All-encompassing systems that manage inventory, procurement, manufacturing, orders, projects, human resources and other core capabilities for companies, enterprise resource planning (ERP) platforms continue to expand right along with their customers’ needs. They’ve come a long way since manufacturers started using them to manage inventory in the 1960s, and were officially named “ERPs” by Gartner in the 1990s.
Fast-forward to 2022 and ERP software capabilities include all of the above plus supply chain, logistics, product lifecycle, risk and maintenance management (to name a few). And if a certain capability doesn’t come “built into” the ERP, there are always application programming interfaces (APIs) available to connect the two and create a unified platform that shares the same data, insights and capabilities.
With the recent spate of supply chain disruptions, transportation snarls and labor shortages creating a bigger need for supply chain management (SCM) functionalities, ERP vendors have responded by bolstering their offerings in this realm. Concurrently, the best-of-breed SCM vendors have stepped up to the plate and refined their offerings, added new functionalities and even made them easier to connect to outside applications.
On track to hit $78.4 billion in revenues by 2026—up from $38.8 billion in 2018—the global ERP market is being driven by a greater need for operational efficiency and transparency in business processes, increased use of Cloud and mobile applications, and high demand for data-driven decision-making.
Increased demand from small- to mid-sized businesses plus the ongoing technological advancements on the part of vendors are also accelerating the adoption rates of these multi-faceted software platforms.
Now squarely in their third year of a global pandemic, shippers of all sizes and across all industry sectors are investing in technology to help them address current challenges and begin to plan for the future.
Those with ERPs in place are enabling more functionalities—many of them related to SCM—while others are implementing platforms that help them work smarter, better, and faster in an uncertain business environment.
“In general, there’s definitely more of a focus on supply chain than there has been in the past. It’s at the forefront of everybody’s mind right now and will likely stay there for at least the next few years,” says Bill Brooks, VP, NA transportation portfolio at Capgemeini. In response to these needs, he says both the ERPs and the best-of-breed SCM vendors are investing in more digitalization, Cloud computing, Artificial Intelligence (AI), digital twins, analytics and other advanced technologies that converge to help shippers develop smooth-running, end-to-end supply chains.
For now at least, Brooks sees plenty of room in the marketplace both for broader-reaching ERP vendors and more specialized best-of-breed software developers. They both continue to invest in their platforms and serve their respective markets, he adds.
“Everyone has their preferences as to what type of software they want,” says Brooks, “and those preferences probably aren’t changing in the short-term.”
As companies continue to work out their current inventory, labor, and transportation issues, more attention is being paid to the warehouses and distribution centers (DCs) that receive and stock goods and then ship orders. With more customers demanding ultra-fast shipping and eMarketer expecting another 14.8% increase in U.S. retail e-commerce sales this year, warehouse management systems (WMS) have been getting more attention and investment, both on the part of shippers and ERP vendors.
“The ERPs are starting to see WMS as an application area that’s worth pushing further,” says Clint Reiser, director of supply chain research at ARC Advisory Group. In some cases, ERP vendors are developing and then offering WMS to their current customers or “install” bases. In other examples, they’re selling the SCM application to customers that are outside of their install bases.
“This holds true with Oracle and possibly SAP as well,” says Reiser, who adds that Oracle has recently signed on customers for its Cloud-based WMS and then had those users also adopt its Cloud transportation management (TMS) platform. “In the past, it’s almost exclusively been TMS first and then WMS as an add-on,” he points out.
Overall, Reiser says WMS is becoming a “higher priority” for ERP vendors like Infor, Oracle and SAP. He points to the pandemic-related challenges plus the rise in e-commerce with driving at least some of this interest. “The WMS application area may be getting more emphasis from the vendors because of its greater interest out in the market,” he explains, “due to e-commerce, the COVID-related disruptions and shortages, and the broader supply chain crises.”
Roll the clock back about 10 years and Reiser remembers that many of the best-of-breed SCM vendors were in the early stages of building out their platforms, with JDA working on its “ldquo;Supply Chain Process Platform” and Manhattan Associates introducing its SCALE offering. Other vendors followed suit.
As technology advanced, the introduction of microservices—software made up of small, independent services that use APIs to communicate with one another—further enabled integration capabilities in the Cloud. This evolution facilitated the exchange of information between adjacent applications like TMS, WMS, distributed order management (DOM) and others.
Ultimately, these advancements gave best-of-breed SCM vendors the power they needed to be able to create more integrated, end-to-end processes. No longer just “standalone” applications, these SCM solutions could now work in tandem with other best-of-breed applications and/or with larger enterprise solutions. Borrowing a term from the business strategy sector, Reiser says this helped best-of-breed vendors construct “moats” around their applications.
“[Microservices] help specialty software vendors keep others off of their turf and solidify their place in the [market],” says Reiser, who sees the use of microservices in SCM continuing. “Now, some of them are using microservices to build up their solutions with a common database that allows them to compete on the basis of end-to-end supply chain unification.”
Looking around at the ERP space, Dwight Klappich says vendors operating in it have matured their supply chain capabilities, warehousing, transportation and other components in order to address the basic needs of a high percentage of their customers.
“For companies that don’t have the most complex or sophisticated needs, ERP supply chain solutions are well worth consideration,” says Klappich, senior director, supply chain research at Gartner, Inc. “In most cases, if you’re committed to an ERP platform like Oracle, SAP or Microsoft, you probably should shortlist your ERP vendor.
Shippers that need more robust software capabilities would be wise to broaden that scope and add best-of-breed solutions to those shortlists. “There’s a market out there for best-of-breed solutions,” says Klappich, “and room for both the ERPs and the specialty SCM vendors.” For example, he says Gartner’s 2022 Magic Quadrant for WMS is dominated by six vendors, three of which are ERPs (SAP, Oracle, and Infor) and the other three are supply chain suites (Blue Yonder, Manhattan, and Korber).
In some cases, Klappich says the ERPs have an advantage because they can invest in new functionalities that can be effectively leveraged across the entire software suite. This creates economies of scale on the research and development (R&D) front, where ERPs that invest in SCM can then leverage those advancements across their entire platforms.
Take analytics, for example. According to Klappich, Oracle, SAP and Infor have all invested in robust analytics platforms that can be used across all of their applications. Specialty vendors, on the other hand, either have to try to replicate that investment or partner/integrate with a third party application provider that does offer those capabilities.
Right now, Klappich says the ERP and best-of-breed vendors share an important goal of improving the user experience. He points to Oracle’s introduction of the Redwood Design System in 2020 as one example of this. Redwood is the new Oracle standard for application look and feel, and was implemented company-wide to help unify the user interface of all of the company’s product offerings.
“Some of it is aesthetics, but as a whole Redwood takes into account how to improve productivity by streamlining the user experience,” says Klappich, “and by factoring in things like conversational voice capabilities and embedded search.” He adds that best-of-breed SCM vendors are taking a similar approach with the goal of improving the user experience, staying out in front of the ERPs, and further protecting their turf.
Looking ahead, Brooks sees the ERPs continuing to build out their SCM offerings in an attempt to “jump over” the best-of-breed vendors. He also sees the best-of-breeds solidifying their positions in the market by staying nimble and innovative.
“At this point, I don’t see either one of those getting a leg up on the other,” says Brooks, “but I do expect more integrations across different software platforms/vendors plus the continued use of microservices and digitalization to create even more seamless flow that we’ve seen in the past.”