November 1999 | Commentary | Supply Chain Technology

Positioning the Supply Chain in a Volatile Market

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ERP vendors are being pressured by their customers to provide not just access to the supply chain, but as much integration as possible. In just how many directions can an ERP vendor go?

The supply chain and its attendant technology is a warp-speed moving target that responds to enterprise strategy changes, the intelligent moves and vagaries of the Big Six accounting firms, the latest acronyms of the supply chain consulting community, and the shifting forces of the marketplace.

The need for faster response time alone has ushered in a host of new concepts, tools, and perceptions along the entire supply chain; in fact, you've read about some of these new tools in this column.

Why is faster response time so critical? Within the context of the supply chain, speed is a deliverable of the highest order because it leads to competitive advantage for the supplier, manufacturer, and distributor. Speed is critical to inventory turnover, to meeting customer expectations, and to reduced cost within supply chain cycles.

One core software application under stress from the dramatic growth and change within the supply chain is Enterprise Resource Planning (ERP). In a market that has been rocked by the indulgence in Y2K, ERP has weathered a tough year. But it is not merely Y2K that is causing this disturbance among ERP leaders such as SAP, Baan, and J.D. Edwards. A combination of demands and business changes is rocking the ERP boat.

ERP vendors are being pressured by their customers to provide not just access to the supply chain, but as much integration as possible. Couple this demand with ERP mergers, shakedowns, and new strategy requirements, and you'll see a high level of ERP crisis thinking.

Part of the problem is that many ERP vendors have attempted to just drill down a level and capture the necessary elements of Manufacturing Execution Systems (MES) software applications. The execution level, in turn, leads to the control or plant level. In just how many directions can a vendor go?

In addition, ERP vendors are seized by the need to either rewrite or write new core code in an object-oriented fashion. This is both costly and time consuming. Do the mergers, therefore, surprise us? No.

And we should not be surprised by a further complication—the looming presence of IBM and Microsoft as potential ERP suppliers, adding yet more players to the various aspects of the supply chain. The move toward the business applications market is in its infancy, but the infants could turn out to be 800-pound gorillas in both ERP and supply chain management.

Microsoft's entry might be through its successful Windows NT, or its Distributed interNetworking Architecture (DNA). IBM may enter the market through its Corepoint subsidiary, which offers a customer service component.

The two business software giants have different reasons for entering or not entering the ERP market. Microsoft may be reluctant because it would be competing directly with its own customer. IBM has less to lose in its customer base, and everything to gain in advancing its AS/400 platform. Both companies just have to realize that the multi-billion-dollar ERP market is where a lot of the money is. They both have a great deal of technology to throw at ERP and supply chain management.

Beyond the perspectives of IBM and Microsoft are the enormous and everexpanding Internet, Intranet, and gold-rush-like aspects of e-commerce. These forces are expanding outward, and replicating and cloning inward. They offer both a hope and a threat to traditional ERP and to any kind of neat formulas conceived by supply chain pundits.

The Internet is not definable. It is to a great extent open, unstructured, expanding, and more attuned to chaos theory than to a SCOR model. The Internet offers the opportunity to significantly reduce response time. It can do this in ways that exceed the performance of any other technology. Transactions between customers and suppliers can be more direct through the Internet. These transactions can operate between suppliers, between customers, and between partners. The negotiation table for transactions is now through the Internet—open, dynamic, and ever more powerful.

Enterprises clearly have to operate in the world of business planning and scheduling, in the broad array of supply chain and Internet functions. They need help now in integrating these applications. The linkages between applications must be smooth, must be reliable, must be maintainable, and must be capable of intelligent migration. To deliver this set of values, vendors are reaching out to each other through partnerships that allow for the combined power of Oracle and Manugistics, or SAP and i2 Technologies. No vendor can do it all.

The delivery of faster response time and all its attendant values may lead to the creation of the Value Net. For a response to be meaningful—a supplier's response to a customer, for example—it has to provide added value. Getting back quickly to customers is all to the good, but delivery of the value is critical.

We will see supply chain technology gathering in a whole new set of forces. These forces will take the form of integrated applications from the manufacturing control level, from MES, from ERP, and from a newly conceived supply chain as it acts out its expansion through Internets and Intranets.

The next decade may well be the most exciting time in business ever. What do you think? Let me know at rmalone@inboundlogistics.com.

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