When is ‘Best-of-Breed’ the Best Choice for Supply Chains? – Part 1
If your company has implemented an Enterprise Resource Planning (ERP) solution, chances are you’ve been (or will soon be) asking yourself if you should expand your ERP capability to include supply chain execution capabilities, or focus on growing with a best-of-breed (BoB) provider of Supply Chain Planning and Supply Chain Execution systems (SCM/SCE). As companies are confronted with an ever-tightening marketplace, they’re looking at leveraging their supply chains as a key way to differentiate.
While it’s true that some ERP vendors have come close to achieving parity with select features of BoB solutions, the reality is that this isn’t adequate for businesses striving to use their supply chain as a competitive advantage.
When evaluating between BoB vs. ERP vendors, the typical analysis focuses on specific technology and integration aspects inherent between the two. However, the objective analysis is better spent assessing the impact to the business and its end users, not just the technology capabilities. And, while there’s value in technology, supporting the needs of the user and their business transformation are the most pertinent factors to consider.
While there are many aspects to the success of any business, two stand out as very relevant to the BoB vs. ERP comparison:
- 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
Let’s take a deeper look into agility and competitive advantage in terms of the BoB vs. ERP comparison.
With the rapid evolution in the demands of the retail consumer and the lean nature of manufacturing being flexible and adaptable is an unrelenting and mounting challenge, now so more than ever. When making this evaluation, pay close attention to the support of this concept. Let’s look at some factors that influence agility, which are listed out below. And keep in mind, the “integration conversation” is low hanging fruit here.
ERP suite vendors have made SCM/SCE to ERP integration a cornerstone of their value proposition. The supposition is that because their capabilities are on the same platform, they’re tightly integrated and require less work to implement and maintain. In some cases this can be valuable, but customers are finding out that this comes at a burdensome cost.
When architecting the integrated solution, the ERP vendor provides two choices, which are tightly integrated or loosely coupled. The vendor may market the solution as “independent of the ERP” to avoid having it closely linked with the large investment required to implement ERP. However, if we consider that the ERP vendor typically assumes they are the sole vendor, their external integration capabilities are often built as an afterthought or as a necessary minimal requirement to fulfill customer’s business expectations. “Independent of ERP” would require these solutions to rely upon their sub-optimal external integration capability. So almost exclusively they choose to tightly integrate to the core ERP solution.
This is where the question of agility starts to surface. While core ERP tends to remain relatively static over time, SCM/SCE solutions need to evolve more dynamically as they reflect the changing landscape much more directly. The net result of this tight coupling strategy is that the SCM/SCE solution cannot evolve without directly impacting the necessarily static, stable and risk averse ERP implementation. Loss of agility follows as the planning system can’t adapt without introducing risk and change into the ERP solution.
In contrast, the BoB vendors have always relied on interaction with external systems. Their integration strategies have been developed to be flexible and robust, as this is a necessity in one-hundred percent of their successful projects. This results in complimentary, but loosely coupled solutions. The benefit to this strategy is that shifts in objectives, upgrades that take advantage of innovation and new business strategies can be accommodated without disruption to core business operation like ERP. The net result is a more agile SCM solution with more frequent innovation at lower overall cost. This also reduces the potential performance and maintenance costs of maintaining ERP which has become of increasing concern over the last few years.
Competitive advantage builds on the idea of agility with additional factors in this evaluation. When architecting SCM/SCE solutions, focus for the early-to-mid term lifecycle of most development is building foundational requirements to meet this business need. These foundational elements are the minimum requirements to gain a seat at the table. You’ll likely hear the phrase “80 percent fit” of the ERP born solution at some point in your selection process. In practice, this typically bears out to be between 50 – 80 percent. If we accept that foundation is built first, we also know then that the differentiators, your competitive advantage, would be in that missing 20 – 50 percent. If this advantage is important to you, the BoB vendor is the direction to seek.
Finally, all ecosystems are constrained by the weakest link. If one component in the ERP model of “one source, one vendor” solution isn’t up to the task, this will impact all downstream value perpetually. That 50 – 80 percent fit? It’ll impact the value of all solutions that interact with it.
In future blog posts, we’ll explore some of the specific functional areas that also need to be evaluated and understood for you to make the best selection. Be sure to check the JDA blog in the upcoming months for more posts around this.
At JDA we understand that these ideas of agility and competitive advantage are what sets us apart in today’s market. Perhaps the BoB acronym more appropriately represents “Best of Both” when referring to our solution advantage. It’s the foundation by which we develop and innovate our solutions. We offer both the depth and maturity of solution like a BoB vendor and a wide breadth of end to end capabilities like an ERP. Learn more about how JDA can help by contacting us today.