Mid-market line of business managers and their IT counterparts know that a high-functioning, flexible and agile supply chain is increasingly critical to business success. Yet many companies think holding off on supply chain improvements when planning enterprise resource management (ERP) changes or upgrades is best practice.
Today, that is no longer the case. Advances in metadata management, data integration and cloud-based applications mean all important supply chain operations upgrades can be undertaken either prior to or concurrent with an ERP upgrade.
No time like the present
It is no longer necessary to wait until an ERP upgrade is complete to reap the benefits from updating your supply chain operations solution. Highly reliable cloud computing offerings combined with dramatic improvements in data integration and mapping mean upgrading your supply chain operations solution first, before your ERP platform, is realistic — even preferred. This is particularly true when integrating multiple ERPs into a single solution.
For many line of business and IT managers, however, there exists an “ERP-first” mindset that is understandably hard to shake. ERP serves as the mission-critical backbone for most mid-market enterprise organizations. Doing anything to jeopardize its stability and functionality is risky. Cloud-based software as a service (SaaS) supply chain operations solutions alleviate these concerns.
Flexibility, not additional responsibility
First of all, it's important to note that SaaS vendors run, own, maintain and manage their solutions. This relieves IT of the responsibility of having to maintain and manage the supply chain operations solution while also migrating, upgrading or replacing the ERP system — a years-long process in many cases. So, as the ERP upgrade proceeds and scope creep inevitably morphs the project, IT does not have to undo months of custom coding to accommodate a new feature or function.
Nor do they have to be concerned with retraining users and rebuilding connectors to suppliers, partners and customers — a challenging and lengthy prospect given the highly interconnected relationship supply chain operations/ERP has with external stakeholders, internal business processes and workflows. So, as the ERP project changes, cloud-based supply chain operations continue on as if nothing new is happening.
This flexibility is accomplished in two main ways. The first is via a portal interface that internal and external stakeholders can configure, typically without the help of IT. New features are simply rolled out through the portal with no disruption or drain on internal IT resources.
Agility, simplicity and performance
Flexibility is also achieved through data integration and mapping. Legacy supply chain operations/ERP systems are proprietary, meaning they are built with end-user lock-in as a primary concern for the vendors that sell them. While open data standards are employed to move data around the different systems that interface with the supply chain operations/ ERP solution, feature sets within these applications are highly interconnected, requiring months of A/B testing to ensure that a change in one place does not interrupt important functionality elsewhere in the ecosystem, like in the accounting or reporting systems.
Cloud solutions, on the other hand, are designed from the outset to be vendor agnostic and loosely coupled to underlying infrastructure, networking and storage resources. This makes changes much simpler because these shared environments utilize pools of storage and compute to meet demand instead of a stove-piped set of pre-configured resources that must change in lock step with the supply chain operations/ERP system to maintain functionality.
Simplicity is further enhanced because the only thing that passes between a cloud-based supply chain operations solution and customers' ERP solutions is data.
This data takes on one of three formats: extensible markup language (XML), electronic data interchange (EDI), and/or flat file such as comma-separated values (CSV), which is the format used by spreadsheets. These data formatting standards are well known, in widespread use, and break down proprietary data formats so the data in one vendor's system can interface with a competitor's offering. This gives cloud-based supply chain operations a flexibility that a tightly integrated, on-premise solution cannot match.
Talking the same talk
Utilizing XML, EDI, and CSV as common data formats allows the information from one system to be understood by another — much like English is the international language of business that facilitates communication and understanding regardless of culture or native tongue.
If the manufacturer is using Oracle and their supplier uses SAP, for example, this poses no barrier to the cloud-based supply chain operations application — even though SAP and Oracle are direct competitors whose solutions are built on proprietary code and logic. The supply chain operations software simply ingests and outputs data in XML, EDI, or other format, which is then mapped to the appropriate fields and formats in the supplier's and manufacturer's systems — all within seconds. In fact, supply chain operations-to-ERP updates often happen faster than the host system's ability to update itself.
Cloud-based supply chain operations solutions engage a flexible and powerful transform engine that accepts, modifies and distributes updated data back to the systems of record using native formats. In this way, data integrity is preserved because latency is never introduced into the data stream.
Batch processes that update production databases on a schedule instead of continuously can introduce errors if the data being consumed by one system is out of sync with another. Left unchecked, even small errors can lead to millions of dollars in costs to reconcile orders and, eventually, update and bring into agreement databases across the entire supply chain — from raw materials suppliers all the way through to the end consumer
Business benefits of cloud-based supply chain operations
Relying on the ERP or back office system as the system of record also means that decision makers will always be working with the most up-to-date information — information that is in agreement across the supply chain. This cuts down on confusion, reduces the number of exceptions that must be managed, reduces reporting errors, and improves managers' trust. All this is accomplished because the data is the most accurate and up-to-date information available.
The other benefit of engaging with a cloud-based supply chain operations solution provider is future proofing. Regardless of what happens with the ERP system — you could change vendors, upgrade to a new version, implement new IT management frameworks, or even suffer a massive catastrophe that wipes out all of your data centers — none of that affects the supply chain operations system. Workflows and business logic are similarly shielded from changes to the ERP system because the only thing traveling between the two systems is data. This separation of core functionality maintains a stable environment that suppliers can rely on to remain consistent as they make changes to their own internal systems and workflows over time.
For the CFO specifically, one of the major benefits of engaging with a cloud provider is the ability to shift CapEx spending to OpEx. Dollars once locked up in software licenses, management, infrastructure, and the staff to manage it all can be reallocated to more business-focused activities (like upgrading the ERP system) that benefit top line growth and bottom line savings.
Because SaaS is hosted in the cloud, the offering is more flexible and agile than either an on-premise solution, or one integrated as a module with an ERP solution. Part of this is due to coding and the proprietary one-to-one nature of the offerings. SaaS providers, on the other hand, employ a one-to-many business model so their focus is providing the most flexible, user-friendly and vendor-neutral offering possible.
SaaS providers are trusted partners that are unaffected by their customer's internal politics, resource limitations and priorities. This gives line of business managers a solution that is more responsive to their needs because it is supported by the vendor — not sitting in a developer's queue waiting for attention
Given that up to 45% to 50% of a typical mid-market manufacturer's working capital is tied up in their supply chain at any moment, making the supply chain easy to manage, nimble and transparent has a major positive impact the bottom line.
Top line growth is also increasingly tied to an effective supply chain because customers have more choice and more ways to exercise that choice than ever before. Delivering on the promises that lead to high customer satisfaction and loyalty is more critical than ever. CEOs know this and expect efficient supply chains to help differentiate their businesses and deliver happy, profitable customers.
A cloud-based supply chain operations solution that frees up internal IT resources to focus on more business value-add activities increases productivity, frees up capital, and makes the business more responsive to internal needs and external changes. In today's hyper-competitive world, this is undeniably an edge that business cannot do without.