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If you're running enterprise resource planning software, your corporate leadership is probably happier than your supply-chain managers. The reason: ERPs are ideal for providing a single unified view of key information across diverse functional areas such as accounting, procurement, manufacturing and customer service. This enterprise-wide data model offers CEOs corporate-wide visibility, assists CFOs with Sarbanes-Oxley compliance and saves CIOs millions by eliminating a tangled web of stand-alone legacy applications. But most ERPs lack the advanced capabilities required by procurement and supply-chain professionals to deal with today's challenges. Sure, all ERPs have baseline, one-size-fits-all capabilities around inventory management and order fulfillment. But few were designed for increasingly complex supply chains that might include vendor-owned inventory, forward-deployed inventory, and global drop-ship management, to say nothing of the requirements for auto-id technologies, shipment label compliance, and collaborative replenishment that are now commonplace.
What do supply-chain managers typically do when they need sophisticated capabilities, such as remote drop-ship management, streamlined shipping processes and RFID compliance? They forsake the low-cost-of-ownership model of a single, central corporate ERP database, and reach out to "best of breed" providers to bring turnkey applications for the sophisticated supply-chain functionality they require. After all, if it's turnkey, it must be simple and inexpensive, right? Unfortunately, it's neither simple nor inexpensive.
Once you start installing best-of-breed software for supply-chain management, you've moved away from the unified data model of your ERP, the very value proposition of installing ERP to begin with. The problem is exacerbated because it often means installing more than one solution, since "best of breed" features are highly specific, e.g., one solution is required for drop-ship management, another for label compliance/barcode printing, one for RFID, another for asset tracking, etc. More importantly, each "best of breed" provider typically requires an independent database that runs in tandem with the ERP and is mapped to that ERP with costly custom code. These proprietary databases and the ERP sync up when batch processes exchange data, adding on layers of delay when reconciling your ERP to your actual inventory. Besides the substantial cost of developing, mapping and batching these databases, you will incur additional implementation costs (often several times higher than the software license fee) and the ongoing cost of maintaining custom code and updating it as software versions change.
This "best of breed" approach significantly reduces the ROI in your ERP, because you have re-introduced "islands of information" into your system architecture. Key modules of your ERP are reduced to function as passive repositories of data, or not utilized altogether, while important system configurations and tolerances must be duplicated in both the ERP and the third-party system. The problem gets worse (and more expensive) as you tackle cross-functional processes such as supplier collaboration, where duplication of data and workflows occurs in the supplier master, the item master, inventory tables, the sales order tables, the purchasing database and accounts receivable. As the number of applications and databases grows, the complexity increases exponentially.
The "best of breed" approach to enhancing ERP functionality is irrational and costly. But what's really remarkable is how easy it is to avoid this approach entirely. You can preserve the unified ERP corporate database by simply "accessorizing" that ERP with supply chain execution modules, a.k.a. "software extensions." This can be done without costly independent data models or custom code. Besides maintaining a single authoritative database, these software extensions keep both the corporate and supply-chain managers happy. Plus your IT staff can keep their cool as well, because they are not being called upon to constantly tweak and maintain extraneous databases, custom codes, and complex integrations while keeping the "total cost of ownership" at the lowest possible figure.
Here are five essential supply-chain execution attributes that can be added to an ERP through "accessorizing."
1. Process automation using barcode printers, RF scanners and RFID. There is an unfortunate perception that auto-ID "edgeware" applications such as barcode, RF data collection, and especially RFID are complicated processes that can be tackled only with "best-of-breed" applications running off of a disparate data model. That's wrong. Companies can "layer-in" RFID capability directly on top of existing ERP systems, without requiring custom code or a "tear out" of existing systems. Indeed, these layer-in ERP accessories can combine data collection, process automation and RFID tracking, and collaborative internet printing, while preserving the global unified enterprise database. These edge systems can provide the transaction context required to translate the information received from an RFID reader and map it to, for example, a purchase order-receiving transaction in the ERP...without requiring any new, independent databases.
