Supply Chain and Logistics Technology: ERP vs. Best of Breed

Deciding between best-of-breed supply chain software solutions and applications that are already built into larger, enterprise software options is an age-old issue for logistics managers. Knowing this, the world’s enterprise resource planning (ERP) solutions are incorporating more warehouse management systems (WMS), transportation management systems (TMS), and other supply chain applications into their offerings in an attempt to make the choice a little easier.

Yet, the ultimate decision usually comes down to this: If a shipper has an ERP in place that’s already chockfull of company data and ready to be leveraged across the supply chain, then it makes economical sense to stick with the larger system and hope that the supply chain functionality is both broad and complete.

If, on the other hand, the shipper needs deep functionality across different supply chain software options, then buying a best-of-breed may be the top choice. In most cases, these “bolt on” systems provide a solid foundation that shippers can use to run their supply chains.

In this year’s ERP update, we’ll look at the inroads that ERPs are making on the supply chain front, highlight new trends associated with these solutions, help you come up with the best possible selection criteria, and see how one shipper is benefitting from its own ERP investment.

ERP vs. best-of-breed
Used by a wide range of companies that want to tie all of their business functions under a single umbrella, ERPs are known for their ability to collect, organize, and store critical data for individual companies. ERPs are used across numerous departments, including financial, human resources, customer relations, manufacturing, warehouse, and distribution.

Historically, two different schools of thought have existed in the ERP vs. best-of-breed when it comes to automating supply chain management. Companies with an ERP in place often turn first to those vendors to help them gain visibility of orders and shipments. After all, if all the data and information is already stored in an ERP, why look elsewhere for the supply chain component?

The answer to that question isn’t always immediately clear—namely because add-on systems have over time proven themselves as viable options for those companies seeking specialized systems that include a high number of functionalities.

Ben Pivar, vice president and North American supply chain lead for Capgemini, singles out the retail, manufacturing, and life sciences fields as three sectors where ERPs are used regularly, both in terms of enterprise software and supply chain solutions. But when those solutions are unable to effectively streamline and increase visibility of orders and shipments, a best-of-breed can help fill in the gaps.

“We see a pretty heavy emphasis on getting a standard ERP package in those markets, and then using various bolt-on supply chain components to make up where the ERP falls short,” says Pivar.

At IDC Manufacturing Insights (IDC), Simon Ellis, practice director, says one way to overcome that shortfall is by tying best-of-breed TMS, WMS, yard management (YM), and related applications directly into a new or existing ERP. This approach requires compatible solutions—a TMS that integrates with Microsoft Dynamics AX or Oracle Applications, for example—that will play well together when installed and implemented.

“It’s really about being able to seamlessly manage a business with the help of technology,” says Ellis. “Exactly where the solutions themselves come from is less important than the fact that they have to work across the enterprise all the way out through the extended supply chain.”

The good news for shippers wanting to get more out of their ERPs is that they can take advantage of their own vendors’ efforts to step up their supply chain games. “It’s still a mix out there in terms of who is using what,” says Ellis, “but it’s clear that ERP vendors are now more competitive in the supply chain space than they were 10 years ago.”

Fill in the blanks
When helping shippers assess enterprise-wide software options, Ellis usually points out that supply chain management software and ERPs are not synonymous.

And while the large ERP vendors like Oracle and SAP have already started embedding a broader array of supply chain tools into their offerings, in many cases best-of-breed options from companies like Manhattan Associates and Amber Road are generally more sophisticated and able to handle more complex supply chain tasks.

In many situations, SaaS (software as a service) has made it easier for shippers to decide between full-blown ERP implementations and the specific functionalities that they need from their supply chain software. “We’re definitely seeing more interest in SaaS solutions that are used in the cloud,” says Ellis. “Both software providers and integrators alike are leveraging SaaS in order to sell more systems to those companies that don’t want to go through an enterprise-wide rollout or upgrade.”

In digging down a little deeper to figure out which ERPs are offering new-and-improved software packages, Kimberly Knickle, IDC’s practice director, says vendors are also developing systems that are user-friendly. This trend is largely being driven by the customers themselves in an effort to put more IT power into more hands—both in the warehouse and outside of the four walls.

“No one wants to have to go through eight different screens on a monitor to get to the information that they need,” says Knickle. “Vendors are aware of this, and are coming out with more focused applications that create a better user experience.”

Knickle says that shippers who are making the selection between dedicated software providers and all-encompassing ERPs should consider whether they want to be tied to a single vendor…or not. With SaaS and mobile computing both coming of age in the supply chain space, she points out that, “cloud-based options provide a more flexible way for shippers to beef up their supply chain software coffers without having to give up their ERPs.“

Driving the ship
According to Pivar, the ERP of the future will largly be shaped by the customers that are using it. “The software vendors are very dependent on customers pushing them to drive solutions,” he says.

Vendor response to those demands will include ERPs developing fuller, richer supply chain capabilities, and more specialized, customized options on the part of the best-of-breed providers. Either way, says Pivar, shippers will be the ultimate recipients of those technology innovations.

“For ERP vendors, it will be about balancing and prioritizing their investments in software development against all of the industries they serve and against all of the different modules they build out,” Pivar explains, noting that specialized vendors tend to focus on narrower industry niches and footprints.

That leaves the door wide open for ERPs that want to bolt-on more robust TMS, WMS, YMS, and other offerings. “In some cases, innovation comes from smaller, niche firms versus bigger industry players,” says Pivar. “We expect that trend to continue in the future.”