Managing Supply Chain Risks: 5 Ways ERP Software Helps

Whether you’re a distributor or manufacturer, you’ve always faced a certain amount of risk in your supply chain. Supplier delays for any reason can have a significant impact on your business. With a steady stream of disruptions over the last two years, businesses are more focused than ever on doing what they can to manage the risk in their supply chain.

According to a BDC study, 85% of Canadian SMEs are reporting supply chain issues. And it’s having a ripple effect on business performance.

• 66% have increased their prices to meet the rising cost of inputs
• 39% have reduced profit margins
• 60% have increased their delivery times

While you can’t control the outside forces disrupting your supply chain, you can adapt your business to increase your own resilience. Sylvie Ratté, Senior Economist at the Business Development Bank of Canada, recommends investing in technology to mitigate disruptions. And according to a recent Gartner survey, supply chain professionals agree – 34% of respondents said that adopting new technology will be the most important change in the next five years.

As an SME, implementing ERP software can have a significant impact on your ability to manage your supply chain effectively and pivot quickly when disruptions occur. Here’s how…

1. Get real-time supply chain visibility

Having a clear view of your on-hand inventory, available to promise numbers and the latest pricing is critical to a well-run supply chain – especially in unpredictable times. This is near impossible to achieve if you’re using multiple systems and manually maintained data sets. ERP software gives you a consolidated view across every part of your business, so your purchasing team can see updates from sales orders, fulfillment and receiving – in real-time.

2. Make smart changes to inventory quantities

Research from BDC indicates that 37% of SMEs are moving from just-in-time inventory management to a just-in-case approach to protect themselves from unexpected delays. If you’re managing inventory manually in a spreadsheet or using very basic tools, it can be challenging to strike the right balance between enough just-in-case inventory without stocking too much that ends up sitting on the shelves. ERP software provides the tools to help you identify the right quantities based on historical data and your preferred safety stock levels for each product. And it won’t require a full-time employee just to manually run the numbers.

3. Diversify your suppliers

In the last couple of years, reliance on international suppliers has been highlighted as a particular risk. Between material shortages, shipping delays and increasing transportation costs, 31% of companies are increasing on-shoring or near-shoring.

Rather than moving all your eggs from one basket to another, the key here is to diversify suppliers with a mix of North American and international vendors so you can adjust more easily when disruptions occur.

With ERP software, this process is much simpler. You can setup multiple vendors for the same SKU, so you won’t waste time sorting through your files to locate the name of your backup vendor (or the backup of your backup when things really go awry). You can also setup alternative items when your preferred items aren’t available, allowing you to adjust purchasing plans in minutes instead of hours.

4. Increase efficiency

PwC’s Digital Trends in Supply Chain Survey found that increasing efficiency is a top priority for 63% of companies. If you want to do more in less time, with fewer people, ERP software can help you get there. For example, using built-in MRP tools could help you reduce inventory planning time between 60% and 80%.

And if you have an eCommerce channel, a proper integration between your webstore and ERP system can yield significant efficiency gains. During the pandemic, many SMEs quickly spun up an eCommerce site so they could still reach their customers. But after only a few months, they realized how cumbersome it was to manually manage orders and inventory availability between their webstore and back-end systems. With an integrated eCommerce ERP solution, you can easily bridge the gap between sales and operations.

5. Manage operational costs

Managing or reducing costs was the second priority highlighted by respondents of the PwC Survey. And it’s often one of the key reasons that SMEs implement ERP software. They want to consolidate their data and streamline processes, with the goal of lowering costs. For distributors and manufacturers, the biggest impact comes from optimizing inventory. With the right quantity of the right inventory at the right time, your carrying costs come down. And as you lower the frequency of backorders, you’ll see savings on expedited shipping costs.

Ready to talk ERP?

Having the right tools to manage your supply chain is more important than ever before. If you see room for improvement in even one of the areas we’ve discussed here, let’s chat about your options. We work with two of the top ERP solutions for growing distributors and manufacturers – NetSuite and SAP Business One. Both have the SCM tools you need to mitigate supply chain risks and we can help you decide which one best fits your business.