2018 ERP Update: Are the mega-suite vendors taking over supply chain management?

Well equipped to handle any inventory, human resources, customer relationship management, order management, reporting or accounting task that’s thrown at it, the modern day enterprise resource planning (ERP) platform is an all-encompassing piece of software. By integrating numerous functions under one umbrella, ERPs stand out on their ability to streamline important business processes and serve as information-sharing platforms for organizations and their business partners.

Not quite ready to rest on those laurels, mega-suite vendors like SAP, Oracle, Infor and NetSuite have been making a slow-but-steady progression into the supply chain management (SCM) space. As a result, transportation management systems (TMS), warehouse management systems (WMS), and global trade management systems (GTM) have become popular choices for shippers looking for a one-stop-shop to help them achieve end-to-end supply chain management and visibility.

The proof is in the numbers: According to the most recent “Gartner Supply Chain Technology User Wants and Needs Study,” nearly six out of 10 companies (58%) are now “largely committed” to a single or primary mega-suite platform vendor. These shippers strongly favor their mega-suite (ERP) vendor for SCM solutions unless that vendor lacks an offering or if its offering doesn’t meet the company’s basic requirements.

Dwight Klappich, Gartner’s research vice president, says that in most cases companies will explore other options before, say, selecting their mega-suite vendor to handle their transportation or warehousing technology needs. In other words, they’re not 100% biased. “However,” he points out, “many times these shippers are committed to the ERP platform and want to minimize the amount of ‘other stuff’ that they’re using.”

Of the 58% of companies that are largely committed to their ERP platforms, 65% of them are “strongly biased” to using those platforms for SCM. Thirty-five percent of firms say they select the best SCM solutions for their businesses, and will only turn to an ERP if the latter’s capabilities fully meet or exceed their requirements.

“There’s clearly a significant emphasis on the mega-suite vendors’ supply chain suites,” says Klappich, who credits the “good enough is good enough” mindset as a key driver of this trend. Put simply, as the ERPs have added SCM functionality to their suites, shippers have adopted these solutions with the knowledge that those WMS, TMS, and GTM solutions may not be as robust or full-featured as the best-of-breed offerings—and that’s okay with them.

“The marketplace has matured to the point where current customers aren’t necessarily the most complex, sophisticated or demanding,” Klappich says. “As a result, their needs are satisfied by their mega-suite vendors’ offerings and there’s not a lot of need or desire to look at anything else.”

Breaking through this mindset isn’t easy for best-of-breed SCM vendors—even those that can clearly spell out how much better, more robust, or fully-functional their applications are. “To the users, that’s not necessarily relevant,” says Klappich, who points to the automotive industry as a similar example. Where 20 years ago someone may have gone out of their way to install a best-of-breed stereo in his or her new car, the units that come pre-installed in today’s autos are generally considered “good enough” for most drivers.

“I haven’t purchased a best-of-breed stereo for my car since I was in college,” Klappich says. “The fact that the Blaupunkt with a 12-inch subwoofer is better than what’s in my car is irrelevant.” Within SCM, Klappich draws parallels to the Oracle offering. “From a transportation standpoint, clearly Oracle is best-of-breed,” he says, “but not necessarily in supply chain planning and warehousing. However, the solution is good enough for a high percentage of its customers.”

New inroads for ERPs

As he looks around at the inroads that ERPs have made in the SCM space over the last few years, Robert Hood, a principal at consulting firm Capgemini, says companies like Oracle now offer applications that are “improving, but still have a way to go in terms of functionality.” The Oracle WMS solution, formerly LogFire’s Cloud-based WMS solution, for example, has experienced a “pretty aggressive development cycle” and is now in its ninth version.

“This new version of the Oracle WMS includes a fair amount of additional functionality,” says Hood, “which previously had [Oracle] as a bit of a laggard behind the Manhattans and JDAs of the world, from a WMS perspective.” Oracle also gained traction on the WMS front when NetSuite dropped support for its advanced WMS solution.

