ERP vs. SCM: Which System Makes Sense for Your Business?

ERP vs. SCM: Which System Makes Sense for Your Business?

When it comes to running your business processes, there are several tools available to help with important tasks like product planning, procurement, forecasting, operational costs, monitoring customer satisfaction, and more. Two major tools that businesses use to automate tasks and collect real-time data are ERP software solutions and SCM systems.

While both solutions help to streamline your workflow and increase profitability with different digital tools and modules, it can be hard to know which is best for your business needs. In this article, we’ll help you understand which solution is best for your organization and narrow down which of these software solutions will be best for your growth goals.

What Is ERP?

ERP stands for enterprise resource planning. This tool records and manages the critical enterprise data collected throughout your business processes. It’s an all-encompassing software tool that assists with almost every function of your business — even things like human resources and marketing.

What Does an ERP System Do?

An ERP system provides intelligence, visibility, efficiency, and advanced analytics tools. It collects real-time data and uses it to inform business systems, automate all major tasks, and provide a smooth, easy operation process throughout your business.

Pros of an ERP System

Here are some pros and benefits found in the best ERP software systems:

  • Centralized data: All of the important information about your business is located in a single source, eliminating data silos.
  • Seamless integrations: Different modules and tools ensure that all data and processes can integrate and work together.
  • Improved customer satisfaction: More efficiency in your business has a direct impact on how happy your customers are

Cons of an ERP System

While there are many benefits of ERP, there are a few cons, including:

  • High prices: ERP systems have extensive features and are often very costly as a result.
  • Not accessible to everyone: ERP systems are complex and can sometimes only be accessed by IT individuals or highly trained personnel.
  • Extensive setup: ERP systems can take months to configure and align accurately, especially if you have a large business.

What Is SCM?

SCM stands for supply chain management. Supply chain management software is a tool that helps you monitor and manage your supply chain — which can improve your processes and provide key metrics for your supply chain success. This works to help you organize your resources and ensure that your products and services are delivered to customers on time.

What Does an SCM System Do?

A SCM software system helps you communicate with your suppliers and vendors so that you are in control of the relationships you have with your third-party providers. It also helps you track the sources of your raw materials and controls the logistics behind the delivery and transportation of your goods and services.

Pros of an SCM System

Here are some of the major pros of having an SCM system:

  • Optimized systems: Because SCM systems are so focused on the supply chain, they are highly optimized for specific supply chain-related tasks.
  • Reduced costs: SCM systems help eliminate unnecessary costs around the procurement process and supply chain processes.
  • Better communication: SCM solutions help you facilitate better supplier relationship management, as these systems help you communicate with your suppliers and improve your relationships with them.

Cons of an SCM System

There are some drawbacks of an SCM system, including:

  • Narrow view: SCM systems only focus on the supply chain, meaning that other aspects of business can be left behind.
  • Potential data silos: If the SCM tool doesn’t connect with other parts of your business, it can create a potential data silo.
  • Limited functionality: Many SCM systems have limited functionality or very few customization opportunities.

Key Similarities and Differences Between ERP and SCM

Now that you understand more about ERP systems and SCM systems as separate solutions, let’s take a look at how they work together and how they differ.

Similarities: ERP vs. SCM

Both ERP and SCM systems have some parallels, as both work to accomplish similar goals of streamlining and improving processes. Similarities include:

  • Better planning: Both ERP and SCM help you plan your organization and create strategies that are better for your business practices and processes.
  • Happier customers: When you have a more streamlined system, your customers see the benefits and are more likely to be happy with your services as their deliveries are on time and of high quality.
  • Forecasting and disruption planning: Both ERP and SCM tools help you plan for potential disruptions, helping you be more forward-thinking in your business forecasting.

Differences: ERP vs. SCM

Now that you know how the two systems are similar, let’s discuss how they are different:

  • Scope: SCMs have a narrow scope, just focusing on the supply chain, while an ERP can manage virtually every aspect of a business and handles multiple business processes.
  • Focus: The main focus of an SCM is on the external relationships you have with suppliers and vendors, while an ERP is more focused on your internal teams and processes.
  • Complexity: An SCM is much less complicated than an ERP.

ERP vs. SCM vs. IMS

There is another major system that businesses often use to help control their internal business process, and that is an IMS. IMS, or inventory management system, is another essential tool companies use to ensure that processes move optimally and that you can control your warehouse and manufacturing tasks.

What Is an IMS?

An inventory management system helps companies take control of their stock levels and organize their warehouses so that manufacturing processes can be optimized and run smoothly. Inventory management is a part of the supply chain, making it another specialization within ERP and SCM.

Pros of an IMS

Here are some pros of inventory management systems:

  • Helps maintain stock: An IMS helps you keep a constant level of stock in your warehouses and ensures that you don’t run out of inventory.
  • Organizes the warehouse: In addition to tracking inventory levels, the system will also help you organize your warehouse so you know where everything is located.
  • Makes teams happy: When teams know what they have in the warehouse and where the items are, they can do their jobs more easily — leading to greater job satisfaction and happier employees overall.

Cons of an IMS

Here are some ways in which an IMS might not be the best fit for your business:

  • Too narrow of a focus: IMS only handles a small aspect of your business, which isn’t very helpful in the long term.
  • Not enough insight: The IMS system doesn’t provide many insights into the “why” of your inventory — or your business processes.
  • Hides production problems: If there are problems with your production or areas of your manufacturing process, your IMS system won’t tell you about them and instead hides that information.

Manage Your Supply Chain With Anvyl

Both ERP systems and SCM solutions help businesses accomplish important business processes and streamline operations. Each option has pros and cons, but both can often integrate to help with tasks like raw material procurement and product planning. Whether you want an ERP implementation or are more interested in SCM solutions, the right tool for your business is out there.

At Anvyl, we focus on providing a supply chain management system that helps you improve supplier relationships and streamline your important business practices while creating a single source of truth. Get a demo of our product today to discover how we can help bring your business processes to the next level.

Take Control of Your Production Process

Anvyl provides a central source of truth for all your order information, and helps you manage your supplier relationships. All in one simple platform.

Take Control of Your Production Process