InformationWeek

January 5, 1998

ERP Links To Supply Chain

Enterprise resource planning capabilities expanded for better productivity, efficiency

Extended ERP Apps nterprise resource planning software will continue to undergo radical change this year. Originally, ERP applications linked back-office operations such as manufacturing, financials, and human resources into a single system. Today, the software is extending beyond its core functionality to include sales-force automation, data warehousing, document management, and after-sales service and support. But perhaps the most important new frontier is supply-chain management.

"Over the past few years, we have seen the ERP vendors-led by SAP-mov e into different business areas," says Byron Miller, an analyst with the Giga Information Group. "The competitive advantage of just having ERP has diminished. The next big thing beyond ERP is supply-chain management."

All the major ERP vendors are racing to deliver supply-chain capabilities that increase efficiency and productivity for their key customers. By linking supply-chain applications with other business systems, users can slash cycle times and reduce inventory. They can also reach beyond their own corporate walls to better connect with suppliers, distributors, and end customers.

Digital telephone maker Qualcomm Inc. is implementing PeopleSoft's manufacturing applications, which include supply-chain functionality developed by Red Pepper Software, which PeopleSoft acquired last September. "At first, we were looking at PeopleSoft and Red Pepper individually," says Norm Fjeldheim, VP of IS at Qualcomm, in San Diego. "But when PeopleSoft acquired Red Pepper, that secured our decision."

Seamless inte gration of the combined offering was important to Qualcomm. "A bolt-on product is OK, but we wanted to do a lot better than that," says Fjeldheim. "Now, everything happens within the same system. You don't have to manually extract data generated in the planning engine and then squeeze it back into the ERP system."

Qualcomm eventually plans to roll out PeopleSoft to its manufacturing sites across the globe. Fjeldheim says the product will give the company a more complete view of its overall operations, allowing it to coordinate the influx of raw materials from suppliers and better optimize its production schedules. For customers, this means phones will be ready the same day they're ordered. The end result for Qualcomm will be reduced inventory and cycle times.

Every ERP player wants to offer customers these kinds of benefits. SAP is developing its own supply-chain applications, called Scope, slated for rollout this summer. Oracle is offering supply-chain capabilities through technology integration deals wi th best-of-breed vendors.

J.D. Edwards last month said it would embed planning and scheduling technology from vendor ILOG into its OneWorld ERP suite. Baan has gone the acquisition route, buying supply-chain vendor Berclain and then adding some internally developed capabilities.

It's no wonder ERP vendors are anxious to extend their systems. Spending on supply-chain software will grow from about $900 million in 1997 to nearly $2.5 billion in the year 2000, predicts IT advisory firm Benchmarking Partners. The market is currently led by such niche players as Manugistics and i2 Technologies. But the big ERP vendors, under pressure to maintain their high double-digit growth rates, are eager to step in.

PeopleSoft is off to a strong start, having signed up such marquee customers as Qualcomm and Toyota Motor Manufacturing North America. Baan, meanwhile, has enticed equipment maker Northern Telecom with its Berclain offering.

"When we first purchased Baan back in 1994, they didn't have the supply-chain func tionality that would let us do forward planning and `what-if' scenarios," says Muriel Prentice, assistant VP of IS at Nortel in Brampton, Ontario. "We thought we would need another product, but then Baan got Berclain. We are in the pilot mode now, but we are finding that the software meets our needs."

Oracle, for its part, has secured such top consumer packaged-goods customers as Kellogg's and Smuckers thanks to its partnership with Manugistics. SAP says it already has several beta customers-including Colgate, Hewlett-Packard, and Motorola-testing its supply-chain applications.

Another area starting to pick up steam is cross-enterprise application integration. This is where companies link their ERP systems directly to the disparate applications of their suppliers and customers.

With these links comes the promise of tighter supply-chain management at a time when most companies need to share production data with an ever-growing number of trading partners.

This type of supply-chain management is being sp earheaded by a small but growing group of integration, or "processware," vendors such as CrossRoads Software in Burlingame, Calif., CrossRoutes Software in Redwood Shores, Calif., and Oberon Software in Cambridge, Mass.

These middleware products add a twist to data sharing: They let commands entered in an ERP program trigger process changes and E-mail notifications in a business partner's application halfway around the world.

Information Free-Flow
"The overall trend is to share more information with customers and suppliers," says Harry Tse, an analyst with the Yankee Group Inc. "In some industries like automotive, big suppliers are letting their customers dial into their systems and extract select information." He adds that by accessing and delivering information in real time, companies can better react to customer needs.

Farmland Industries Inc., a $9.1 billion agricultural cooperative in Kansas City, Mo., is a good example. Farmland buys everything from grain to livestock from more than 1,40 0 independent farm cooperatives. It also supplies agricultural products such as fertilizers and pesticides to these same cooperatives, which, in turn, resell them to local farmers. But while Farmland has implemented an ERP suite from SAP, the local cooperatives still run their own point-of-sale, accounting, and inventory-management systems.

"From a technology standpoint, the trick is to integrate their systems with ours," says Dick Weaver, a business area manager for Farmland. "By sharing information, we can optimize the timing and placement of inventory across the whole system." Farmland has invested in technology from CrossRoads that will let the company access real-time inventory status at participating member cooperatives. The co-ops, for their part, will be able to access online order-status information within Farmland's SAP system.

Companies that have implemented ERP say these software packages have gone a long way toward automating their own internal processes. But now, users want to take a gia nt step further and automate the entire supply chain.

"We are actively looking at new ways to share information with our trading partners," says Ken Ouchi, CIO at Solectron Corp., a manufacturing outsourcer that runs Baan software. "We want to be able to log on to each other's systems and extract key information. From a technology standpoint, data sharing is not completely there yet. But we expect the ERP vendors to carry the load."

Back to Hot In '98