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November 8, 1999

One Vendor, One Solution
Businesses turn to ERP to help simplify their supply chains and avoid integration hassles

By Talila Baron

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f E-business has become every company's mantra, the need to streamline supply chains isn't far behind. For that, many businesses are turning to prominent enterprise resource planning software vendors, believing that a single solution from a single vendor may be the best way to coordinate the flow of material among the companies and their suppliers and distributors.

The reason is simple: integration. Linking supply-chain tools to back-end ERP systems is a key concern for companies such as Green Mountain Coffee Inc., which in 1997 implemented PeopleSoft Inc.'s ERP suite. "We made the decision to buy an ERP system in order to avoid the integration issues between dissimilar packages. We will work extremely hard to avoid buying any supply-chain management packages from anyone other than PeopleSoft," says Jim Prevo, VP and CIO at Green Mountain Coffee, in Waterbury, Vt.

Prevo cites four key reasons. Data mapping is difficult, and sometimes there is no exact match for certain data in dissimilar systems. Version control becomes a problem across different packages, particularly as upgrades emerge. Dissimilar toolsets require an IT staff to learn how to use all of them. And each vendor has its own help desks, bug-reporting and fix-downloading processes, user-group meetings, and maintenance contracts. The more vendors a company has to manage, Prevo says, the more time and money it has to devote to those relationships.

Given that integration of back-end ERP systems with supply-chain suites can be an onerous task, the leading ERP vendors, including Baan, J.D. Edwards, Oracle, PeopleSoft, and SAP, are challenging the positions of traditional supply-chain vendors, such as Manugistics Inc. and i2 Technologies Inc. By 2004, Gartner Group predicts, revenue from supply-chain planning suites will reach $4 billion--and that ERP vendors will account for 60% of that revenue.

Photo by Bill Cramer Eliminating inefficiencies and reducing costs are key drivers for companies such as Jefferson Health System, a group of hospitals and health-care organizations in Radnor, Pa. "Health-care organizations are focused on lowering expenses," says Mike Ferris, operations manager, materials management at Main Line Health, a division of Jefferson Health System. "Supply acquisition expenses can comprise upwards of 45% of a health-care company's total expenses, so we're focused on streamlining our supply chain."

Supply-chain suites also address the demands of the changing business climate. As companies buy and sell online, they face mounting pressure to compete on price and service. Customers today have access to more information and more choices than ever before. Online auctions and online exchanges are shifting the power balance from seller to buyer. And electronic procurement demands that business users be able to log on, find products, and execute transactions quickly and easily.

Supply-chain management tools let companies configure products to order, confirm availability, and track orders and delivery schedules in real time--all crucial capabilities for E-business, analysts say. "Today, more companies are becoming aware of their competition, and that's driving the need for supply-chain management," says Karen Peterson, an analyst with Gartner Group.

Given the need for streamlined supply chains, the top ERP vendors are coming to the forefront of the supply-chain market, Peterson says. "Today, thousands of companies have already implemented ERP--and as they look to streamline their supply chain, they're naturally looking to their ERP vendors," she says.

ERP vendors have anticipated that demand. This week, Baan Co. will release version 2.0 of its Supply Chain Planner, as well as an application called Supply Chain Order Promising, which is designed to maximize customer order-fulfillment capabilities at the most-profitable levels across multiple production sites. The vendor will release Baan Enterprise Solutions, an integrated offering that includes ERP, supply chain, and front-office functionality, later this year.

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