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Manufacturers, frustrated by the high cost of installing, integrating, and maintaining stand-alone supply chain planning packages, manufacturers are scaling back plans to roll out new modules and are evaluating alternative means to collaborate with partners. Some enterprises are ditching plans to install large, specialized supply chain software and are instead taking advantage of modules made by their enterprise resource planning (ERP) vendors. Others are reverting to manual supply chain operation and planning methods using the traditional tried-and-true method of emailed spreadsheets and phone calls.

Based on transactions in the last quarter and opinions expressed among a recent sampling of corporate logistics managers, there is some evidence to suggest that some companies could reduce costs and arrive at full functionality sooner through the purchase of pre-integrated supply chain modules from their enterprise resource planning vendors. These provide their back-end applications with streaming data, as opposed to just continuing to pass spreadsheets back and forth without integrating vital data that can be later consolidated to corporate levels for actionable management reports.

Some Cancellations

One specialty materials maker cancelled a pilot of SynQuest's supply chain planning tools early in 2001, replacing them with applications of J.D. Edwards, its principle ERP vendor. While the manufacturer liked the technology, it was concerned about the cost of integrating those applications with the ERP software. They realized that every time there was a new release of either product, integration issues would have to be addressed. This would increase the long-term total cost per transaction and total overhead support above that of the less-capable J.D. Edwards software.

After evaluating supply chain planning tools from both stand-alone and ERP vendors, some companies are still reluctant to enter the new e-business age of fully-integrated logistics and supply operations. These companies plan to use existing manufacturing resource planning systems in combination with emailed spreadsheets containing schedules and demand forecasts to fill their supply chain planning needs. Data from the spreadsheets would be extracted from these spreadsheets and forwarded to corporate databases via the ad-hoc or batch running of PC data-extraction utilities for that purpose. The manufacturer's customers were seen as vastly preferring to place orders via telephone in lieu of learning and interfacing with an automated replenishment system or other complicated supply chain solution which might not have the facility for handling an unusual order.

In a Strategic Directions survey of 42 manufacturers on the subject, 35, or 83%, said they have deployed only one or two modules of their supply chain planning suites, while just under 10% plan to deploy more, once integration methods prove out. Approximately one-third of the respondents stated that the anticipated return-on-investment (ROI) has failed to meet expectations so far, according to the study.

Supply Chain Management (SCM) Integration Challenges

Integration of the different technologies has prove to be the most difficult problem to tackle, experts say. Despite the benefits of using simple XML interfaces available with many of the SCM toolkits, they say, the ERP vendors lack XML and other standard interface means and generally are reluctant to permit interfacing of non-proprietary software to the vendor's ERP systems. Web-based forecasting, scheduling, collaboration, and planning tools all depend on the basic sales and manufacturing information generated each day by the enterprise resource planning and materials resource planning (MRP) systems, and this data must be imported accurately and on a timely basis if the supply chain applications are to provide useful and accurate results. Often, the difficultly of interface to legacy systems complicates both data availability and scheduling owing to the batch nature of data links and management intervention coming from the corporate data centers.

Even with full application of the emerging W3C standards for XML and well-crafted data templates for commonly-used ERP applications and constructs such as SAP and J.D. Edwards, almost half the manufacturers surveyed experienced almost a year in internal development project delays in linking their supply chain tools with back-end systems. Connecting with their suppliers' ERP systems proved even more challenging, since multiple interfaces to dissimilar systems mounted up to an almost overwhelming task. Only 14% of respondents said they have successfully linked their systems to more than ten percent of their suppliers.

Integration costs, particularly in a sliding economy, is looming as another huge hurdle for stand-alone supply chain application software suites. Companies can expect to spend anywhere from one to three times as much on supply chain integration as they do on the SCM software suites themselves, analysts say. This may explain why over one-third of the survey respondents reported that ROI for their supply chain software investments have not yet panned out.

Despite Nagging Problems, SCM Sales Still Increasing

Wall street analysts covering I2 technologies, leading vendor of stand-alone supply-chain planning tools, agreed it was difficult to implement the manufacturing-plant-oriented modules, as well as other modules, to certain long-standing corporate legacy systems. Implementation of multiple modules concurrently also proved a challenge for many companies steeped in old-fashioned mainframe and accounting-system technologies.

On the bright side, though, the majority of respondents surveyed stated that they're pleased with the SCM systems and are getting a solid return. The majority of these have more up-to-date internal systems and ERP systems from newer vendors originating in the 90's. One electronics manufacturer was quoted as saying, "We are now able to do our manufacturing planning daily, rather than monthly, and we've noted it's giving us a better mix of inventory to meet both regular and unexpected surges in demand. I2 said, despite the daunting challenges of interfacing to older technologies still hosted by the larger corporations, it went live with new applications at 120 customer sites last quarter, 163% over the previous year's quarter, and new sales are currently running roughly equal to the same volume of the previous quarter, despite fears for the economy and the new attention focused on the events of September 11.