Complete systems that manage inventory, purchasing, manufacturing, orders, projects, human resources, and other business-critical capabilities, enterprise resource planning (ERP) platforms continue to grow at the same time as the needs of their customers. They’ve come a long way since manufacturers started using them to manage inventory in the 1960s, and were officially named “ERP” by Gartner in the 1990s.
Fast forward to 2022 and ERP software capabilities include all of the above, plus supply chain, logistics, product lifecycle, risk and maintenance management (to name a few). some). And if a certain capability is not “integrated” into the ERP, there are always application programming interfaces (APIs) available to connect the two and create a unified platform that shares the same data, information and capacities.
With the recent wave of supply chain disruptions, transportation issues, and labor shortages creating an increased need for supply chain management (SCM) functionality, ERP vendors have responded by strengthening their offerings in this area. At the same time, top SCM vendors have taken over and refined their offerings, added new features, and even made it easier to connect to external applications.
On track to reach $78.4 billion in revenue by 2026, from $38.8 billion in 2018, the global ERP market is driven by an increased need for operational efficiency and transparency in business processes , increased use of cloud and mobile applications, and strong demand for data-driven decision making.
Increased demand from small and medium-sized businesses along with continued technological advancements from vendors are also accelerating the adoption rates of these multi-faceted software platforms.
Stay at the forefront
Now in its third year of the global pandemic, shippers of all sizes and across all industry sectors are investing in technology to help them meet current challenges and begin planning for the future.
Those with ERPs in place are enabling more functionality, many of which relate to SCM, while others are implementing platforms that help them work smarter, better, and faster in an uncertain business environment.
“In general, the focus is much more on the supply chain than in the past. It’s at the forefront of everyone’s mind right now and it will likely stay there for at least the next few years,” said Bill BrooksVice President, NA Transportation Portfolio at Capgemeini. In response to these needs, he says ERPs and top SCM vendors are investing in more digitalization, cloud computing, artificial intelligence (AI), digital twins, analytics and other advanced technologies that converge. to help shippers grow smoothly. – running end-to-end supply chains.
For now at least, Brooks sees plenty of room in the market for both larger-reach ERP vendors and more specialized edge software developers. They both continue to invest in their platforms and serve their respective markets, he adds.
“Everyone has their preferences for the type of software they want,” says Brooks, “and those preferences are unlikely to change in the near term.”
ERPs dive deeper into WMS
As businesses continue to address their current inventory, labor, and transportation issues, more attention is being paid to warehouses and distribution centers (DCs) that receive and store goods, then ship them. orders. As more customers demand super-fast shipping and eMarketer expects a further 14.8% increase in U.S. retail e-commerce sales this year, warehouse management systems (WMS) are attracting more attention and investment from both shippers and ERP vendors.
“ERPs are beginning to see WMS as an area of application worth pushing further,” said Clint Reiser, director of supply chain research at ARC Advisory Group. In some cases, ERP vendors develop and then offer WMS to their current customers or “installed” bases. In other examples, they sell the SCM application to customers who are not part of their install bases.
“This is also true with Oracle and perhaps SAP,” says Reiser, who adds that Oracle recently signed up customers for its cloud-based WMS and then those users also adopted its transportation management platform. in the cloud (TMS). “In the past, it was almost exclusively TMS first, then WMS as an add-on,” he says.
Overall, Reiser says WMS is becoming a “higher priority” for ERP vendors like Infor, Oracle, and SAP. He points to the challenges of the pandemic as well as the rise of e-commerce with at least some of that interest. “The WMS application area may be further promoted by vendors due to its greater market interest,” he explains, “due to e-commerce, COVID-related disruptions and shortages and broader supply chain crises”.
Protect their territories
Roll back the clock about 10 years and Reiser recalls that many of the top SCM vendors were in the early stages of building their platforms, with JDA working on its “supply chain process platform ” and Manhattan Associates presenting its SCALE offer. Other sellers have followed suit.
As technology evolved, the introduction of microservices, software comprised of small, independent services that use APIs to communicate with each other, enhanced cloud integration capabilities. This evolution has facilitated the exchange of information between adjacent applications such as TMS, WMS, Distributed Order Management (DOM) and others.
Ultimately, these advancements gave top SCM vendors the power they needed to create more integrated end-to-end processes. These SCM solutions are no longer just “stand-alone” applications, they can now work in tandem with other leading-edge applications and/or with larger enterprise solutions. Borrowing a term from the business strategy industry, Reiser says it has helped top vendors build “moats” around their apps.
“[Microservices] helping specialized software vendors drive others out of their turf and consolidate their place in the [market]“, says Reiser, who sees the use of microservices in SCM continuing. “Now some of them are using microservices to build their solutions with a common database that allows them to compete based on the end-to-end supply chain unification.”
There’s room for both
Looking at the ERP space, Dwight Klappich says the vendors operating there have matured their supply chain, warehousing, transportation, and other component capabilities to meet the basic needs of a high percentage of their clients.
“For businesses that don’t have the most complex or sophisticated needs, ERP supply chain solutions are worth considering,” says Klappich, senior director, supply chain research at Gartner, Inc. “In most cases, if you’re committing to an ERP platform like Oracle, SAP, or Microsoft, you should probably pre-qualify your ERP vendor.
Senders who need more robust software capabilities would be wise to expand this scope and add the best solutions to these shortlists. “There is a market for the best solutions,” says Klappich, “and room for specialized ERPs and SCM vendors.” For example, he says Gartner’s 2022 Magic Quadrant for WMS is dominated by six vendors, three of which are ERPs (SAP, Oracle, and Infor) and the other three are supply chain suites (Blue Yonder, Manhattan, and Korber).
In some cases, according to Klappich, ERPs have an advantage because they can invest in new features that can be effectively leveraged across the software suite. This creates economies of scale on the research and development (R&D) front, where ERPs that invest in SCM can then leverage these advancements across all of their platforms.
Take analytics, for example. According to Klappich, Oracle, SAP and Infor have all invested in robust analytics platforms that can be used across all of their applications. Specialty vendors, on the other hand, should either try to replicate this investment or partner/integrate with a third-party application vendor that offers these features.
Today, Klappich says that ERP and top vendors share an important goal of improving user experience. He cites Oracle’s introduction of the Redwood Design System in 2020 as an example of this. Redwood is Oracle’s new standard for application look and feel, and has been implemented company-wide to help unify the user interface across all of the company’s product offerings.
“Part of it is aesthetic, but overall Redwood considers how to improve productivity by streamlining the user experience,” Klappich explains, “and considering things like conversational voice capabilities and integrated search”. He adds that top SCM vendors are taking a similar approach in an effort to improve user experience, stay away from ERPs, and further protect their turf.
Looking ahead, Brooks sees ERPs continuing to develop their SCM offerings with the goal of “jumping” top vendors. It also sees the best of breed cementing their market positions by remaining nimble and innovative.
“At this point, I don’t see either one being one step ahead of the other,” says Brooks, “but I expect more integrations between different software platforms/vendors, as well as to the continued use of microservices and digitization to create even smoother flows than we’ve seen in the past.”