As the lines between the large enterprise resource planning (ERP) providers and best-of-breed supply chain management applications continue to blur, the ERPs are now moving to create holistic, end-to-end “hubs” that incorporate multiple trading partners, providers and even customers.
For it’s most recent “Supply Chain Management User Wants and Needs Study,” Gartner asked its customers about their use of “mega-suite vendors” like SAP, Oracle, Infor and Microsoft.
While not necessarily known for being specialists in any single area, the study found that these large, enterprise resource planning (ERP) vendors appear to be gaining ground in the supply chain management (SCM) software arena. In fact, the largest ERP vendors have all posted significant growth in SCM over the last five to six years, according to the Gartner results.
Right now, Gartner says that 63% of companies are committed to a mega-suite platform, with just 36% saying that they have no such affinity to a large ERP provider. In the meantime, just 18% of companies are committed to using “purely best-of-breed options,” says Dwight Klappich, research vice president for research giant Gartner. “This indicates a strong bias toward the mega-suite vendors,” he points out, “with the strongest of them being SAP at this point.”
When asked about future buying preferences, 57% of companies would rather procure their supply chain software from a mega-suite vendor, Gartner reports. “If an ERP vendor like SAP does everything—or most—of what the company needs,” says Klappich, “in many cases that firm won’t even look at other options.”
Over the next few pages, we’ll explore ERP’s continued and steady march into the SCM space, find out what’s driving these moves, hear why best-of-breeds are still valuable in certain situations, and find out what ERPs are doing to help shippers achieve their end-to-end supply chain visibility goals.
Toyota or Mercedes-Benz?
Even though he knows that shippers will probably take the path of least resistance and work with their existing providers to gain SCM functionality, Klappich usually advises companies to explore all of their software options before making a decision. He does this even when there’s a strong and obvious bias toward a large ERP offering.
Many times, the advice falls on deaf ears. That’s because for many companies, the Toyota Camry does the trick, says Klappich, making the more expensive BMW or Mercedes-Benz unnecessary.
Another trend driving the ERP-based SCM market right now is the rate of innovation and spate of innovations within that market. Klappich points to Infor’s purchase of Predictix, a provider of cloud-native, predictive, and machine-learning solutions for retailers, as one example of how the ERPs are expanding their portfolios on the supply chain front.
“We continue to see the mega-suite vendors making these kinds of moves,” says Klappich, “either by developing new deployment models or by acquiring smaller providers that are out on the market’s fringe, where the innovation continues to emerge.”
A functionally-rich option
As Steve Banker, vice president of supply chain management at ARC Advisory Group, surveys the current state of ERP in SCM, he says that, for the most part, today’s ERPs offer functionally-rich SCM solutions that integrate cloud-based options that may even be a little bit ahead of the best-of-breed options in some cases.
“The fact that their cloud-based solutions require little or no customization to get up and running—and that they’re integrated into a larger solution that the shipper is already using—makes ERP offerings particularly attractive in today’s cost- and time-conscious business environment,” says Banker. “Today’s software solutions are so rich and so configurable that it rarely makes sense to go down the path to customization. Oracle, for example, makes it possible to add customizations to its cloud solutions, but it really discourages that move,” he adds.
And with SAP’s new supply chain planning solution, you aren’t even allowed to add new features and functions to the platform, adds Banker. “I’m a big fan of putting cloud solutions in quickly and without any customization at all. I really think that results in a better total cost of ownership [TCO], and both SAP and Oracle are a little bit ahead of the rest on this.”
Blurring the lines
As the lines between the ERPs and best-of-breed SCM solutions continue to blur, Tom Cassell, vice president and supply chain solutions leader at CapGemini, says that the former are definitely stepping up their games in the core areas of supply chain.
“For the most part, the ERPs sell a ‘good enough’ SCM solution that, once you include all of the elements of integration and standardization,” says Cassell, “is generally a pretty viable play.”
In particular, Cassell says that ERPs like SAP and Oracle are improving and enhancing their transportation management, warehouse management, planning, and procurement offerings to the point where those solutions may soon not even be discernible from best-of-breed offerings.
The ERPs are playing a predominant role in supporting many of the supply chain processes—from planning to procurement to logistics,” says Cassell. “In fact, we have many clients that rely on traditional ERP platforms to manage all of the activities and coordination going on in their supply chains.”
Cassell says that the inherent benefit of this approach really hasn’t changed much over the years. “It’s still oriented around TCO and the standardization of processes and technology,” he points out. “It’s the whole native integration play and the need for data consistency across the extended supply chain.”
On the other hand, Cassell says that the impacts and requirements that the digital economy has placed on shippers have opened the doors for best-of-breed SCM providers to develop some very targeted solutions. The growth of omni-channel, for example, has made a significant impact on the retail and consumer products industries. This, in turn, has placed greater demands on the logistics and fulfillment companies that serve those industries.
“Traditional ERP didn’t really handle this model very well,” says Cassell, “and we’ve seen many shippers turning to best-of-breed e-commerce solutions to handle the multi-channel order orchestration part of omni and then integrate back into an ERP system for fulfillment.”
Expanded visibility, please
Supply chain visibility is another area that’s being influenced by digital requirements, according to Cassell, who says numerous best-of-breed SCM providers have addressed this issue with solutions that help companies more effectively view and orchestrate inventory and logistics activities related to omni-channel.
“This is another area where best-of-breed players have made significant inroads compared to traditional ERP vendors,” says Cassell, adding that the ERPs are paying attention to these “digital disruptors” and working to better their solutions—many of which were designed around a single, holistic approach to models like omni-channel.
“Their message to shippers is, ‘Look, you can’t provide a seamless shopping experience with a fully integrated and orchestrated fulfillment process on the back end with a bunch of best-of-breed solutions,’” says Cassell, who expects the ERPs’ single-model sales pitch to continue to resonate as the software providers continue to improve in areas like omni-channel visibility.
“The situation isn’t much different than in years’ past, when the ERP played a central role in the back office but wasn’t very good at functions like advanced planning,” Cassell explains. “Over time, they got better at it. Now, as their SCM capabilities and functionalities evolve, they’ll continue to displace best-of-breed.”
Coming soon: A hub of hubs
As the ERPs continue to evolve and hone their SCM offerings, most are also looking at how to create holistic, end-to-end supply chain visibility that incorporates multiple trading partners, providers, and even customers.
In fact, Banker says Oracle, SAP, and JDA are all developing “supply chain control tower” solutions that give users better end-to-end visibility across the entire supply chain. And, he says, all three are approaching the task in a very similar way.
“They’re all talking about being the ‘hub of hubs’ or ‘network of networks’ kind of solution,” Banker explains. “If you look at the various business-to-business networks like GT Nexus, E2open, NeoGrid, and Elemica, all of them serve as places where shippers can go to transact business,” noting that GT Nexus (now owned by Infor) allows shippers to connect with ocean carriers. “Based on its architecture, GT Nexus is a good platform for visibility.”
The problem, Banker says, is that no single provider enables perfect visibility across the supply chain. “Where a provider like GT Nexus can handle ocean, and where Descartes manages air well, truly becoming a ‘hub of hubs’ requires platforms that can hook into those of other providers,” he says.
And while providers have been talking about the control tower concept for several years now, Banker says that we’re now in the early stages of actually making it happen.
“Over the last year, the control tower or hub became more than just a futuristic pie in the sky,” says Banker. “We’ve seen the three largest ERP players in the market make solid commitments to it and start moving toward it. However, even as the ERPs continue to acquire, partner with, and integrate with some of the visibility networks, their work isn’t done yet. We’re really only at the beginning of that journey.”
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