Study makes case that ERP comes up short for meeting supply chain objectives

A study recently released by GT Nexus, a provider of cloud-based network services for global trade and supply chain management, in conjunction with Supply Chain Insights makes the case that ERP systems may be coming up short, when it comes to providing supply chain visibility for shippers.

Data for this study was based on feedback from nearly 80 respondents made up of manufacturers, retailers, 3PLs, wholesalers, and distributors, with nearly 60 percent of those respondents serving as heads of supply chain operations for global manufacturers.

The study found that companies dependent on ERP for supply chain visibility are often faced with a 50 percent gap in inter-enterprise visibility capabilities, among other findings, including:

• 97 percent of companies agreeing on the need for supply chain agility, while only 37 percent are meeting their stated goals;
• the average importance rating for supply chain visibility across external partners is 82 percent, with confidence in ERP to deliver visibility is low as 60 percent of respondents have confidence in ERP to deliver visibility within the enterprise and 34 percent have confidence in ERP to provide visibility with suppliers and customers;
• 95 percent of companies agree that supply chain agility is needed, but just 38 percent are meeting stated goals; and
• supply chain visibility is low and performance levels in the extended supply chain are half of what they are inside the enterprise, with a 54 percent gap between visibility performance within the enterprise versus visibility with suppliers and customers, among others

In an interview with LM, GT Nexus VP of Corporate Marketing Greg Kefer said the study’s findings were in line with what his company expected.

“There were no real surprises,” he said. “There are many companies using ERP as their supply chain system of record, and when you talk about a global supply chain that involves thousands of networks scattered around the world within individual companies, the challenges of connecting those networks in an efficient way to do things like track inventory flows and other supply chain operations just does not work. Those ERP systems were never designed to work across companies, instead they were designed to work for a single company. That was our hypothesis coming in to the study and we saw some of the gaps in terms of what is actually happening so that validated it.”

In addressing the current state of supply chain visibility in terms of importance versus performance, the study found a 50 percent gap for inter-enterprise order management to customers (79 percent citing importance and 29 percent citing performance or what they are getting out of ERP systems in terms of meeting specific needs), a 45 percent gap for first tier material suppliers (83 percent citing importance and 38 percent citing performance), and a 44 percent gap for transportation and logistics network (96 percent citing importance and 53 percent citing performance).

Faring somewhat better were second and third tier suppliers with a 32 percent gap between importance versus performance (50 percent to 18 percent) and manufacturing within company at 22 percent (85 percent to 63 percent).

“When you have a hypothesis that most companies have ERP systems that is the prevailing system of record for operations in corporate America, and support progress within the company but when you go outside the four walls, things break down,” said Kefer.

Related: Most Companies Fail with ERP for Supply Chain Orchestration