What is supply chain software?
Supply chain management is the end-to-end process of producing a product, from the sourcing of raw materials all the way to the final delivery to the customer. For companies in almost every industry, this process is more complex than ever before, involving many people and a myriad of interrelated nodes and activities. As well, products in many industries continue to grow in complexity. It’s not unusual for a single product to be made up of hundreds, or even thousands, of separate components, each of which must be sourced from a large network of suppliers that spans the globe.
Successfully managing these high levels of complexity in any supply chain requires specialized supply chain software designed to meet the needs of large enterprises. Typically cloud-based, modern supply chain software encompasses the full range of activities required for supply chain planning and execution. Inventory management, supplier management, warehousing, demand planning and forecasting, supply planning, manufacturing, transportation, returns and customer service – each of these areas relies on purpose-built software to automate and help improve the efficiency of the supply chain from end to end.
In addition to automating many essential supply chain planning and management tasks, the leading supply chain software solutions offer much greater real-time visibility and insight into supply chain data from one end of the supply chain to the other. This makes it possible for planners and other supply chain professionals to drill down into what’s happening in any area of the supply chain at any given time. Armed with the latest information, they can update, optimize, and realign plans and processes in response to any changes, no matter where and when they occur.
Why is supply chain software important?
Purpose-built supply chain software is essential for helping companies improve the efficiency of their supply chains, drive out costs and get products to market sooner. Achieving these goals is especially important in today’s dynamic and rapidly evolving global economy. Customer expectations have never been higher and frequent supply chain disruptions – often on a global scale – are the norm, whether caused by natural disasters, global health crises, geopolitical conflict, or changing regulatory and trade environments.
When volatility and major supply chain disruptions occur, having the right software in place enables companies to react with greater agility. It provides the tools and data they need to make informed decisions proactively to mitigate the impacts of future events.
In addition, companies equipped with advanced software have a rich set of supply chain management capabilities across all the functional areas, creating a significant competitive edge in the market. They’ll have an edge over companies that continue to rely on outdated manual processes and generic software tools, such as Microsoft Excel, to manage their supply chain planning and execution. Not only are these tools error-prone and labor intensive, they also create functional silos that prevent critical data from being shared among the other groups involved in the end-to-end process.
What’s the difference between end-to-end and best-of-breed supply chain software?
When implementing supply chain software, companies typically fall into one of two categories: those that use a single enterprise resource planning (ERP) software solution that includes separate supply chain modules; and those that use best-of-breed software solutions to cover the complete range of supply chain management functions.
Enterprise resource planning (ERP) software
Companies in the first category are committed to a single-source or end-to-end approach in which the company’s enterprise resource planning (ERP) software solution handles critical business activities like master data management and transaction management as well as supply chain management functions.
The majority of ERP systems were not designed to handle the specific challenges of supply chain management. However, many vendors in this space have augmented their core software platform with a series of modules to cover many supply chain planning and execution functions, such as inventory management, demand planning, supply planning, and distribution. Companies that take the single-source ERP route can purchase one or more of these modules for the supply chain management functions they need.
Best-of-breed supply chain software
The second group of companies choose to implement best-of-breed supply chain software solutions that cover all the different supply chain functional areas but are still able to integrate with their existing ERP systems. This approach represents a shift from ERP-centric architectures. With this model, the ERP is used only as the system of record for financial transactions and the building of analytics architectures that allow data to stream to supply chain software that’s capable of driving actionable insights.
In their own words: Lessons from supply chain planners
What are the drawbacks of using ERP software for supply chain management?
A key drawback of using single-source ERP solutions for supply chain management is that they lack the robust capabilities of their best-of-breed counterparts and next-generation technologies such as machine learning and artificial intelligence (AI) that make many of these features possible. ERP vendors are primarily focused on building software that helps companies manage their day-to-day business activities, such as accounting, procurement, human resources, and compliance. It’s challenging for any vendor to be all things to all people, so the capabilities they provide outside of their core focus areas, such as supply chain management, often don’t measure up to the best purpose-built solutions available.
The modular architecture of ERP systems is another drawback for supply chain management. Individual, disconnected software modules used to manage the various supply chain functions – whether it’s supply chain management, inventory, or some other area–create silos across data, processes and people. This results in a linear, sequential method of planning across functions, which makes it extremely challenging for companies to react with agility when the unexpected happens. By the time a demand or supply plan is formulated, for example, the supply chain may be facing a completely new set of circumstances that make the plans obsolete.
The data silos that result from the modular architecture of single-source systems also create a dependence on spreadsheet tools like Excel in many organizations. Because ERP systems simply do not provide advanced tools for automation, collaboration and data analytics, Excel is often the only alternative. However, unlike specialized supply chain software tools, Excel provides a generic set of capabilities, and its significant limitations make it a poor choice for dealing with the most challenging aspects of supply chain management. Dealing with supply chain volatility, in particular, requires the help of supply chain software that combines sophisticated real-time data analytics with automated intelligence and the ability to quickly create and analyze what-if scenarios rapidly.
What are the advantages of best-of-breed supply chain software?
Despite their limitations, ERP solutions continue to perform well as systems of record, where they act as a shared information resource across the business and serve critical business functions like master data management and transaction management, which are considered table stakes for any solution.
How effective these solutions are at meeting the many complex requirements of supply chain planning and execution, compared to best-of-breed solutions, is still the subject of an ongoing debate. However, several key considerations informing the debate have changed the equation. These include the rise of the cloud, better integration tools, and a greater focus on the impact network solutions have on business transformation and the customer experience. As a result, the pendulum is swinging in favor of best of breed as these considerations continue to eliminate the purported advantages associated with getting supply chain software tools from a single ERP vendor.
An updated approach involves deploying best-of-breed supply chain solutions that integrate easily and seamlessly with ERP systems to add value beyond the edges of existing processes. In this new way, best-of-breed supply chain software solutions act as systems of engagement that provide real-time access within a single platform and complement the capabilities of the ERP system of record.
A best-of-breed system of engagement, especially one that is based on concurrent planning principles, eliminates the silos between functional groups, bringing data, processes and people onto a single platform. This platform provides integrated supply chain planning that works seamlessly with data sources from a variety of vendors. Information flows back and forth in real-time, creating new connections across the entire value chain. Supply chain systems of engagement capabilities enable supply chain professionals to make fast, confident decisions that drive overall business transformation.
Adopting a best-of-breed system of engagement and integrating it with the ERP system of record allows all stakeholders to work concurrently and enables fast and proactive responses as circumstances in the supply chain inevitably change.
What quantitative benefits do best-of-breed supply chain software solutions deliver?
The benefits of best-of-breed supply chain software solutions are backed up by data. Kinaxis customers that have adopted this approach have realized significant supply chain performance improvements, including 83% fewer expedites, 20% lower lead times, and 57% shorter planning cycles.