MRP, ERP, SCM and APS: different but complementary solutions
In today's globalized business world, complexity has become the norm. The vast majority of organizations of all sizes generally rely on more than one application to support their operational processes. As a result, the software used by an organization needs to be integrated together to better support and optimize these processes.
The organization of highly structured industries, such as manufacturing and sales, uses multiple applications, among which the enterprise resource planning (ERP) system, the most widely used. (ERP for Enterprise Resource Planning), MRP (Material Requirements Planning), SCM (Supply Chain Management) and APS (Advanced Planning and Scheduling), to optimize their production and distribution processes. Although each application (or suite of applications) has its own features and functionalities, they share commonalities and sometimes overlap. And when these applications integrate with each other, they help to optimize business operations and achieve a higher return on investment (ROI), giving the organization greater value for money (VOI).
In this article, we'll look at the main differences between APS, SCM, ERP and MRP, and then see how these organization and planning applications complement each other to generate organizational benefits.
Contents
- What is Advanced Planning and Scheduling (APS)?
- What is Supply Chain Management (SCM)?
- What is ERP (Enterprise Resource Planning)?
- What is Production Resource Planning (MRP)?
- How do APS, SCM, ERP and MRP software differ?
- How do APS, SCM and ERP systems complement each other?
- Conclusion
What is Advanced Planning and Scheduling (APS)?
APS is a software application that functions as a decision-making mechanism for logistics and production processes. It takes into account both short- and long-term planning. The system uses advanced mathematical algorithms to simulate and optimize logistics and other business processes requiring extensive planning, such as demand planning, production, distribution and transportation.
The main objective of an APS system is to provide the best possible solution for organizational and planning issues , based on an optimal cost-benefit analysis of orders, demand, supply, capacity and logistics. For example, in the event of a shortage, an APS system needs to know whether to deliver to the most important customers first, so that they are satisfied (irrespective of profit margins), or whether to deliver to the most profitable customers first. An APS system provides a high level of responsiveness to market fluctuations, improved throughput and delivery times, and optimized costs. delivery times, optimized stock levels and improved customer service, all of which reduce costs.
However, an APS system does not replace other systems; it is an add-on. It is, in fact, a sub-category of an SCM software suite specializing in fast-computing optimization. The system is often available as a special Supply Chain Planning (SCP) module, with specific optimization algorithms and a specialized computer database. It takes into account specific problems and constraints (a broken machine, limited capacity, a strike, weather problems, etc.) and then generates simulations using the results.), then generates simulations with the data in its possession to finally deliver optimized recommendations.
What is Supply Chain Management (SCM)?
SCM manages several operational processes in the supply chain, from initial product planning to delivery or execution. An SCM system helps organizations develop processes that integrate their manufacturing activities with logistics. The main objective of any SCM application is to manage the flow of information between buyers, suppliers, production, warehousing and logistics. Intrinsically, every SCM link has strategic, tactical and operational dimensions. The overall objective of an organization's supply chain is to produce and deliver a product with maximum profitability, but with minimum investment in the entire process.
The aim of an SCM application is to provide end-to-end visibility into each component of the supply chain network, without losing sight of the company's short- and long-term objectives. An organization needs to understand where its products and the market will be in terms of demand and product lifecycle over the long term. With long-term objectives in mind, the business information in the SCM application is aligned with the company's short- and long-term objectives.
Since an SCM system manages multiple processes in the supply chain, it can be subdivided into solution sub-suites: SCP and SCE. An SCP system includes sales and operations planning (S&OP), demand planning and sensing, strategic supply network design and other long-term strategic planning capabilities. In contrast, an SCE system includes warehousing, transportation planning (naturally more tactical) and fulfillment capabilities (actual picking, packing, order deliveries, loading).
What is ERP (Enterprise Resource Planning)?
Simply put, an ERP system is enterprise software that integrates a range of back-office functions, from finance and human resources (HR) to manufacturing and sales. It manages company-wide resources and reconciles all financial transactions in its general ledger (GL). An ERP system is designed around several business functions, which means that modules communicate with each other via a central database, and information between different departments is shared.
What is Production Resource Planning (MRP)?
