Full disclosure: I work for a best-of-breed supply chain planning vendor so I will do my best to take an unbiased approach as I provide my opinions on how to solve the challenges of planning today’s supply chains with all its complexity and volatility. I’ll be honest, it would be great to get everything from one supply chain software vendor. One negotiation, one price list, one number to call if by some chance something went wrong. At first glance is seems like a practical, straightforward approach. I can understand why IT organizations would want to limit the number of vendors they need to deal with. But do the economics work out?
How free is free software?
For a best-of-breed approach, the biggest objection is usually around pricing. Why would we pay that much for supply chain planning software when our enterprise resource planning (ERP) vendor is actually giving some of those capabilities away? Yes, when your competition is free software, a best-of-breed vendor has an uphill battle to sell value. There is one key question for a company to ask when evaluating free software. Does it work? If it doesn’t solve your planning challenges, the cost to not being able to plan and respond with agility will take a much bigger toll on your business than the cost of software. You may be getting a free module but if it’s siloed from other planning processes there will be a good deal of lag time from answering planning questions that need an end-to-end view of your network. If a supply chain is disrupted, maybe from the result of a natural disaster (true story) a free demand planning tool will not be able to identify what customers are impacted, help you allocate limited supply and plan corrective action. What’s the value of responding in time so you do not lose an order or miss any delivery dates when one of your sites is shut down by a wildfire? (True Story #2) What’s the value of reducing planning cycle times from days, weeks and months to hours or even minutes? (Yet another true story…) Costs, or lack of, certainly have to be weighed against value when evaluating your choices.
One system, one view
When it comes to planning the supply chain, it’s best if it can be done on one platform. This means the planning community including demand, supply, inventory, master scheduling and capacity planners are all looking at the same data with similar views on the same system. Preferably this will a cloud-based system. If it is, there is no need to purchase and manage dedicated hardware. Costs are significantly reduced when it comes to supporting upgrades in an on-demand environment. If you have separate modules, not all supported in the cloud, in the long run it will end up costing more when it comes to hardware, integration, security and managing the environment. ERP vendors have historically have gone the module approach, typically through acquisition, so when you hear single platform and free module, pull back the covers. There continues to be a perception that it will be more convenient and less expensive to deal with the incumbent ERP vendor for supply chain planning needs. It only makes sense for companies to continue to evaluate the solutions offered up by the ERP vendor if it’s an opportunity to reduce costs, especially since they aren’t going away. At the same time, companies need to tackle supply chain planning and response management challenges effectively, efficiently and with confidence. All ERP vendors will say they can do what the best-of-breed solutions can do. Maybe they can. As an incentive to move off of best-of-breed solutions some ERP vendors give functionality away. Be careful. We’re all for reducing costs but to manage today’s complexities and volatility, a new set of capabilities are required. If a module, siloed approach doesn’t work, and if it doesn’t address our new realities, free can’t fix it.
Recently I had the chance to sit down on camera with Lora Cecere of Supply Chain Insights to discuss this very topic as it directly relates to SAP environments. To learn more about why you should consider best-of-breed IBP and S&OP solutions, watch this short, informative video now.