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Can ERP's create supply chain intelligence?

In recent discussions with industry analyst Pierre Mitchell from the Hackett Group, we spent some time talking about whether ERP systems (such as SAP and Oracle) provide any level of capability around supply chain intelligence. Pierre noted that the “Supply network design network” is the most holistic design model, and is used primarily for high level planning, but not as backbone for all data.” On the other hand, the “System of Process” is primarily the ERP system which governs transactional and operational data. It lags many best of breed systems that are added as “bolt-ons”, but freezes the market enough to be able to take a snapshot and stay in game (“it’s in the next release!”).

Some people have also begun to explore using portals as a vehicle for collecting market intelligence from multiple sites. The portal is a “roll your own” type of system, much like the development of dashboards/scorecards…and ERP providers have been weak here. Dashboards constitute the application of supply chain analytics which pull from many different sources, but which also rely on planning and monitoring data, as well a hodge podge of stuff that must be consolidated and integrated. As such, the biggest gap which ERP (or any ‘empty’ application with no data in it until you use it) is the content required to create knowledge and intelligence.

You can have some basic cubes summarizing what happened or what you plan to do (regardless of how good the plan is), but this system doesn’t help you in asking right questions, knowing what to gather externally, who to gather it from how to synthesize, how to predict or forecast based on the data you have gleaned, etc. This type of work in most cases requires the human computer. ERP is not good at dealing with external unstructured data (and complex multi-tier data model relationships not currently modeled). Instead, companies seeking to improve their intelligence networks need good analytic data models that model the operational workflow (planning/execution) process, that model the physical world of what is happening. What most ERP systems today tout as “analytics” is fragmented along the domains of the workflow (i.e., analytics is embedded everywhere) or ‘embedded decision support’. This is the Oracle/SAP view of analytics…what they call ’real-time [ERP] analytics’ that just summarizes the local activity, but not the supply chain.

The biggest opportunities involve tying all the analytics together – not easy. Pierre’s presentation at one of our SCRC meetings provided a great summary of this. In supply chain, it’s really an ‘extended supply planning’ add on to sales and operations planning, complete with price/cost modeling, risk/hedging analytics, contract management, sourcing optimization, etc.

Pierre finished up by noting: “ERP is a commodity, but you need to manage your commodities well in order to do the strategic stuff.”