To increase market share, vendors are expanding and offering more services to customers. On one hand, enterprise resource planning (ERP) vendors are adding such functionality as warehouse management systems (WMS) andtransportation management systems (TMS) into their suites; on the other hand, supply chain management (SCM) vendors are including business intelligence(BI) or supplier relationship management (SRM) functionalities in their applications. Consequently, the IT market is seeing a convergence of functionality for ERP and SCM systems.
In pushing downward into the supply chain space, ERP vendors are incorporating such additional functionality as product lifecycle management(PLM), SRM, advanced planning, WMS, TMS, event and performance management, labor, slotting, yard management, and radio frequency identification (RFID) to their ERP product suites. This business model of ERP vendors pushing downward has expanded, and it is consuming valuablesupply chain execution (SCE) market share. This is in accordance with market demand, as organizations are now expected to have one system to address all needs collaboratively.
This article examines the upward push of supply chain vendors into the ERP space and the downward penetration of ERP into the supply chain market, as well as the overall impact on the market.
The Downward Push of ERP Vendors
ERP vendors are expanding their market share at the expense of SCM vendors. ERP solutions encompass a wide range of functionality that includes most of the business processes of an organization. Traditional modules like accounting, BI, customer relationship management (CRM), advanced planning and scheduling, manufacturing, warehousing, and shipping are all standard ERP offerings today.
Most ERP functionality is usually stronger within a particular function of the enterprise (such as financials), while accommodating the other functions within its infrastructure. Other business functions within the ERP infrastructure are incorporated within the same platform, and there is no need for additional interfacing between each operation. Although ERP software covers many modules, its functionality within a module may vary widely, and may not incorporate an adequate level of detail for a particular function like an engineered-to-order product.
Many organizations have elected to implement best-of-breed SCE software on top of their current ERP system to address the shortcomings of functionality within the supply chain. An example where additional functionality was needed in the warehouse is Indigo Books & Music. Indigo implemented SAPcorporate-wide, and then had to install an additional WMS (HighJump) to cater to its warehousing requirements. This is common for other companies, such as Nike, Daydots, and 99 Cents Only Stores, where ERP systems have been installed along with WMS solutions to manage the warehouse.
Companies like Catalyst, HighJump, Manhattan Associates, and RedPrairie have all interfaced to SAP successfully, and Catalyst is even approved by SAP for its interface between the WMS and the ERP. Generally speaking, new SCM functionality now incorporated into the ERP products is more detailed and stable from a platform and functionality aspect.
This new level of functionality incorporated within ERP may be the element that is currently missing to handle today’s increasing need for real-time information and accuracy. Tier one vendors, aware that their solutions were lacking in detailed supply chain functionality, have spent extensive research and development resources to improve these shortcomings. SAP, for instance, has dramatically increased functionality within its WMS offering.
Figure 1 outlines most of the traditional functionality included with most ERP and SCM systems software.
| TRADITIONAL ERP FUNCTIONALITY | TRADITIONAL SCM FUNCTIONALITY |
| Electronic data interchange | |
| Supplier relationship management | |
| Customer relationship management | Warehouse management |
| Business intelligence | Slotting optimization |
| Financials | Labor management |
| Advanced demand planning | Yard management |
| Financial and item planning | Transportation management |
| Catalog planning | Carrier management |
| Radio frequency identification |
| Automated search and retrieval systems |
| Manufacturing execution systems |
| Product lifecycle management |
| Event management |
| E-commerce | |
| Manufacturing | |
| Enterprise performance management | |
| Point of sale | |
| Human resources | |
| Procurement |
Figure 1. Traditional functionality of most ERP and SCM systems software.
The left-hand side of the chart shows traditional ERP modules, and the right-hand side displays typical SCM functionality. Within each of these modules, there are submodules, as in advanced demand planning (outlined in gray). In demand management alone, several components that were not previously included in earlier versions of ERP have now been incorporated. Likewise, within SCM software, modules such as BI, manufacturing, and SRM are now included as part of SCE software.
SOURCE:http://www.technologyevaluation.com/research/articles/squeeze-play-in-the-supply-chain-management-market-19481/
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