2024 ERP Update: Vendors maintain solid footing in SCM space

It has been 10 years since the 2014 Oracle OTM SIG (Oracle Transportation Management/Special Interest Group) conference convened in Philadelphia. At the time, there was a lot of buzz around cloud computing along with a building groundswell of enterprise resource planning (ERP) developers adding supply chain management (SCM) applications to their existing portfolios.

Some of the ERPs were building their own application, while others sprang into acquisition mode, buying up smaller companies that had already carved out their own footprints in their respective corners of the SCM market. For example, Oracle introduced OTM after acquiring G-log in 2005; it then introduced a cloud-based version of the application in 2012.

Back in 2014, many ERP providers that relied heavily on on-premises licensing, maintenance and other fees were worried about how cloud subscription models would affect their bottom lines. This fear has since come to pass as most of the larger ERPs—as well as many of the best-of-breed SCM providers—have moved over to cloud-based software delivery models. Concurrently, ERP providers like Oracle, SAP, Microsoft and Infor were firmly solidifying their place in the SCM market.

What’s also changed is the perception of what it means to implement SCM software developed by an ERP versus a best-of-breed software provider.

Where it was once thought that a warehouse management system (WMS), transportation management system (TMS) or inventory management system developed as part of a developer’s broader software package was simply “good enough” for certain shippers, these applications have since become more feature-rich and able to meet the needs of a larger swath of shippers.

Take WMS, for example. Years ago I interviewed Dwight Klappich, research vice president at Gartner, about the key differences between a system sold by an ERP versus a best-of-breed vendor. He used the “good, better, best” comparison, noting that the prevailing wisdom at the time was that if all you needed were the basics—and if getting an WMS from an existing vendor was easier—then go for it. However, if you need more functionality, features, and capabilities, then a best-of-breed would be your best bet.

Fast-forward to 2024 and Klappich says that we’ve reached a point where “good enough is good enough” for most shippers. He also points out that a number of best-of-breed software providers have become large entities in and of themselves. For example, companies like Manhattan have developed broader, deeper product portfolios that meet a wider range of needs.

“For the SAP user that has a basic warehouse setup, SAP’s supply chain management applications will potentially be a good enough solution for many of those companies,” says Klappich, who continues to recognize real benefits of taking the best-of-breed route—particularly in terms of implementation affordability and tools.

“For the most part, we’re still implementing warehouse systems the way we’ve done it for the last 40 years,” says Klappich. “Some of the best-of-breed vendors help companies lower their implementation costs and use wizards and tools to streamline that process.”

No longer an operational “nicety”

To tell large ERP providers that they’ve “come a long way” within a fairly short time in the SCM space would be an understatement. Credit the disruptions and constraints that emerged during the pandemic with pumping up the momentum, as both ERPs and best-of-breeds tightened up their games on the supply chain management front.

Any company that was still using paper, spreadsheets and e-mail to run its fulfillment and logistics operations, for example, suddenly needed more real-time visibility, data-driven decision making and agility.

Amid the massive pandemic-driven disruptions, investing in SCM software basically became a matter of survival. “A lot of ERPs have moved into or are getting into supply chain, and I think a lot of that movement was highlighted during the pandemic,” says Kira Bilecky, senior supply chain consultant at St. Onge Company. “The connections between financials, risk, and resilience during world events are being viewed in a different light now.”

Bilecky says companies are particularly interested in improving both visibility and connectivity, with the goal of “improving the information flow” between their traditional ERPs and standalone SCM applications.

This requires a combination of integration prowess and newer innovations like application programming interfaces (APIs) that can tie the disparate systems together into a unified solution. In most cases, the need to reduce risk and improve resilience tends to drive these investments.

“In global networks and supply chains, one little hiccup can snowball into a broken link in a very complex chain,” explains Bilecky. “This is one of the core reasons that more companies are looking for ways to create higher levels of ‘connectivity and visibility’ across their ERPs and SCM systems.”

Keeping innovation at the edge

Most software vendors have shifted to a “cloud first” mindset over the last few years, which means that most of their systems’ new functionalities and features are only available in the cloud. This trend is obvious in the SCM space, where in order to get your software’s latest bells and whistles, you need to be in the cloud.

“This is one way software vendors can ensure that all of their users/clients [adopt] the architecture faster, and that they’re able to start enjoying the benefits of those newer innovations faster,” says Shashank Mane, go-to market leader, manufacturing at Capgemini Americas. “The cloud-first approach also minimizes the burden on companies that would otherwise have to maintain their on-premises software versions, and the vendors that support those platforms.”

Mane doesn’t see the cloud-first trajectory changing anytime soon, and says that the ubiquitous nature of the cloud has also pushed some vendors to come up with more creative innovations to differentiate themselves in the now-crowded market. “Vendors are focused on maintaining their digital cores or standard capabilities,” he adds, “while also keeping their innovations at the ‘edge.’”

Addressing ESG initiatives

With all eyes on sustainability right now, Bilecky sees ESG initiatives as one more reason that companies are investing in more SCM software—standalone and ERP-made.

Supply chains, and particularly their transportation components, generate a high degree of greenhouse gas (GHG) emissions. One recent PwC survey found that nearly all (86%) of executives link their supply chain strategies directly to ESG goals. As those supply chain executives increase their emphasis on ESG initiatives, technology like SCM has become table stakes.

“Achieving reductions in emissions upstream and downstream in the supply chain requires a thoughtful strategy and appropriate technology to gain better visibility into data and support better collaboration with partners,” PwC notes in its report.

As the regulatory environment evolves and new requirements are introduced, Bilecky expects sustainability to play an increasingly important role in the selection, implementation, and use of SCM software. “Many emissions and sustainability metrics are centered on the supply chain and its reach,” she points out. “Because of this, having high levels of connectivity and visibility into the heart of your systems is extremely important.”