Another term often used when talking about ERP: MRP. Most manufacturers use an organizational system called MRP (for Material Requirements Planning), which enables overall planning and control of the materials used in the manufacturing process. In fact, ERP systems have evolved from MRP systems. Introduced a few decades ago, ERP systems extended the capabilities of more advanced MRP and ERP solutions, known as MRP II. ERP systems did not replace these solutions, but offered broader functionality and integration, and extended the use of MRP solutions beyond the manufacturing industries. ERP systems incorporate standardized record-keeping, like MRP solutions, but their main function is to enable the sharing of information between many separate areas of an organization, allowing a coherent view of how a business operates.
How do APS, SCM, ERP and MRP software differ?
Although APS, SCM, ERP and MRP systems are all used in sectors such as manufacturing, where the organization, planning and optimization of complex processes are essential, they differ in their usefulness and functionality. As these applications have different objectives, the results you achieve depend on how you implement, integrate and use them.
An APS application is used primarily for planning and organization, while an SCM application is used for visibility, collaboration and optimization of the supply chain network, and finally, a SCM application is used for the management of the supply chain.Finally, an ERP system provides the data (filing system) and business rules required for various business functions.
ERP and MRP applications are not generally used as strategic decision-making applications. Only an APS or SCM system can be used to better understand what needs to be planned and organized for optimal operations. To understand this, we need to take a closer look at how the applications actually work. In an ERP application, demand planning, materials planning, manufacturing and logistics processes are usually isolated, so there is less visibility of the limitations between business functions. This is not the case in an SCM or APS application. In these applications, all planning operations concerning constraints are carried out simultaneously in real time, helping the user to understand the impact on each operational process. For example, when a customer's delivery date is modified in an SCM application, the system calculates at the same time what needs to be communicated to the supplier regarding the delivery of raw materials, and makes adjustments in the planning process.At the same time, it recalculates where and when the goods should be stored in the warehouse.
ERP applications are transactional systems, based on standardized repetitive tasks. Let's take another look at the example of how a change in a customer's order date will affect global business functions. With the help of an APS application, an analysis can be carried out to see the impact of an order change on other sales orders. An APS system can also calculate the optimum solution in terms of material, capacity and logistical constraints.
To sum up, ERP systems often fail to provide sufficient detail about customer orders. For this reason, many organizations are looking to SCM and APS applications to optimize and refine planning, procurement, production, warehousing and delivery processes.
How do APS, SCM and ERP systems complement each other?
Although all these systems can work on their own, they deliver the best results when combined. SCM and APS applications need an ERP system and its centralized data stores to be able to perform analyses when changes occur in supply, demand or the manufacturing process. This enables rapid or real-time decision-making. Organizations specializing in manufacturing, logistics and distribution require applications that can perform real-time simulations and analyses to achieve optimized product costs, profits and prices.
Moreover, ERP applications lack the ability to match requirements to customer constraints and preferences when faced with a multitude of production sites and geographical locations. Using an APS application, however, means that customer requirements can be processed in a logical way, from incoming orders through to the planning and organization of materials, capacity and logistics. ERP and APS applications work together to create the most favorable plan based on constraints, capacity and material. An ERP system takes the simulated plan from the APS system and generates requirements for different departments (from the finance department to the warehouse).
ERP applications perform a top-down analysis based on changes in customer demand. However, manufacturers also want to know how, when and where the product is to be produced and delivered. SCM and APS systems help them make these assessments. For example, ERP systems plan particular orders or requirements according to predefined configurations in the system, and do not take exceptions into account. But when an ERP system is integrated with an APS system, it simultaneously takes into account capacity availability, materials, equipment, human capital and logistical constraints. When the same order requirements are integrated into an SCM application, they are communicated upwards through the supply chain network. This means that the supplier knows the new requirements, and the logistics provider knows when the material will be ready for delivery to the customer.
Conclusion
In principle, in today's world, a modern, powerful ERP is capable of performing APS and SCM tasks, but due to the low computing power and ERP database management capabilities available several dedecades ago, it was easier for ERP vendors to concentrate on back-office transactional needs, and leave collaborative data processing and optimization capabilities to APS and SCM specialists. Now, with more powerful ERP in-memory databases, such as SAP HANA, it wouldn't be surprising in the future to see ERP vendors attempt to provide ERP, APS and SCM tools all integrated on the same data model.
Now that you know what these four applications do for industries with high planning and organizational demands, and how effective they are together, you have a better idea of which systems may be most useful for your business. Once you've decided on the type of system(s) you need, you can compare the different solutions available on the market and find the one best suited to your company's needs.
Article translated from French