ERP versus Best-of-Breed?

ERP versus best of breed supply chain managementI recently spoke with a reporter who asked me to discuss the benefits of supply chain software from a best-of-breed provider such as Logility versus from an ERP vendor. The benefits are measurable; however I felt it important he understand the idea of a “fully integrated” system from a single enterprise vendor is just that, an idea. A common misperception is that supply chain capabilities from ERP providers are fully integrated and lead to quicker deployment with a lower cost of ownership.

In speaking with many of you and working with supply chain research firms about implementation time, ROI and time to value, we often find a common theme. Supply chain modules from ERP providers are more challenging to integrate with their own financial, inventory, and order management modules than leveraging a best-of-breed provider.  In reality supply chain from your ERP provider will likely present a higher total cost of ownership than a best-of-breed solution.  This sounds counter-intuitive until you dig a little deeper. An independent third-party just did this and recently wrote about it.

supply chain management softwareShaun Snapp of SCM Focus analyzes this issue in his latest post, “What If You Paid Nothing for SAP Software: How SAP’s TCO Compares for Supply Planning“. Here, Shaun crunches the numbers comparing SAP to an unknown best-of-breed provider. The result may surprise you. The total cost of ownership for SAP is far greater than the best-of-breed provider and what is interesting are the reasons Shaun provides. At the top of his list: “SAP’s software is very difficult to understand and is highly encapsulated”.  He goes on to comment how this is great for consulting firms which have made a nice business of this complexity but not so great for customers who must pay for all of the extra services.

As all these discussions, and “SAP for Free” are rolling around in my head, I walked into a session at CSCMP led by the CIO and vice president of supply chain for a $5B global food company. The executive repeatedly made the point that his company recently invested $10M in an upgrade of SAP and received very little additional value for the effort. These are harsh words. To improve their supply chain and drive more tangible value, the supply chain team at this well-known company is now spearheading efforts in inventory optimization and Sales & Operations Planning with complimentary best-of-breed providers.

The best-of-breed vs. ERP debate is hotly contested. I believe it is our job to ensure customers receive the software and capabilities that best match their business, goals, and need for supply chain excellence.  The key is to help understand the full (short and long-term) costs and make sure your information technology team is aligned to help meet your business needs.  Supply chain excellence makes a difference in top line growth and bottom line profitability.