ERP systems are becoming Supply Chain planning bottlenecks
Few companies realize that they are typically trying to improve their Supply Chain capabilities based on the wrong foundation. A foundation built on ERP systems.
ERP by definition is an “Enterprise” based architecture. When faced with the supply chain requirement, ERP responded based on the way the architecture was designed, namely connecting nodes in a sequential fashion and protecting the inherent “batch” inefficiencies through long lead times and freeze schedules. Plus as many organizations painfully came to realize, ERP is far from being standard, even if we deployed the same “vendor software” at multiple locations or nodes in our supply chain.
The new paradim of Supply Networks
In fact our supply chains aren’t really chains at all, they are logical networks comprised of multiple enterprises and trading partners operating across multiple physical tiers who
need visibility across the network to orders, shipments, and inventory. These network participants also require a highly secure, permission-based roles capability, governed by their trading contracts, to interact with the supply network platform to ensure that it operates without disruption while incurring the lowest costs. These trading partners include customers, suppliers, contract manufacturers, 3PL’s, 4PL’s, carriers, warehouse operators etc.
Why ERPs are dragging Supply Chains back
Today we do an incredible amount of work trying to execute against these critical supply chain capabilities. It is a losing battle if we are executing based on an architecture designed to do something else. Given that our requirement space has now been redefined as a supply network comprised as a multi-party, multi-echelon environment, we need an architecture designed to match that requirement which is capable of driving a much higher level of visibility and problem resolution across that network.
Envisioning a Supply Network “Platform”
Just think about the benefit of reducing latency alone. Whether the demand is for production parts or after market, we know there will be some level of forecast error. Why accept all the information delays related to ERP node to node processing and the related lack of visibility when a supply network can operate in real time, eliminating this latency, and providing full network visibility based on the secure permissions framework?
EDIs suck too !
Even the traditional EDI layer is laden with inefficiency. Why implement an entire point to point EDI framework when the integrity and structure of the EDI transaction set can easily be translated into a network-based supply solution and be made available across all subscribed trading partners? As part of the network solution, a Tier 1 supplier could operate a transaction in concert with a Tier 2 supplier based on managing the state changes of an order.
An example to illustrate opportunities
For example if the trading partners are operating a Min/Max replenishment policy and the Tier 1 wants to prevent early shipments which inflate their inventory positions, they can control the ASN such that they do not allow the Tier 2 to issue the ASN if it is going to violate the Max inventory setting. This transaction is represented by the “procure to pay” cycle. But the question is – why try to understand and improve the performance of the “procure to pay cycle” by recombining multiple transactions across multiple systems when we can simply implement a single transaction across multiple trading partners who control the transaction by managing and reacting to state changes within the transaction through a permissions framework?
These transactional state changes provide trading partners the ability to control a transaction and address exceptions prior to executing a transaction that would have produced a poor outcome given policy violations or changing conditions. Thus at any point in the “procure to pay transaction cycle”, whether it be sending the PO, acknowledging receipt, committing the order, creating the ASN, order pick up, order
in transit, order scheduled to factory, order delivery etc., visibility and control is provided across trading partners based on their permissions framework which is based on their trading contracts and easily set up as part of their network subscription.
Time to switch gears
Thus, the old and tired ERP blueprinting process is now a thing of the past. No longer do we have to change our processes to accommodate the technology. Today our technology provides us with a tunable system of control across multiple trading partners across multiple trading echelons. And not only is there significant benefit in improving supply chain performance and lowering costs, but these newer network technologies are subscription based through a cloud architecture, which significantly lowers TCO, along with providing much more flexibility in deployment where individual processes can be implemented and integrated to the legacy environment rather than having to do a big bang approach.
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