ERP Manufacturing Insights

How to Survive the Supply Chain Crunch with the right ERP System

Cargo Containers Supply Chain Crunch

The supply chain crunch that is currently impacting manufacturing and distribution enterprises in the US and Canada was originally precipitated by import tariffs, but is now further exacerbated by the Covid pandemic and it’s many far-reaching restrictions on production and logistics across the globe. To make matter worse, some companies are already enduring a sluggish market economy, a poor product mix, and struggling inventory management practices. Fortunately, under challenging business environments such as these, those companies with a robust ERP system can not only weather these difficult times but may actually use their systems’ efficiencies to gain a competitive edge. So now more than ever, the right ERP system can determine which businesses succeed and which will struggle during the Supply Chain Crunch of 2021 and 2022. The question is, does your business have the right ERP system in place to survive this challenge?

This article explains how the right enterprise resource planning (ERP) system with robust supply chain, inventory management and materials management capabilities can be the best way forward for businesses looking to survive these uncertain times. 

Factors Causing the Current Supply Chain Crunch

For most companies, supply chains comprise multiple stakeholders, including suppliers, partners or distributors, customers, third-party logistics providers, warehouses, transportation service providers, e‑commerce sites, retailers, and financial institutions. An essential ingredient in every excellent supply chain is its ability to adapt well to any fluctuations in demand. 

However, with the escalating impact of COVID on global markets, the flow of goods across countries and continents is severely disrupted. But the pandemic isn’t the only thing to blame for the current supply chain crunch. Here are a few more contributory factors:

Changing trade policies 

The recent increase in import tariffs imposed by government bodies worldwide impacts many industries. Global trading patterns are changing rapidly, with companies facing increased costs and uncertainties when dealing with foreign partners. 

Rising raw materials and energy prices 

Increased crude oil prices have hit oil producers hard. There’s also a sharp rise in mining costs, with the trend set to continue throughout 2022. In addition, increased fuel costs are putting pressure on transport infrastructure. Meanwhile, rising natural gas prices will likely lead to additional cost increases for power generation facilities.

Increasing input costs

Raw material costs rose in 2019 and continued climbing through 2021. This upward inflationary trend shows no signs of slowing down, especially with the pandemic still unsolved across the globe and its many markets. A large part of the increase comes from rising input and energy costs for agricultural commodities like soybeans and corn. Other materials, such as plastics and metals, also saw an increase in production costs over the last 12 months.

Increasing adoption of E‑commerce platforms

With the face-paced fast-paced adoption and popularity of online stores like Amazon and Alibaba, it’s no longer possible to hide behind physical distribution centers located outside China. This makes it even harder for manufacturers to get products from factories around the globe and into retail stores. According to a trading economics report, China’s exports grew 27.1% year-on-year to $300.22 billion in October 2021, following a 28.1% surge in September. With such a change in demand dynamics, manufacturers need to find new ways to address the supply chain crisis.

5 Ways the Right ERP System can Ease Supply Chain Disruption

One of the first steps companies should take to survive the current disruption and ensure smooth trade operations after the pandemic is to invest in the supply chain of the future. That means leveraging the right technology solutions like ERP software. Here are the top 5 ways the best ERP systems can help with supply chain management:

Better Inventory Management

An ERP-based inventory management solution provides visibility into every aspect of your company’s supply chain. By providing access to your entire network of suppliers, customers, and distributors, an ERP allows businesses to monitor inventory status and plan shipments accordingly. With SCM tools, the best systems effortlessly track orders and shipment statuses and improve the accuracy of forecasts for customer order fulfillment and warehouse delivery schedules. Crucial data reflecting how much inventory is needed for actual demand versus forecasted needs assures accuracy and improves cost-efficacy related to inventory management.

Streamline Purchasing Processes

ERP software allows businesses to manage all aspects of materials and product procurement, including vendor selection, contract negotiation, purchase requisitions and payments, inventory tracking, and order processing. With these processes streamlined, your company can also eliminate manual tasks, free up staff time for higher-value projects, and reduce costly errors and mistakes. A robust ERP system, such as Epicor for Distribution, has built-in capabilities for inventory tracking, including dynamic replenishment methods and inventory analytics, providing quick identification of products that may be running low by comparing actual real-time inventories against sales forecasts.

Efficient Management of Complex Supply Chain Networks

Many manufacturers and distributors rely heavily on third-party service providers (such as freight brokers, shippers, and carriers) who play an integral role in their operations and logistics. The problem for many companies is that these service providers often lack integrated operating systems, making it difficult to see where each element of the supply chain intersects. An ERP system can easily interface with these different components of your organization’s ecosystem. And because these interactions are logged into a central database, businesses can use data reporting to analyze key metrics such as landing costs, cycle counting and warehouse activities.

Increased Customer Service Levels

As discussed above, a poorly planned distribution network causes unnecessary delays in shipments, thereby reducing customer satisfaction. These problems get compounded because customers do not receive an accurate estimate of delivery times. When this happens, they complain about poor service and may avoid doing business with you again. With a comprehensive ERP solution, you can build online reporting tools that provide real-time visibility into shipment status. The integrated warehouse management system also helps optimize storage space based on forecasted demand.

Integration of Internal Business Processes

A world-class ERP system integrates seamlessly with other enterprise applications. For example, one of the most common integration points between manufacturing ERP systems and accounting software is invoicing. An ERP solution will allow you to automatically generate invoices from sales orders and send them directly to clients or vendors. It’s even possible to automate the process of receiving payment and sending refunds.

Navigating these uncertain times requires the most powerful business solutions. The right ERP system can not only lead distribution and manufacturing enterprises through the current supply chain crisis of 2021 and 2022, but these solutions can also assure strategic growth in the many years ahead when market forces are more predictable. While there’s no denying that there’s little you can do to change some of the factors causing the supply chain crunch, ERP systems provide results-proven solutions to rise above the storm and sail through the present challenges.

If you need help getting started or are looking for more information about how specific ERP solutions can help your business, please feel free to reach out to us today.

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