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How to Manage Supply Chain Risks With an ERP

Efficiently managing supply chains became more challenging recently due to Covid-19 disruptions and geopolitical conflicts. It is not uncommon for manufacturers to engage a complex network of global suppliers to cut costs, but this practice poses several risks including delays, inconsistent quality, and compliance issues. 

Enterprise Resource Planning (ERP) solutions are essential to supply chain management (SCM). ERPs provide a holistic and granular view of various parts of a business including procurement, delivery, storage, and inventory of materials.  

To overcome challenges inherent in SCM, ERPs can automate demand planning, provide reliable processing and documentation, consolidate suppliers and vendors, improve warehouse resource management, and enhance collaboration among various departments. 

Here are some common supply chain risks that can be mitigated with ERP solutions.  

Disruptions in the Flow of Materials 

Supply shortages can result in reduced productivity and financial losses. Decreased availability of in-demand raw materials means higher prices, and persistent shipping challenges significantly increase average lead times for production materials.

ERP for distribution is vital in managing the procurement of goods especially when it comes to manufacturing. Cloud-based ERPs allow you to view critical data in real time–you can analyze supply chain channels and key performance indicators (KPIs) so you can immediately act on delayed orders or missed shipments. These platforms make it more convenient to communicate with vendors with conversations recorded in one place for future reference.  

The role of ERP software in warehousing is significant. Manual processes are inefficient and prone to human error. ERP software makes it easier to forecast demand, automates replenishment of goods, and helps track orders while proactively alerting managers when stocks are low. ERPs break down silos and integrate purchasing with key departments such as engineering. As teams work in tandem, materials are ordered promptly. 

Changing Needs and Demand Fluctuations 

Being able to quickly adapt to changing customer needs and preferences can be a major competitive advantage. Too much inventory drives costs up as unused or unsold inventory sits idle and spoils or becomes obsolete; too little inventory, on the other hand, means missed opportunities and dissatisfied customers. Maintaining and optimizing the right inventory levels is nearly impossible without a reliable ERP system. 

The SCM modules of ERP have features such as demand planning using predictive analytics. They eliminate guesswork by providing historical data and recent trends so you can make informed decisions. These modules predict demand across different channels utilizing forecasting analytics that help you anticipate customer needs at various times of the year, which helps reduce spoilage and costs associated with excess inventory.

Recalls Due to Defective or Unsafe Products

ERP systems provide centralized inventory control, allowing you to create inspection plans and checklists. You can set the accepted values in material requirements planning and consistently track KPIs, which can also help you comply with federal and international regulatory requirements and avoid costly penalties.  

But because supply chains are increasingly more complex and often involve multiple subcontractors, product recalls are becoming more common. When a product is deemed unsafe for market use or consumption, ERP solutions can help minimize the impact on your business. You can quickly identify affected lots and shipments and immediately notify your customers. Audit trails and reports can be easily generated to mitigate further risks.  

A reliable ERP system is a powerful tool that integrates various functions, increases efficiencies, and lowers costs. A reputable provider like NBS offers a single solution that supports materials planning, procurement, supply chain management, project management, accounting and finance, and human resources to provide businesses with an arsenal of tools needed to stay afloat in trying times.

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