April 2007 | Commentary | Supply Chain Technology

Rumble in the IT Jungle: ERP vs. Best-of-Breed

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If the logistics software world held a heavyweight championship fight, it would feature ERP systems such as Oracle, SAP, and Infor in one corner, versus best-of-breed providers - Manhattan Associates, i2, and HighJump - in the other.

While ERP may be the reigning champ, best-of-breed is a serious challenger, and the fight would go quite a few rounds.

This virtual IT smackdown represents the actual ongoing debate over whether enterprise-wide, monolithic ERP systems or boutique-style, best-of-breed specialists offer the most effective logistics and supply chain management capabilities.

Vendors, consultants, and journalists have gone to great lengths to argue each side, and logistics professionals likely have their own strong opinions.

ERP systems often get a bad rap. Complaining about your two-years-and-counting SAP or Oracle implementation is now standard cocktail party chatter among business folk.

For logistics and SCM professionals, specifically, the gripes go further - ERP systems often lack the robust warehousing, transportation, and global trade functionality we need to optimize the supply chain, they say.

Dueling Blows

Ill feelings aside, manufacturers, retailers, and distributors continue to pour money into ERP systems, and the quest to standardize disparate and legacy systems on an enterprise-wide platform is still a top goal among corporate IT departments.

In addition, the rate at which major ERP providers gobble up competitors and complementary providers suggests no lack of funds in their coffers.

At the same time, best-of-breed solutions have generated major buzz in recent years, tend to be more innovative in embracing new delivery methods such as on-demand, and continue to gain users rapidly, while also partaking in an acquisition spree of their own.I told you this was no quick TKO.

ERP systems have evolved and matured to the point where they now offer logistics professionals a lot more than they have in the past, which is one component of their ongoing popularity.

"What was considered ERP 10 years ago is only a fraction of what constitutes ERP today. Advanced features such as business intelligence, SCM, analytics, and warehouse management are now included within ERP applications," says Rod Winger, director, product marketing for Epicor, an Irvine, Calif.-based software provider.

The addition of these new capabilities, however, is not always a sure bet. The speed at which ERP providers are acquiring companies to fill the gaps in their solutions doesn't necessarily match how quickly they'll be able to integrate these new capabilities into their offerings, says Jane Barrett, research director, industrial manufacturing for AMR Research.

"Potential users need proof that these new products can integrate with the ERP solution they have. Vendors are moving to a services-oriented architecture (SOA) strategy, which will ease integration requirements, but it will take a while," she explains.

In addition, new capabilities are not always compatible with older versions of the vendor's ERP product, which means users may face a system-wide upgrade in order to gain, say, a new vendor managed inventory module.

Fighting for Change

ERP users also cite dissatisfaction with the systems' ability to adapt to changing market conditions as a common frustration. ERP systems, many argue, are about as flexible as the sidewalk.

"ERPs are like concrete - pour it out and you can form it to any shape you want. Once it settles, getting it into a different shape is almost impossible," says Julie Smith David, associate professor of information systems at the W.P. Carey School of Business, Arizona State University ("Why ERP Systems Face Extinction," Knowledge@WP Carey, Feb. 28, 2007).

This rigidness comes from ERP systems' ubiquity - with so many business processes running on one system, a large and often unknown ripple effect occurs throughout the system any time you add capabilities or make a process change, Smith David explains.

Epicor's Winger couldn't disagree more. "Enterprise systems using SOA provide the greatest level of flexibility possible - they are built to allow for business re-orchestration," he says. "Companies are more constrained when they try to work with multiple software solutions that all need to talk to one another."

The IT industry's move toward SOA-based solutions also helps ease integration pains for best-of-breed providers. Integrating point solutions - with existing legacy systems, other point solutions, or ERP systems - is getting easier.

Another advantage for best-of-breed solutions is that they only have to be master of one small universe - warehouse management or global trade solutions, for example - and therefore have the flexibility to give users exactly what they desire within that niche.

"Best-of-breed vendors provide the software for a specific problem area and the experience, process development consulting, and change management assistance to extract the most value from that solution in the shortest time," says Charlotte Diener, vice president and general manager of global supply chain management for ON Semiconductor ("5 Burning Questions," Inbound Logistics, January 2007).

And Diener knows that firsthand. Her IT lineup at ON Semiconductor represents a common model for global supply chains: one that incorporates both ERP and best-of-breed solutions. The Phoenix, Ariz.-based manufacturer uses an Oracle ERP system coupled with i2's planning tools, Manugistics' forecast management software, and a warehouse management solution from Manhattan Associates.

"ERP systems can be viewed as general practitioners - everyone should have one. But to solve chronic problems, one needs a specialist: a best-of-breed provider," Diener explains.

AMR's Barrett is also a proponent of the hybrid model. "Every company has to have ERP for the basics; it is the backbone transactional system for the company," she notes. "But the point solutions are where companies gain the most value. Putting a transportation management system into a high-volume warehouse is where you obtain the big ROI.

"ERP vendors are trying to bulk up their solutions, but no one vendor can provide everything," she adds. "Whether a company wants to standardize manufacturing execution in 40 plants worldwide, or is only looking for a solution to handle its transportation requirements, the vendor landscape is just too fragmented."

This practice of using ERP with bolt-on capabilities from other providers, however, comes with its own litany of worries. At some point, it becomes hard to utilize the multi-layered IT pileup as a comprehensive solution.

"You end up with a system that wasn't originally designed for what you're asking it to do. You get an inefficient system that is ill-suited for the job at hand," says ASU's Smith David.

Too Close to Call

So, here we are in the 12th round with no clear winner yet.

In the end, whether companies select ERP, best-of-breed, or a combo approach often comes down to what the IT budget allows or what executives above and beyond the supply chain have decided.

The good news is that if you are destined to manage your supply chain within an ERP environment, it is probably more capable than you think it is. And if you utilize a best-of-breed solution but lack a larger enterprise system, you at least have dedicated functionality around certain aspects of your supply chain.

Is it, then, a moot point to argue over whether ERP or best-of-breed would win the heavyweight title? Perhaps, but everyone loves a good fight.

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