterprise Resource Planning (ERP) System in place is a major way to guard against them. Companies using trustworthy ERP systems can not only overcome these obstacles but also make use of their effectiveness to gain a competitive edge. A well-implemented ERP system backed by proficient supply chain, inventory, and materials management is essential for navigating these challenging times.
What is the Supply Chain Crunch?
When the supply chain meets significant obstacles and limits, it is said to be in a supply chain crunch. Consumers and businesses have both suffered greatly from supply chain interruptions. It is frequently characterized by a lack of supply, longer lead times, higher prices, and trouble finding raw materials or finished goods.
Factors Contributing to Supply Chain Crunch
- Global Events: Pandemics, trade disputes, and geopolitical events that affect suppliers, production, and transportation can all have a substantial influence on supply chains.
- Transportation Issues: Shipping and logistics delays could prohibit products from reaching their destinations in a timely way, which could lead to disgruntled customers and an imbalance in inventory.
- Inventory control problems: Inefficient inventory management practices can result in excess stock of some products and shortages of others, which reduces efficiency.
- Increased Demand: If manufacturing and distribution capacity is limited, a sudden rise in demand for goods or services can strain the supply chain
7 Ways the Right ERP System Can Ease Supply Chain Crunch
Manufacturers can handle and alleviate supply chain constraints with the help of Enterprise Resource Planning (ERP) technologies. In order to provide real-time data and enable effective decision-making, ERP software integrates numerous business processes and activities into a single, unified system.
1. Streamline Purchasing Processes: Manual material and product procurement methods cause delays, inefficiencies, and increased operational expenses. Stockouts and unsatisfied consumers are exacerbated by time-consuming inventory tracking and manual order processing. ERP automates procurement, vendor selection, contract negotiation, and payment processes. After installing an ERP Cloud System, Johnson Controls, a global leader in energy storage systems, streamlined manual procedures and obtained real-time supply chain visibility. With an integrated ERP system, AstraZeneca, a multinational pharmaceutical business, received benefits such as enhanced data integrity and better pricing and purchasing decision-making. These case studies demonstrate how ERP Cloud Systems may be a game changer in terms of optimizing procurement procedures and offering a competitive advantage in today’s market.
2. Demand Forecasting and Inventory Management: Accurate demand forecasting helps businesses in preparing for variations and changes in client demand, lowering the likelihood of a supply chain disruption. A supply chain crunch, on the other hand, can influence the exactness of request projections, making it crucial for organizations to address and settle supply chain issues as rapidly as conceivable in order to preserve productivity and responsiveness.
3. Efficient Management of Complex Supply Chain Networks: Third-party service providers such as freight brokers, shippers, and carriers play an important role in ensuring seamless operations and logistics in the manufacturing and distribution sector. But, this lack of connectivity creates a disconnect, making it difficult for organizations to have a comprehensive view of the entire supply chain and comprehend how its many components interact with one another.
4. Integration of Internal Business Processes: With an ERP system in place, you can automatically generate invoices from sales orders and send them straight to suppliers or clients. Processes such as accepting and refunding the payment can also be automated in a similar way. During uncertain times such as these, it is crucial for organizations to have an adaptable and flexible system like ERP in place. This empowers them to efficiently manage and prepare for unexpected changes, ensuring streamlined operations and readiness for any challenges that may arise. Making internal changes is the first step. For instance, cutting inventory can save working capital, warehousing, and transportation costs. Often, chances for cost savings can be found by analyzing inbound logistics. The integration effort then spreads farther and farther.
5. Real-time Visibility and Tracking: Organizations that fail to leverage this cutting-edge technology are missing out on a tremendous opportunity. Real-time transportation visibility capabilities have completely transformed the way businesses handle logistics.
- Customer Churn: It’s due to the lack of real-time transportation visibility that increases the customer attrition rate and contemporary clients demand end-to-end delivery transparency and will only remain engaged with companies who keep their commitment to give accurate information along with on-time orders.
- Inaccurate KPI benchmarking of deliveries: Real-time insight makes it possible to plan, allocate and track deliveries as well as assess the performance of delivery workers. A crucial KPI for deliveries is setting benchmarks in order to comprehend and plan future requirements and to make sure that the delivery process runs properly. Planning and supply chain process monitoring would become inaccurate without real-time visibility and control, which would ultimately result in a waste of resources and income loss.
- Increasing transportation risks: The most vulnerable part of the supply chain system is the Logistics sector. As it is susceptible to a number of dangers, poor visibility only makes them worse, especially in sparsely linked areas. This is where an ERP’s automated reporting and alert system can assist firms in monitoring inventory levels, tracking KPIs and spotting possible interruptions in the whole process.
6. Data Analytics and Reporting: Companies all around the world are dealing with persistent supply chain concerns, with difficulty in successfully using data to provide significant insights beyond simple metrics and descriptive statistics. The vast volumes of data, which are frequently housed in several systems, and added complexity from extended partners, make it difficult to generate relevant insights.
A comprehensive data analytics approach with the help of ERP must be established to address these supply chain concerns. Bringing together internal and external data in an organized style, focusing on actionable outcomes to improve performance, and ensuring that the results are easily understandable are all part of this process. Organizations can quickly forecast and analyze potential disruptions by using advanced analytics on real-time data flows, allowing them to respond to swings in demand, supply, and inventory for better monitoring and management of business performance.
7. Risk Management and Contingency Planning: Any organization can experience a supply chain crunch at some point, whether it is localized or global. Contingency planning lays down actions to be taken in the event of a disaster whether natural or man-made.
According to the U.S. Bureau of Labour Statistics, the recent global pandemic caused the demand for 56% of small firms’ goods or services to decline. That was due in part to the product shortage and in part to the lack of a reliable supply chain backup plan.
ERP has a built-in Risk Management Module which systematically classifies risk based on Risk Category and Risk Area. It notes down the impact of risk along with symptoms and triggers. It documents the response method to analyze whether the risk can be mitigated, avoided, transferred, or accepted. ERP systems also use intelligence and predictive analytics applications to enhance forecasting and risk management because all the data is connected in one location.
ERP systems have demonstrated their effectiveness in navigating and overcoming challenges presented by unforeseen global circumstances. Though it is evident that certain causes of supply chain issues are beyond our control, these systems offer valuable solutions to mitigate their impact. The correct ERP system can ensure strategic growth in the years to come, given that the market forces will be more predictable. Here at iQuasar, we are committed to helping you overcome your supply chain obstacles through ERP. Please feel free to get in touch with us right away if you need assistance getting started or if you want more details about how particular ERP systems might benefit your company.