2. Compliance with barcoding and RFID labeling requirements. World Wide Technology (WWT), a leading value added reseller and logistics provider in the information technology industry, recently implemented compliance labeling functionality as a layer-in to its Oracle ERP order fulfillment processes. This module enables WWT to respond to the dynamic supply-chain label demands for hundreds of its clients, functionality that otherwise would have required bolt-on applications or custom modifications and IT involvement for every single label change. Instead, compliance business rules automate adherence to stringent customer standards and guidelines that are integral parts of WWT's high-velocity supply-chain capabilities.
3. Management of contract manufacturer order fulfillment. Contract manufacturing is on the rise, and few ERPs can handle the complexity well. But contract manufacturing ERP accessories available today allow a parent corporation of a global drop-ship management network to manage and seamlessly collaborate in real time with its contract manufacturers, suppliers and their suppliers, regardless of their geographic location or the sophistication of their IT infrastructure. JDS Uniphase, an Oracle ERP user, runs just such a contract manufacturing accessory via real-time web pages and XML APIs. JDS Uniphase's manufacturers and suppliers can achieve seamless, transparent access to JDS Uniphase's ERP, but JDSU retains complete visibility and control over the disposition of inventory during the staging and shipment processes at supplier locations. This control includes the printing of compliant shipping documents, commercial invoices and barcode labels, with all of the necessary customer information printed in JDSU's format. JDSU remains the brand that customers see and the single point of customer contact. JDSU simply interacts with data where it resides, at any point in the supply chain, at any time and from anywhere on the globe. JDSU's customers demand immediate access to their inventory, often with one-day turnaround. Using a supply-chain execution accessory, JDSU extends its access in real-time to inventory beyond JDSU's facilities and reaches deep into a matrix of manufacturers and suppliers they otherwise wouldn't be able to access.
4. Advanced shipping. As a leading supplier to automotive OEM's such as DaimlerChrysler, GM, Ford and Volvo, ArvinMeritor wanted to avoid the traditional "pick, pack and ship" offered as the standard ERP business flow. Yet corporate demands required that they leverage their ERP data. ArvinMeritor required a single solution for automated data capture and shipping process automation that could be used across 22 manufacturing facilities in 13 countries. Though "best of breed" solutions were off the table, ArvinMeritor's requirements were clearly beyond the supply-chain execution capabilities within the ERP. It needed to move items directly from work-in-process lines to the shipping dock, while maintaining maximum flexibility and responsiveness to customer requirements that often changed at the last minute. (ArvinMeritor's shipping challenges also included a large number of facilities, high volume shipments, and repetitive orders that are build-to-ship.) ArvinMeritor was able to layer into Oracle a supply chain execution "advanced shipping" software accessory which provided an optimized workflow that reduced the number of transactions required to process an order by 60 percent, as it increased order efficiency and accuracy, while leveraging the configurations and setups within the ERP.
5. Automated replenishment through supplier process integration. In another example of a layer-in that avoided a "best of breed" application, a large supplier of equipment and services to the global semiconductor industry recently had a real supply-chain issue to resolve. The company was unable to track payment requests from suppliers for parts that the company wasn't even sure it had received. These demands ran into the millions of dollars yearly. "Best of breed" was unacceptable, because of the corporate requirements for a unified database. So, by choosing to accessorize its ERP (both Oracle and SAP in this case) and layering-in a purchase order collaborator, the company hosted a system with tracking and control down to the carton level. The purchase order collaborator required that any carton shipped to the company by any supplier had to have a barcode with a distinct Package Tracking Number (PTN). The supplier obtained the PTNs only by using a web portal to connect to the company's purchase order collaborator, which generated a barcode for printout at the supplier's site. No barcode, no shipment; no shipment, no payment. This system closed the loop on purchase orders, eliminating a massive gap between accounts payable and received goods for the first time.
This is the type of vertical-specific functionality that we have come to expect from "best of breed" solutions. Indeed, many "best of breed" vendors could custom code this solution into place. But just imagine the costs in custom code, data mapping, batch processing, and IT maintenance for a system as complicated as this, and you can see how much more attractive and economical it was for this company to leverage its data and accessorize its ERP.
Tom Dziersk is president and CEO of ClearOrbit, which provides real-time supply-chain execution software solutions, with a special focus on SCE extensions to Oracle systems. ClearOrbit is based in Austin, Tex.
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