In other words, the days of monolithic “we do everything” ERP systems may be coming to an end with innovation in delivery and interoperability, and each supplied by cloud services, typically outside of the ERP vendors.

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In IT, it’s seldom the case that things come to an end. More often, they simply get wedged to the side by something newer and, generally, better. But the old stuff sticks around for a long long time. Especially in software. The reason for this, especially with ERP systems is that it’s probably the most mission critical software product in most businesses. The accounting doesn’t work if the ERP has issues but, more importantly, operations don’t work if the ERP is broken. So, replacing it is very difficult to do. Hence a long long life AND a motivation to attach new things to it rather than replace it.

I like the article a lot. Especially for a transaction-heavy business that operates largely through networked 3rd parties. But for a business that’s internally complex operationally, a high-end ERP is likely to be a good fit for a long time.

Paul

Thanks for sharing Paul.

I agree that adding alternate suppliers is an excellent approach to mitigating the risks described in the article. However, this step doesn’t necessarily eliminate the need for some level of buffer inventory. Instead, by adding alternate sources of supply, you can reduce the amount of buffer needed. Let’s assume that you have two suppliers for a key component and each supply 50% of the demand for this component. Now let’s assume that one of the suppliers is shut down for 4 weeks due to a major disaster. How long will it take for the alternate supplier to ramp up to satisfy the full demand? What about orders that the impacted supplier was working on when the disaster occurred? Can the alternate supplier step up and satisfy those requirements on time? So you can see that while you wouldn’t need as much buffer inventory as you would if you only had one source but you would still need some…perhaps more then you are currently carrying.

Good article and agree that days of monolithic ERP systems are numbered, This has been in discussion for the last 3 years and is currently labelled as “Surround strategies” where specialist providers enhance the core ERP (if ERP still exists) or working together to eliminate the need for ERP. Providers such as Invapay have been successfully removing Purchase and Pay from ERP platforms for global organisations.

I hear the term ‘Value Chain’ mentioned often these days and I believe that’s a better term for what supply chain managers should be focusing on – the adding of value from resources to customer (and even back again, including reverse logistics). Value chain also implies focus on product in one direction and cash in the other – all part of SCM. The term ‘value’ even tilts us towards ‘Lean’ and reminds us to also focus on eliminating those activities that don’t add value.

I agree that Value Chain Strategy would be a subset of Value Chain Management (Management includes Strategy but goes on to include execution, etc.)

Thanks for the thought provoking post!