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Supply Chain Technology: Putting the spotlight on ERP

According to our latest ERP usage study, adoption rates and interest are both high. But just how far have logistics professionals gone in putting their ERP to work to solve today’s logistics and supply chain challenges?
By Bridget McCrea, Contributing Editor
June 01, 2011

Cloudy skies ahead?
When asked about using a cloud/on-demand platform for ERP, 5 percent of respondents said they’ve adopted SaaS software, while another 25 percent are evaluating the possibilities. The remaining companies were unsure of how an on-demand strategy could fit into their ERP platform.

Reasons for going with a SaaS solution included the desire to run a leaner operation; greater utilization of resources; scalability; greater communication with customers and vendors; and the cost structure. Shippers cited the potential drawbacks to a cloud-based ERP as security concerns, system reliability, and system performance.

The analysts we spoke with about the survey weren’t surprised at the low interest in, and adoption levels for, on-demand ERP solutions. “TMS is the only application where we’re seeing high SaaS adoption,” says Steve Banker, director of supply chain solutions for ARC Advisory Group. “For the rest of the [applications], companies aren’t really interested in the cloud computing environment.”

Dwight Klappich, research vice president for Gartner, Inc., in Stamford, Conn., says that adoption of SaaS solutions is growing across the supply chain space, albeit in a “targeted” manner that doesn’t necessarily include the multifaceted ERP space. “For example, a company may use for sales force automation and another vendor for an on-demand TMS, but still use Oracle for ERP,” says Klappich. “We expect that kind of targeted SaaS use to continue, particularly among smaller shippers.”

Assessing the numbers
When asked to compare their own research and numbers with the ERP adoption rates uncovered in the April survey, all analysts said the results were in line with what they’re seeing in the market overall.
Klappich says the survey numbers are particularly relevant for the manufacturing and wholesale distribution sectors, where just over half of companies have adopted an ERP.

Ben Pivar, vice president and North American Supply Chain Lead for Capgemini, says that if firms with $1 billion+ in revenues were surveyed, the deployment numbers for ERP packages would be even higher. Holding some of the smaller shippers back, he says, are the implementation and maintenance costs associated with ERPs.

To address those issues, Pivar says some of the larger ERP vendors are releasing “slimmed down” or less sophisticated versions of their solutions, with an eye on hitting those shippers that don’t need the full package. “The economics of installing a TMS package on a client server, for example, doesn’t really work until you have nearly $100 million in freight spend,” says Pivar. “That’s why on-demand is so popular in that space.”

Banker says that he was surprised that WMS stood as the top application currently running on respondents’ ERP platforms. He also says that the high percentage of shippers that are currently evaluating new modules or ERP solutions for purchase within two years are probably being overly optimistic.

“When you ask people what applications they’re planning to install or upgrade within the next 24 months, the numbers are always much bigger than what really happens,” says Banker. “They may want to do it, but getting through the budgetary approval and [integration] process is always much tougher than people think.”

More to come?
Klappich added that other barriers for logistics professionals include the total cost of ownership, and the complexities that come along with rolling out enterprise-wide IT solutions.

He pointed to SAP, Red Prairie, and Oracle as three large providers whose solutions include “very sophisticated, IT-centric tools” that help users get through the latter challenge.

“At the same time, the applications themselves have become increasingly complex, which often results in a third challenge: dealing with the complexities of the ERP systems themselves,” says Klappich, who like the other analysts interviewed for this article, feels that ERP’s future is bright, particularly in the “hybrid” category.

“The days of cobbling together full best-of-breed ERP solutions are gone, and in most cases the new implementations are some form of hybrid, with shippers putting as much as they can on their ERPs and supplementing as needed,” says Klappich. “That’s what we’ll continue to see going forward.”

About the Author

Bridget McCrea
Contributing Editor

Bridget McCrea is a Contributing Editor for Logistics Management based in Clearwater, Fla. She has covered the transportation and supply chain space since 1996, and has covered all aspects of the industry for Logistics Management and Supply Chain Management Review. She can be reached at .(JavaScript must be enabled to view this email address).

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