“Those companies that were in the process of deploying NetSuite had to do a bit of a swap, so they switched out the Oracle WMS solution for the advanced WMS on those deployments,” Hood explains. “That’s creating quite a bit of activity for [Oracle’s] WMS product.”

The continued push into the Cloud is also creating more demand for the ERP’s SCM applications. In an environment where most of the mega-suite vendors were “dragged kicking and screaming into the Cloud,” says Hood, most have since accepted the fact that this is how customers want their software delivered.

“We’re going to see the continued migration to Cloud,” says Hood. “On the transportation side, for example, we’re going to see the Oracle Cloud WMS continue maturing in capability and become increasingly competitive with the Tier One solutions on the best-of-breed side.”

Not to leave SAP out of the SCM conversation, Hood says the ERP is going head-to-head with best-of-breed vendors in the supply chain sector, where it’s offering solutions that break out of its traditional mold. “No one ever got fired for buying SAP and all of the stuff that goes with it,” Hood notes. “Now, this ERP is taking multiple SCM solutions and aggressively marketing them in a way that competes against traditional best-of-breed solutions.”

Making waves in the market

Pointing to Oracle, SAP, and Infor as the “big three” ERPs that have made the most inroads in the SCM market, Clint Reiser, research analyst with ARC Advisory Group, says he’s seen brisk activity in the WMS space over the last year. In other words, most ERPs are now funneling development, sales and marketing dollars into their Cloud-based WMS offerings.

“They’re really pivoted toward the Cloud WMS, both for existing and for new customers,” says Reiser. Infor, for example, has been making a push in this area and focusing on Tier 2 and Tier 3 (i.e., smaller shippers) that would naturally gravitate to Cloud-based options versus on-premise solutions.

Digging a bit deeper, Reiser says he’s also seeing best-of-breed vendors beginning to look and act like their larger counterparts. In Europe, for example, he says WMS vendors are folding more warehouse control (WCS) and warehouse execution systems under their product portfolios. The Inconso logistics suite, for example, includes WMS, TMS, yard management, and a logistics network planning and control functionality.

“Inconso has its own WCS and WMS, plus the SAP extended warehouse management [EWM] implementation app,” says Reiser. “It basically goes to customers and says, ‘If you want to implement on WMS you can also do an automation project and implement our WCS plus SAP’s EWM—all utilizing our control system. This is a pretty widespread practice in Europe, where SAP EWM has become a strong force.”

Selling value over functionality

As they continue to hone their SCM offerings and add new functionalities and capabilities to their product lineups, expect the ERPs to sustain and even claim more market share in the supply chain software space in the next few years.

“The platform sale is still as strong as ever,” Reiser says. “The selling points for ERPs are that having a supply chain execution platform that provides integration benefits reduces total cost of ownership. And while best-of-breeds like Manhattan have done the same by folding multiple SCM applications under one umbrella, that trend has sort of taken a backseat and isn’t the story that it was a few years ago.”

Hood says that as the ERP’s supply chain applications continue to evolve, some additional mergers and acquisitions could be in the cards. “The JDAs, Manhattans, and the other best-of-breed providers continue to pour money into enhancing their capabilities,” says Hood, noting that the latter’s Active Omni solution is being positioned as a technical architecture roadmap for the future.

“WMS is slowly moving in the Active Omni direction, and I’m sure that Manhattan will do the same with its TMS and other solution areas as well,” says Hood. “I think that the best-of-breeds are going to continue to be formidable. However, with the benefit of a single solution provider, completely-integrated application, and the install base that SAP and Oracle both enjoy, I think that the ERPs will continue to chew up market share as we go forward.”

To combat this trend, Klappich adds that the best-of-breed supply chain software providers will need to sharpen their pencils and come up with new ways to add value for their customers. “They’ll have to stop focusing on putting more toys in the toy box, and instead figure out how to address and present their overall value propositions,” he says. “That could mean faster implementation times, lower costs, or other guarantees focused on value over functionality.”