MRP, ERP, SCM and APS: different but complementary solutions
In today's globalised business world, complexity has become the norm. The vast majority of organisations of all sizes generally depend on more than one application to support their operational processes. As a result, the software used by an organisation needs to be integrated together to better support and optimise these processes.
The organisation of highly structured industries, such as manufacturing and sales, uses multiple applications, including the enterprise resource planning (ERP) system, which is the most widely used. (Enterprise Resource Planning), Material Requirements Planning (MRP), Supply Chain Management (SCM) and Advanced Planning and Scheduling (APS), to optimise their production and distribution processes. Although each application (or suite of applications) has its own characteristics and functionalities, they share common features and sometimes overlap. And when these applications integrate with each other, they help to optimise business operations and achieve a higher return on investment (ROI), giving the organisation greater value for money (VOI).
In this article, we'll look at the key differences between APS, SCM, ERP and MRP, and how these organisation and planning applications complement each other to generate organisational 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 optimise logistics and other business processes requiring very advanced planning, such as demand planning, production, distribution and transport.
The main objective of an APS system is to provide the best possible solution for organisational and planning issues based on an optimal business case for orders, demand, supply, capacity and logistics. For example, in the event of a shortage, an APS system needs to know whether it is best to deliver to the most important customers first, so that they are satisfied (irrespective of profit margins), or whether it is better to deliver to the most profitable customers first. An APS system enables us to react quickly to market fluctuations, improve throughput and delivery times, optimise our costs and reduce our costs. delivery times, optimised stock levels and improved customer service, all of which reduce costs.
However, an APS system does not replace other systems; it is a system that is grafted onto another. It is in fact a sub-category of an SCM software suite specialising in fast-computing optimisation. The system is often available as a special Supply Chain Planning (SCP) module with specific optimisation algorithms and a specialised computer database. It takes into account specific problems and constraints (a broken machine, limited capacity, a strike, weather problems, etc.) and then generates simulations with the data in its possession to finally give optimised recommendations.
What is Supply Chain Management (SCM)?
SCM manages several operational processes in the supply chain, from initial product planning through to delivery or execution. An SCM system helps organisations to 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, warehouse and logistics. Intrinsically, every SCM link has strategic, tactical and operational dimensions. The overall objective of an organisation's supply chain is to produce and deliver a product with maximum profitability, but with minimum investment in the entire process.
The objective 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 organisation 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. An SCE system, on the other hand, includes warehousing, transport planning (naturally more tactical) and execution capabilities (actual picking, packaging, order deliveries, loading).
What is ERP (Enterprise Resource Planning)?
In simple terms, 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 a number of business functions, which means that the modules communicate with each other via a central database, and information between the various departments is shared.
What is Production Resource Planning (MRP)?
Another term often used when talking about ERP: MRP. Most manufacturers use an organisational system called MRP (Material Requirements Planning), which allows for the overall planning and control of materials used in the manufacturing process. In fact, ERP systems were developed from MRP systems. Introduced a few decades ago, ERP systems extended the capabilities of the more advanced ERP and MRP 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 standardised record keeping, like MRP solutions, but their main function is to allow information to be shared between many separate areas of an organisation, enabling 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 organisation, planning and optimisation of complex processes are essential, they differ in their usefulness and functionality. Because these applications have different objectives, the results you get from them depend on how you implement, integrate and use them.
An APS application is used primarily for planning and organisation, while an SCM application is used for visibility, collaboration and optimisation of the supply chain network, and finally, an APS application is used for planning and organisation, while an SCM application is used for visibility, collaboration and optimisation of the supply chain network.Finally, an ERP system provides the data (system of record) 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 organised for optimal operations. To understand this, we need to look more closely at how the applications actually work. In an ERP application the demand, materials, manufacturing and logistics planning processes are usually isolated, so there is less visibility of the limitations between the business functions. This is not the case in an SCM or APS application. In these applications, all planning operations relating to constraints are carried out simultaneously in real time, which helps the user to understand the impact on each operational process. For example, when a customer's delivery date is changed 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 standardised repetitive tasks. Let's look again at the example of how a change in a customer's order date will affect the overall 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 based on material, capacity and logistical constraints.
In summary, ERP systems often do not provide sufficient detail about customer orders. For this reason, many organisations are looking to SCM and APS applications to optimise and refine their 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 centralised data shops to be able to carry out analyses when changes occur in supply, demand or the manufacturing process. This enables rapid or real-time decision-making. Organisations specialising in manufacturing, logistics and distribution require applications that can run simulations and analyses in real time to achieve optimised product costs, profits and prices.
In addition, 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, enables customer requirements to be dealt with in a logical way, from incoming orders through to the planning and organisation of materials, capacity and logistics. ERP and APS applications work together to create the most favourable 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 of changes based on 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 and 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 focus on back-office transactional needs, and leave collaborative data processing and optimisation capabilities to APS and SCM specialists. Now, with more powerful ERP in-memory databases, such as SAP HANA, it would not 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 organisational 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