Page 50 - The European Business Review

Supply Chain

digitalisation solutions, will become issues for companies ZLWK HFRPPHUFH IXOÀOPHQW VSHFLDOLVWV IURQW HQG V\VWHPV H J
actively looking for ways to evolve their capabilities. POS), and the data needed to power CRM. Another example
is the end-to-end supply chain visibility, data, and demand
The Expanding Vendor Ecosystem integration capabilities that provide optimisation and trace-
Just a few years ago, most IT purchasing functions relied on ability. Even if the large IT vendors are offering services in
a handful of large vendors to manage their IT supply chain these areas, the speed of evolution is such that they are skel-
solutions. The most prominent example would be SAP, of eton solutions when compared with those of innovators.
course, which offers a complete suite of functionalities, even Companies are under pressure to expand their vendor base,
to large and diverse companies. Depending on the company’s and this is coming not just from users, but from the fact that
priorities and its competitive advantage, SAP would usually companies must adapt their business models to meet new
be complemented with a management execution system market expectations.
(MES), or warehouse management solution (WMS), supplied In a way, supply chain digitalisation is pushing compa-
by a niche IT vendor with an attractive product. nies to return to the past, where the enterprise system was
Anyone who has participated in a major ERP imple- not the all-in-one answer to every functionality requirement.
mentation has likely been confronted by the staggering In this context, it is understandable that functions like IT
number of legacy applications that a system like SAP is management, purchasing and business process excellence
intended supplant. It is often in the hundreds: small niche might struggle to identify business practices to adapt, even
tools woven together in surprising complexity. There are in the service of the exciting possibilities of supply chain
many advantages to consolidating vendors and unwinding digitalisation.
legacy complexity. First, focussing spend increases penetra- One vertically integrated energy company is taking an
tion into the vendors’ customer base and creates leverage interesting approach. It understands that it must evolve and
IRU SULFH QHJRWLDWLRQV 6HFRQG FRPSDQLHV FDQ LQÁXHQFH move away from trying to limit the IT vendor ecosystem.
vendors’ development priorities – rather than modifying To manage the transition, the leaders of the business
the core vendor product to suit its needs, a company can functions have agreed on a core of 15-20% of business
have its needs integrated into the next version of the functions that the company considers as its competi-
YHQGRU·V FRUH SDFNDJH 7KHUH DUH DOVR VLJQLÀFDQW WHFK- tive advantage. These are the functions that warrant the
nical considerations. Fewer vendors and solution packages increased complexity and cost to support smaller, special-
means fewer servers, interfaces and data incompatibility ised digitalisation vendors.
issues. This leads to lighter IT infrastructure, which lowers The remaining functions are not necessarily condemned
the cost of maintaining, deploying and enhancing a suite to settle for pre-packaged ERP options. These processes
of supply chain solutions. are transitioning to what the company considers the
1RW HYHU\RQH LV IXOO\ VDWLVÀHG ZLWK WKLV PRGHO KRZHYHU “industry standard” solution: the most common, readily
Users – the business functions that use the solutions oper- available, reasonable trade-off between niche player and
ationally – inevitably must compromise. A minimalist SULFH FRPSOH[LW\ 7KH FRPSDQ\ ZRUNV ZLWK LQÁXHQFHUV OLNH
approach to IT, and using SAP for most functions, usually Gartner and industry groups to determine the industry stan-
means foregoing specialised, niche applications which are dard solution for each business function. This combination
WDLORU PDGH IRU VSHFLÀF IXQFWLRQV )RU H[DPSOH SURGXFWLRQ of industry standard and targetted, niche leaders is forming
functions typically prefer smaller vendors that offer pack- the company’s roadmap for the future. The IT purchasing
ages that are uniquely designed for MES. They would argue function is now rethinking its sourcing approach. Rather
LW EHWWHU VXLWV WKHLU VSHFLÀF QHHGV LPSURYHG PDWHULDO ÁRZ RQ than looking at the raw spend it used to have with large ERP
WKH VKRS ÁRRU RU LPSURYHG WUDFNLQJ RI HTXLSPHQW HIÀFLHQF\ players, it may now use the fact that it is a large customer for
Distribution teams may feel the same way. Quality service D VPDOOHU YHQGRU DOEHLW ZLWK OHVV UDZ VSHQG WR WU\ WR LQÁX-
teams, too, may agree, as they seek superior traceability. ence the vendor’s development roadmap.
But digitalisation is rapidly changing the dynamic. The 7KHUH ZDV XQGHUVWDQGDEOH UHVLVWDQFH DW ÀUVW 1R RQH OLNHV
functionalities associated with digitalisation are coming to be thought of as not contributing to a competitive advan-
online too quickly for the large, one-stop-shops like SAP. The tage. One of the keys to success in an approach like this is
expectations of omni-channel have brought to market order full engagement and support from senior management. A
management systems and distribution solutions that are disciplined, consistent message and adherence to the policy
designed to manage the complexity and demands of working is essential.

50 The European Business Review January - February 2018