2022-11-27

BDMETER

Global Industry Technology Information

SUPPLY CHAIN INTEGRATION STRATEGY: WHAT’S BEST FOR OUR BUSINESS

6 min read

BUILDING A SUPPLY CHAIN INTEGRATION STRATEGY

Whether you are a manufacturer, distributor, or service provider, every organization has a supply chain that needs to be managed. For many, the overall benefit of supply chain management software (SCM) is not difficult to understand. However, considering all the business processes that comprise the supply chain and the numerous SCM tools available, the basic question is where to start. The following are the critical first steps that manufacturers should take
to create a supply chain integration plan and avoid wasting time and money along the way.

LAY A SOLID IT FOUNDATION FOR SUPPLY CHAIN INTEGRATION

A prerequisite for managing the supply chain is having a core ERP system that provides functionality for demand management, sales order processing, production planning, procurement, shop floor execution, and shipping. ERP
systems can provide the integration and software capabilities to address these internal supply chain processes.

If there are currently many islands of automation within your business or your ERP system lacks important capabilities in these areas, consider implementing a new integrated ERP solution or acquiring additional functionality to fill the gaps. For example, if the sales forecast is currently performed in a spreadsheet, most ERP vendors offer a forecasting module that is integrated with their order promising and planning systems. Also, if the existing production scheduling or distribution software is inadequate, consider more advanced supply chain capabilities offered by your ERP vendor or a third-party bolt-on application. The answers for multi-site manufacturers may include advanced planning systems
(APS), more robust warehouse management systems (WMS) or distribution requirements planning (DRP). Again, the key is to shore up internal systems and processes first.

UNDERSTANDING CUSTOMER AND SUPPLIER DISCONNECTS

Perhaps the most difficult part of developing a supply chain integration strategy is understanding the information disconnects and inefficiencies within processes that directly interact with the customers and suppliers. Typically, these touchpoints must be better understood in order to identify the hidden costs and opportunities and to prioritize supply chain initiatives. At times, this requires working with customers and suppliers to address their needs and to understand their technical capabilities.
The software solutions in this area may or may not be available within your particular ERP system or from your ERP vendor. However, there are many third-party providers that focus exclusively on eCommerce or other SCM solutions. This list includes electronic data interchange (EDI), with dozens of transaction sets available; transportation management packages; third-party logistics support; customer or supplier portals; database services for standardization and sharing of item information and online tools for partner collaboration during product design.

Clearly, there are many potential SCM software tools. Without a proactive and more holistic approach, many companies find themselves simply reacting to customer and supplier supply chain demands. This can result in sub-optimization within the business and necessitate the development of many complex system interfaces prior to supply chain integration.

DEPLOYING SUPPLY CHAIN MANAGEMENT SOFTWARE HINGES ON BREADTH, DEPTH, INTEGRATION

Figuring out which mix of components will best address a supply chain challenge is only the first step toward deploying supply chain management software. Zeroing in on the optimal SCM software deployment method is the next major phase — and far more straightforward, thanks to the maturity of SCM deployment options.

Experts say there are really two major choices a manufacturer needs to consider when deploying SCM software. Traditionally, the first issue is deciding between a fully integrated SCM suite that packs all, if not most, of the primary
supply chain planning and execution components and a strategy of stitching together standalone, specialized tools. The next decision involves choosing between the traditional, on-premises deployment option for SCM or moving
to a Software as a Service (SaaS) or cloud-based approach — a delivery method gaining traction in recent years, particularly with niche SCM providers. In many ways, the two deployment decisions really go hand and hand. Most integrated SCM platforms, because of their broad scope and complexity, are generally still offered — and in many cases, preferred — as traditional on-premises software that runs in a manufacturer’s own data center supported by its internal IT organization. Niche applications, most of which deliver highly specialized capabilities in one or two areas within the broad set of SCM functions, have more aggressively embraced SaaS as a way to deliver their highly targeted capabilities to a wider population of users.

The bottom line is there is no universally right decision for SCM software deployment. Rather, industry observers say it depends on a multitude of factors, from the organization’s internal IT capabilities to the extent of its extended supply chain and its need for SCM to integrate with other core enterprise systems.

“It’s not an out-of-hand decision that you buy SaaS software or that you buy software that needs to run in your own data center,” explains William Newman, managing principal at Newport Consulting Group, based in Clarkston, Mich.
“You have a lot of choices right now and it needs to make good business and economic sense depending on the size of your organization.”

A HYBRID APPROACH TO SCM DEPLOYMENT

In fact, many companies are opting for a hybrid approach to deploying SCM software, running on-premises SCM modules in their own data centers for internally facing processes, for example; here they might need to tap into financial or product development data in ERP or product lifecycle management systems. At the same time, companies are syncing those efforts up with SaaS modules to gain supplier visibility. “Clearly, this concept of visibility into the extended supply chain requires an on-demand SaaS solution, given the scaling problem,” said Joshua Greenbaum, principal at Enterprise Applications Consulting, based in Berkeley, Calif.

“Most organizations are taking some sort of hybrid approach where some SCM applications are managed in the cloud while hard-core manufacturing-related tasks are handled behind the firewall using on-premise SCM software.”
SaaS delivery is becoming far more prevalent among some SCM modules, primarily because many SCM practices involve multiple, geographically dispersed players. Creating the network and security infrastructure to connect far-flung partners, especially as supply chains become more global, is extremely difficult in an on-premises configuration, according to these experts.

With new SaaS SCM offerings, most suppliers can tap into the system as long as they have Web access and the SCM provider handles the security protocols, which relieves the manufacturer of having to invest in costly hardware, net-
working and storage to run the extended SCM application.

“You need some sort of mechanism to figure out how to connect multiple parties — in the past, that was very difficult for a company to implement on its own,” said C. Dwight Klappich, research vice president at Gartner Inc., a Stamford, Conn.-based provider of technical analysis. “When it’s about trying to orchestrate multi-enterprise business processes in the supply chain, that’s when the cloud model is emerging as a better tool.”

On the question of specialized (often called “best of breed”) versus integrated SCM suites, there are no hard and fast guidelines. A good rule of thumb is to go with the niche product when the company has a highly specialized process (for example, a warehouse provider that needs exceptional capabilities in that area). Larger companies that rely heavily on existing enterprise platforms like ERP will have fewer integration challenges and faster SCM deployment by
opting for an integrated SCM suite. Again, the decision boils down to weighing the benefits of gaining deep functionality in a specific area against the realities of what’s required to integrate myriad applications from different vendors. “You have to step back and figure out the heavy lifting based on your strategic priorities,” noted Ann Grackin, CEO of Newton, Mass.-based ChainLink Research. “It’s all about what’s important to make the business a success.”

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