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Chapter 11 • Supply Chain Management 317

their capabilities are beginning to overlap based on normal product enhancements as well as due
to business acquisitions and mergers. There is therefore a surge of integrated SCM–ERP
solutions available in the market.
ERP was traditionally not considered for SCM; consequently, the information flow
between various members of the supply chain was slow. This was because until the late 1990s
the focus of organizations was on improving the internal efficiency alone. ERP systems there-
fore supported only internal organization functions instead of interorganizational supply chain
functions.
The organizations soon realized, however, that although internal efficiency is important, its
benefit would be limited unless they were complemented by increased efficiency across the supply
chain. They also realized that seamless flow of real-time information across the supply chain was
the key to success in the emerging market scenario, which was characterized by great advance-
ments of technology, shorter product life cycles, and so forth. Organizations therefore started
integrating ERP applications with SCM software. This ensured that the efficiency was achieved
across the supply chain and there is a seamless flow of information. Thus, ERP becomes a vital link
in the integrated supply chain as it serves as the integrated planning and control system.
In a simple, straightforward way ERP applications help in effective SCM in two ways.
Data sharing is the first. They can create opportunities to share data across SCMs, which can
help managers to make better decisions. They also provide managers with a wider scope of the
supply chain by making much broader information available. Real-time information is the
second way. ERP systems can provide real-time information, which can be a great help in supply
chain decisions. For example, ordering raw materials can be based on the inventory details
provided by the ERP systems.
In short, Web-based technologies have revolutionized the way business is carried on, and
SCM and ERP are no exceptions. In order to leverage the benefits offered by this new technolo-
gy enabler, ERP systems are being “Web-enabled.” The Internet allows linking of the Web sites
to such back-end systems as ERP and provides connections to a host of external parties. The
benefits of such a system are that customers have direct access to the supplier’s ERP system, and
the vendors can in turn provide real-time information about inventory, pricing, orders, and
shipping status. As stated in the section on e-supply chain, the Internet thus provides an interface
between ERP system and the supply chain members, allowing real-time flow of reliable and
consistent information. To illustrate, one of the benefits of Web-enabling ERP is that it would
allow customers to go online and configure their own products, get price information, and know
immediately whether or not the configured product is in stock. This is possible because the
customer’s request is directly accessible by the ERP system of the supplier.

ERP/Legacy ERP/Legacy ERP/Legacy ERP/Legacy ERP/Legacy
system system system system system

Supplier Manufacturer Distributor Retailer Customer

FIGURE 11-4 ERP/Legacy Systems Linkage Across the Supply Chain.