Supply Chain Survival Guide, Part III By Amy Zuckerman ...


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Supply Chain Survival Guide, Part III By Amy Zuckerman ...

  1. 1. Supply Chain Survival Guide, Part III By Amy Zuckerman September 30, 2008 In many ways, i2 Technologies is the poster child of stand-alone dedicated supply chain management technology. Founded in 1988 with the vision of “helping businesses make more intelligent decisions by using information resources,” the company quickly grew to a market leader in the supply chain space with marquee-name clients like Texas Instruments, 3M and Ford. The advent of the Web began to change the landscape for stand-alone ‘best in breed’ technology. By the late 1990s, industry observers were questioning whether companies like i2 would survive but, after a momentary blip, the company continued to prosper and expand. In recent years questions again surfaced about the viability of stand-alone supply chain software, with the i2’s future subject of speculation. Indeed, there was talk that the company might be sold with its software licensing business declining in the face of mounting competition from the larger enterprise resource planning (ERP). Of its independent viability questions were answered late this summer when the company— after months of rumors—announced it would be bought by JDA Software Group. Just weeks before the deal, CEO Pallab Chatterjee was marketing the company’s “Supply Chain 2.0”, a broader networked model that would enable (in principle) more real-time enterprise-wide data and decision-making. The i2 saga reflects a technology sector very much in flux. “In an industry that continues to consolidate, scale matters,” conceded Chatterjee in the press release announcing the sale. And announcing the purchase, Hamish Brewer, JDA CEO acknowledged the threat the ERP vendors posed to stand-alone players. Once dominated by the best-of-breed vendors, the supply chain management arena is transitioning to a world of ecosystems, networks and platforms to help customers manage the complexities of global supply chains with integration into the core business platform. The arc of technology is being given added urgency by the difficult economic climate. With customers grappling with a rising fuel prices and a faltering U.S. economy, industry analysts point out there is demand for approaches that promise easier integration of supply chains into the core operation. ERP giants such as Oracle and SAP correspondingly argue that the “ecosystems” they are creating with add-ons like transportation management, planning or purchasing tools are best suited to provide the integration customers need. Not everyone, however, is convinced. Art Mesher, CEO of Descartes Systems in Waterloo, Ontario, a provider of global logistics software based on the Descartes Global Logistics
  2. 2. Network, considers the ERP vendors “vanilla” and best for companies whose competitive strategies are not based on supply chain performance. He notes, for example, that Descartes chose to avoid “competing head on head” with the Oracles and SAPs by creating a network to solely serve transportation service providers—a niche where he says the ERP vendors do not have a strong presence. The same is true for niche player IES Ltd. in Midland Park, N.J., which is focused heavily on international trade shipping and compliance. As Forrester Research analyst Patrick Connaughton points out: “I wouldn’t say the best of breed are going away, but they are evolving and making themselves more relevant in this SAP- dominated ecosystem.” Those vendors that will be standing in five years, say the analysts, will specialize in providing results—and quickly. For a manager facing deployment of new supply chain solutions, it’s imperative to know as much as possible about the myriad of options now available. This article reports the latest trends from the supply chain management front and offers some advice on picking and choosing the most appropriate approach for a given business. Many companies are offering what’s called on-demand or software-as-a-service (SaaS) where software is hosted by a third party. But i2’s Chatterjee was convinced, even prior to the JDA deal, that even the SaaS approach doesn’t go far enough for many customers coping with a volatile global economy. Instead, the answer is to expand the scale of technology and business processes—in essence, providing platforms capable of tracking (and even managing) all of a customer’s supply chain, including sales and marketing. For Lenovo, the China-based computer manufacturer that bought IBM’s PC business, i2 has been supervising marketing and promotions teams based in China. They’ve also worked closely with Panasonic’s TV division analyzing point-of-sales data daily. Chatterjee says i2 personnel have helped readjust shipping so products are not arriving at stores where there is no demand. Another long-term i2 customer, Del Monte Foods, has found i2 consultants so worthwhile for demand planning for the fruit and vegetable division that they recently expanded the tool set to cover all Del Monte offerings, according to Fary Matthis, Del Monte Director of IT Systems Solutions Delivery. Although major ERP vendors approach him and his CIO “regularly,” Matthis said he was satisfied with their current tools. If anything, he said they were “taking some functionality out of our ERP system and moving the system to what it’s meant to do, which is control financial information,” he said. Speak to Jon Chorley, vice president of Oracle’s SCM Product Strategy based in Redwood Shores, California, though, and you will hear a persuasive case for the large-scale ERP vendors at a time when the supply chain “is on the forefront of most CEO’s minds. They know it’s critical to manage in a highly effective way and that supply chain disruptions can put them business out of business.” It’s no longer “the guys in the back room trying to keep a business running.” That’s why he’s seeing supply chain applications moving “out of the niche space into the mainstream space. When you look at what businesses have to manage now, it’s enormously more complex than five years ago. The cost of transport, which is a big factor in the cost of most goods and is really influencing where people are looking to save costs, means having visibility
  3. 3. to all your data. That requires a different class of systems. That’s why companies are looking for industrial strength solutions.” He argues that the big guns like Oracle and SAP are giving best-of-breed vendors a run for their money because they have the advantage of being “very stable, well-established and have a global reach.” Plus, he says they have the advantage of offering integration and optimization for transportation—from full audit to the cash cycle. According to Chorley, five of the top ten logistics service providers, for whom the supply chain is their core business, “use our solutions. We compete against the niche providers and have a healthy win rate.” Tim Andreae views the field from the perspective of a niche player that is partnering with an ERP major—SAP. Senior vice president of global marketing for Philadelphia, Pennsylvania- based MCA Solutions, which provides expertise in spare parts planning, Andreae says SAP now recognizes that it “can’t build everything.” The ERP giant has altered their architecture “to allow service-oriented partners like us to plug in easily. Their whole partner strategy has become more open, and their partnerships are there for the long term.” There’s a strong reason for this approach. Andreae believes that innovation “tends to come from more nimble, agile small companies.” Even if the big vendors are dominant in ERP solutions for financial transactions, with the right architecture “there’s the potential for other solutions to plug in (to their platforms).” That’s especially true for “unique work flows that require specific needs,” he adds, explaining that in their case it’s a focus on spare parts planning. To accomplish this level of forecasting, particularly globally, requires “a system with advanced capabilities that can deal with large global networks and create optimization across multiple echelons.” For example, MCA Solutions provides the technology to assist Cisco Systems with the support contracts it offers its customers. Cisco ensures that if something breaks anywhere worldwide it will be fixed “in two to four hours,” Andreae explains. With this level of complexity, he says traditional supply chain software “doesn’t fit. We’ve developed a very unique software to forecast extremely sporadic demand that will optimize the inventory mix across a global network.” He predicts that the market will demand “a single platform like SAP globally because they’ll have had their own experiences of SAP in individual countries.” But he also envisions “open opportunities for other vendors to fit into (SAP’s) global infrastructure.” Sidebar: ERP or Full Service Model? Look at the Vendor! As in any technology purchase, Tim Andreae, senior vice president of global marketing for Philadelphia, Pennsylvania-based MCA Solutions, says decisions need to be driven by business needs and technical functions. Before jumping into the ERP camp or a full-service model, he says make sure the vendor has the following: • a deep understanding of your business problem and a willingness to work with you to develop the right solution; • successful references in your industry and implementations in an environment like yours;
  4. 4. • a compatible architecture with your ERP platform; and • a willingness to model your environment with their product that uses real data and helps develop business cases. Direct link to above article: 2006_A_10000000000000433390