July 2001 | Commentary | Supply Chain Technology

SCM Software: An Intelligent Response to a Complex Need

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Our current set of ERP applications grew out of an array of MRP and MRP II applications and their extensions. ERP took its cast from MRP and therefore was created first and foremost for transaction processing, data collection, and reporting of that data. Its motivation and structure came out of the financial world and naturally its daily business role was and still is the execution and processing of this data.

The original MRP model and its grown-up ERP version lacked the ability to make decisions regarding high-volume, real-time transactions. MRP was overwhelmed by scale and the lack of well-designed, powerful analysis tools and techniques that enable data reporting systems to make sense out of a volume of data.

ERP applications needed to include advance planning and scheduling. A few software service providers recognized this demand, but integrating ERP and what became APS (Advanced Planning and Scheduling) was far more complex than anyone imagined.

In retrospect, the core problem of early ERP applications is that they did not offer the user sufficient flexibility. When an enterprise underwent reengineering, it might concentrate on planning and business strategy. This good start may prevent bad after-effects. But, unfortunately, most companies did not make this nice clean start and were therefore forced to compromise on functions they needed.

The most specific inadequacies revolved around the problem of planning for and scheduling advance manufacturing capacity and production lead times. The worst offenders in these cases were the big ERP players. It is no wonder that they have partnered, rewritten code, backed off from claims, seen a falloff in their ERP business, and now focus on web-enabled ERP with integration to supply chain management.

MRP/ERP applications have suffered from one-dimensional, sequential planning. This kind of planning works fine in a world of limited demand and low constraints. Problems arise, however, when multiple constraints act in a simultaneous time frame.

The traditional ERP system is not geared to handle such a situation. A manager can initiate a plan that starts with a demand forecast that is used to create product requirements for a plant or factory. This plan can then be checked against available capacity and material.

In a traditional sequential system the plan will not be optimal. New data must be found and the constraints reexamined. The process has to continually evolve because businesses are constantly changing. A truly optimal plan, therefore, cannot be contrived with simple sequential procedures.

Supply chain planning avoids the trap of sequential planning. Vendors that offer Supply Chain Management (SCM) and APS focus on planning rather than transactions. They have the advantage of hindsight, having seen the limitations of MRP and ERP. At a reduced cost, SCM can plan for multiple constraints, within the time needs of contemporary technology and customer requirements.

When it was first introduced, SCM was seen as a new way of gaining competitive advantage. Very quickly, the perception of SCM changed to a means to extend ERP—a necessary extension, no less. This insight came about as more and more users recognized that traditional ERP did not have the advanced planning tools required for the competitive business market.

Demanding SCM Users

SCM software customers are now web-enabled, computerized, and software savvy. They demand just-in-time, just-in-place, and at-the-right-cost treatment at a level never known before. And, they demand the technology to deliver real-time information and transactional processing to any customer, any time, anywhere.

Today's technology exists, quite simply, to satisfy the customer. In addition to its integration with ERP and other applications, SCM software is positioned to take advantage of the enormous gains in information and communication technology such as LAN/WAN.

Volume of information and distance between parties is no longer an issue in doing business, thanks to the reach of B2B, increased transmission capacity, and the ever- advancing and increasing bandwidth of carriers. Today, supply chain partners are seconds away from each other. SCM was born to serve these advancements.

ERP, SCM and CRM (Customer Relationship Management) vendors have recently acknowledged and accepted the synergy among their products. Along with alliances, consolidation has created a new market structure, which benefits customers who can now obtain a full application offering from some vendors.

In addition to integrated software, customers may also be offered a different form of integration through embedded solutions and/or easily handled standard interface certification programs.

Sticking to the Plan

The greatest challenges for any enterprise engaging in supply chain activity are having and sticking to a flexible and pragmatic plan, and seeing the work of application software integration through to a working style. This integration involves a balancing act among MRP, ERP, SCM, APS, and CRM application sets, and in some cases older systems such as EDI, JIT, and legacy systems that handle warehousing, data collection, and a host of logistic functions. The best-of-breed software in any specific function may not be a part of a larger application offering.

No vendor alone can claim a total supply chain management package. None can have the granular detail available from SCM niche players. It takes too much industry knowledge, focused technology and an understanding of specific customer needs to be all things to all customers. Clearly, an upgraded ERP is now the transactional backbone of the supply chain.

The need for simultaneous tracking and control of resources, logistics, manufacturing, distribution, and customer demand has brought about supply chain management software. It is an intelligent response to a complex need. No core function—supply management, warehousing management, manufacturing management, distribution management, or customer management—can operate properly without being a part of supply chain management.

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