BoB vs. ERP – Part 2: Warehousing, Distribution and Logistics
A common theme in the Tier 1 and 2 landscape of supply chain execution management is the desire to “orchestrate and synchronize end-to-end business processes,” and that “warehousing and transportation are notable points of convergence” (source: Gartner 2017 Magic Quadrant for Warehouse Management Systems). Logically dovetailing this notion is the added realization that in order to satisfy the world’s most sophisticated supply chains, the need for deep customization is usually a requirement.
Unfortunately for the tier 1 and 2 markets, companies are often spending over 50 percent of postimplementation total cost ownership (TCO) to support these modifications (source: Gartner 2017 Magic Quadrant for Warehouse Management Systems). Gartner has found that project TCO and ROI are considered the greatest areas of customers’ concerns, after functionality and integration.
With companies confronted with an ever-tightening marketplace, they’re increasingly finding that the best way to differentiate is through optimization and differentiation of their supply chains. While it’s true that some Enterprise Resource Planning (ERP) vendors have come close to achieving feature parity with best-of-breed (BoB) solutions for basic warehouse management, transportation management and labor management capabilities, the reality is that simply “good enough” is no longer enough for most businesses striving to use their supply chain as a competitive advantage.
In the first blog post of this series, When is ‘Best-of-Breed’ the Best Choice for Supply Chains?, we found that any approach to technology hits on two key needs:
- Agility: The ability to adapt, transform, and change rapidly without negative disruption to the business
- Competitive Advantage: How your organization is differentiated and winning against the competition
However, as we dive deeper into the specific needs of supply chain planning and execution, we find that an additional debate rears its head: Tightly vs. loosely coupled interoperability. Or put another way, how closely do we tie the functional abilities of warehouse, transportation and labor management systems to those of the ERP?
Market Dynamics Are Driving Innovation
Market dynamics – the increased agility required of today’s supply chains to meet the needs of the modern shopper – are driving innovation at a swift pace. Companies that excel in their supply chains need solutions with advanced capabilities. Warehouses and transportation are the backbone of a successful logistics operation. Each is unique to the business it supports, and a warehouse management system’s (WMS) and transportation management system’s (TMS) software decision must reflect these nuances. This need for capability and agility is why more complex organizations are choosing to integrate BoB systems in conjunction with their ERP suites, rather than build off the ERP itself.
A BoB WMS provides the power to quickly adapt to change and optimize and execute tasks to get the right inventory to the right location at the right time, all in real-time. Users are empowered with more flexibility, real-time responsiveness and the ability to easily manage complex warehouse operations. With a BoB WMS, organizations can optimize their distribution networks and ensure every aspect of inventory movement and labor productivity are realized. If a warehouse operation wants more advanced features like interleaving, advanced labor standards or advanced technology integration, those features may not be offered by their ERP.
These more complex organizations are also choosing a BoB TMS to create sustainable value by synchronizing all the critical transportation processes — delivering both optimal cost control and excellent service. Supply chain disruptions can happen at any time and a BoB TMS provides the ability to iteratively re-plan and drive optimal decisions in a fast-changing environment. The enterprise-wide visibility that TMS provides allows for the easy detection of changes and disruptions as they occur across the supply chain, informing the planning and replenishment processes to immediately re-plan when unexpected events or disruptions occur.
Order orchestration capabilities re-optimize fulfillment plans for profitability and service, which allow for more tightly-coupled transportation and warehouse processes, ultimately giving way to re-plan pickwaves, shipments, loads and routes. Or perhaps optimize the orchestration of the truck, load, dock door, and labor into a cohesive execution picture. All of this happens immediately and interactively to produce the best solution at the time, ensuring customer satisfaction and profitability.
The Integration Conversation: Tight vs. Loose Coupling
ERP suite vendors have made the ERP-supply chain management (SCM) integration a cornerstone of their value proposition. Still, some ERP customers are asking themselves: “If we opt for best-of-breed supply chain capabilities, are we undermining a key advantage of having an ERP suite?” Often, the answer is “no.” For years, BoB providers have been supplying their customers with pre-built interfaces to major ERP suites.
Not surprisingly, as some companies began using ERP solutions in the warehouse, they quickly began demanding more sophisticated picking and inventory management capabilities than the ERPs could natively provide. Due to the challenges associated with expanding the core ERP, ERP developers responded with the construction of dedicated warehouse and transportation management systems that “plug into” the existing ERP framework. Consequently, a key advantage of ERP systems is that they can be tightly coupled to the ERP itself, sharing characteristics like data model and a common user interface.
This tightly-coupled nature comes at a cost: increased rigidity and impact in the event of a change, since invariably the ERP itself is now a core component. Overall TCO and time to value increase, while ROI decreases, due to two key driving forces:
- Changes to the WMS or TMS typically require a change to the ERP, such as with use cases involving operational workflows, data model management, or audit trails, even if the change is not relevant to the ERP
- Most native integration the ERP vendors offer requires customization, considering that in our experience, every ERP we encounter carries a high degree of customization of its own
Furthermore, supply chain management execution solutions usually require information from disparate systems across the enterprise and must communicate across the extended supply chain – not just to the ERP. In fact, many customers have found that the bulk of the overall integration effort is to non-ERP systems.
Therefore, a robust, fast, flexible and reliable integration framework is needed to provide a consistent flow of information to and from all sources. As opposed to the tight coupling, this approach creates a “loose coupling” with these external systems, which offers similar levels of time to value and overall capability while also providing much higher levels of flexibility and risk protection – all resulting in a lower TCO.
How JDA Can Help
JDA has a tremendous amount of experience interacting with a wide array of ERPs, due to a large customer base. The two largest ERP providers account for the single largest percentage of our customer base, so JDA understands the importance of easing the integration effort after many years of first-hand experience. That’s why JDA has invested in developing a robust, versatile and high-performance integration capability that not only provides an accelerated time-to-value through pre-built interfaces and easy-to-use configuration tools, but also establishes a high degree of flexibility and adaptability, permitting support and evolution of this integration over the long term.
So, bringing this full circle, why do we care about capability, flexibility, and innovation? After all, a decision to invest in this kind of technology needs to deliberate and for good reason. Ultimately, this technology – and the ensuing partnership with the vendor of said technology – is the enabler. This is the toolkit, the expertise, and the future-focused thought leadership that will directly help you drive towards that goal of better ROI, lower TCO, and quicker time to value. Can an ERP vendor give this as well as a BoB vendor can?
To learn more about JDA’s proven ERP integration capabilities, contact us today.