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Best-of-Breed vs ERP Supply Chain Planning

6 Jan 2015

Using quantitative data to support conclusions that formerly were in the realm of conjecture and opinion is changing the business world. And now data is transforming a decades-old debate over best-of-breed vs. ERP suite-based supply chain planning software.  In the past, this discussion had been mostly opinion-based. Now, three recent analyst reports have brought actual user and customer data to the debate. All point in one direction.

A nine-month research project by Supply Chain Insights (SCI) surveyed 120 company respondents representing 183 instances of demand and supply planning. “The data is clear: best-of-breed supply chain planning solutions are faster to implement, have a better ROI, and yield higher satisfaction than planning systems from ERP providers,” says SCI founder & CEO Lora Cecere in a recent Supply Chain Shaman post.  Some highlights from the detailed study:

  • Best-of breed solutions pay back faster – with return on investment (ROI) average of  7 months, versus 13 months for ERP-based solutions
  • Best-of breed solutions are faster to implement – Taking 12 months on average versus 20 months for “ERP expansionist” implementations (Editor’s Note – This is ironic considering the claimed “ease of integration” by ERP vendors.)
  • Best-of breed solutions are less likely to go over budget –  Best-of-breed came in on or under budget 57% of the time for versus only 37% of the time for  ERP solutions (That is, ERP expansionist rollouts were over budget 63% of the time)

Cecere says that while some early best-of-breed solutions were originally over-hyped, extended ERP footprint solutions made things “even worse.” They “were more expensive, harder to use, and required larger teams to run [30-40% more people].”   She concludes bluntly that the movement to adopt “supply chain planning software from an ERP vendor moved the industry backward.”

Are customers best-of-breed or ERP supply chain planning software to run their business?

In a Forbes magazine column, Cecere writes, “Supply chain planning by SAP is installed in almost every manufacturing company greater than $5B in revenue, but very few companies can use the optimizers within the SAP planning software to run their business. The reason? The software from SAP, with the name of SAP APO, doesn’t meet the line-of-business needs for optimization and visualization.”

In an exhaustive 2014 Magic Quadrant analysis for Supply Chain Planning “Systems of Record”, Gartner Group came to a similar conclusion. Gartner reports that SAP Advanced Planning and Optimization (SAP APO) had lower overall customer reference satisfaction scores than the others profiled. Gartner says that SAP “is seen as expensive, with longer-than-average implementation times and higher-than-average service-to-software costs.”

A third report entitled “Oracle’s Shortcomings in MEIO and Supply Chain Design” by Nucleus Research compared software usability and functionality between Oracle and best-of-breed vendors. After extensive discussions with users, the report concluded that best-of-breed supply chain solutions are up and running faster, speeding payback. The software offers more extensive functionality, so companies can reap quicker and larger ROI. The report also says that ERP integration is oversold—most best-of-breed vendors can easily integrate their tools.  The study concludes, “Our initial assessment suggests that best-of-breed can generate ROI 1x to 2x higher than ERP.”

The data is in. Three analyst firms. Three studies. Hundreds of user experiences. One conclusion. Best-of-breed outperforms ERP-based supply chain planning by a significant margin.

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