In an era where data reigns supreme, W. Edwards Deming’s words from 40 years ago resonate deeply: “Without data, you’re just another person with an opinion.”
This statement from the luminary academic, consultant and architect of Total Quality Management has never been truer than in today’s advanced technological business environment. Yet as the volume and specificity of data grows exponentially, the management and utilization of that data has become both more critical and more complex.
Businesses seeking to improve their competitive positions are looking across their organizations for areas where they can leverage data to drive efficiencies and meet customers' expectations. But what’s interesting is that those analyses often look at business functions in a somewhat siloed fashion. The importance of ERP in supply chain management becomes evident when these functions are analyzed in tandem.
The Evolution of Business Functions
According to a study by McKinsey, companies who digitized their supply chains can expect an annual growth in revenue of 2.3% and earnings of 3.2%. That’s not just faster time to market, that’s direct financial impact. Supply chain has evolved from an operational function to a material business driver, and the role of ERP in supply chain management cannot be underestimated.
Gartner’s “4th era of ERP” describes how a modern ERP helps “drive predictive analytics, improve strategic planning and be the backbone for finance transformation.” The integration of ERP in supply chain management further amplifies these benefits.
So why, in an interconnected world, do businesses still view the functions as distinct? Much of the reason is historical both in purpose and in ownership. In the past, supply chain was the purview of the Chief Supply Chain Officer (CSCO), whose task was to ensure the efficient flow of goods. ERP was the domain of the Chief Operating Officer (COO) who was tasked with the overall management of the organization and, at times, its financial health.
Those definitions no longer apply.
The CSCO’s role has expanded dramatically and is now defined as the individual “delivering value throughout the entire end-to-end supply chain operation of an organization.”
At the same time, gone are the days when the Chief Financial Officer (CFO) focused only on providing accurate numbers to the organization. According to Deloitte, CFOs are moving away from their role as financial partner to a more strategic partner of the Chief Executive Officer (CEO).
The Necessity of Integration
In light of these shifts, when charting the course for organizational digital transformation, it is critical to approach the challenge in a holistic fashion with data as the core, unifying element. Each line of business within an organization must interact with the other in real-time, not just for reporting purposes, but to guide, assess and act. And nowhere is that connection more critical than between supply chain and ERP.
The relationship is bi-directional. A modern, connected supply chain system provides the means to deliver on customer promises and direct visibility into the business' operational health. A modern, connected ERP system ensures all areas of the organization are working in harmony and allows for faster, more impactful responsiveness to business disruptions.
Russell Ackoff, Professor Emeritus of Management at the Wharton School of Business was quoted as saying, “a successful system is not a sum of its parts, but as the product of its interactions of those parts.”
Today, it is more important than ever to ensure that as organizations aim for transformation, they do so comprehensively. A unified approach to supply chain and ERP modernization, with a single source of data at its core, is not just sensible, it is critical for future success.
