Enterprise resource planning and supply chain management are complex and important technologies designed to integrate and manage business operations. These systems serve as important tools to unify different parts of a business, facilitate processes for sharing information, provide insights for decision making and improve the general efficiency of operations. ERP and SCM help companies better manage their resources and respond to changing market demands by offering a unified view of business processes.
In the first part of this series, I discussed trends and challenges affecting ERP, along with some of the key ERP vendors. Now I’m moving on to SCM. In this article, I will look closely at SCM solutions, breaking down the complexities and innovations in this area of the market, and provide my insights on expected trends and developments.
SCM Leans On AI
AI-enabled low-touch planning is gaining prominence in SCM, helping to bridge the gap between supply chain planning and execution. This approach leverages AI to reduce the need for human intervention in supply chain operations, leading to increased efficiency, accuracy and agility in the supply chain. There’s a growing trend toward leveraging technology to improve transparency and visibility in collaboration. At the same time, there is a strong emphasis on achieving sustainability, meeting regulatory standards and reducing risks.
As you can imagine, many factors can disrupt a supply chain, and if you think about everything that can influence the movement of goods and services, you can feel the pain that businesses must routinely overcome. According to survey data, the leading challenge is mergers and acquisitions, responsible for 66% of disruptions, followed by extreme weather at 41%, factory fires at 37% and business sales at 33%. Yet even with these challenges, companies are not adequately harnessing SCM capabilities to lessen the impact of disruptions. For instance, proactive supply chain management, which allows companies to anticipate and address supply or demand shifts before they become critical, is practiced by only 22% of companies.
SCM 2024 Trends
Just as with ERP, SCM is moving forward by incorporating innovative technologies. Here are some of the trends set to shape the industry this year.
- Embedded AI — Integrating AI and machine learning directly into SCM enables the system to automate various tasks and connect all stages of planning and execution. Demand forecasting, inventory optimization, transportation management, warehouse automation and predictive maintenance are examples of processes that have been optimized by AI and ML to improve efficiency and supply chain resilience.
- Visibility and collaboration — Having a clear view of the supply chain is crucial to prevent delays and mistakes. This means you need to be able to share data with internal teams and collaborate effectively to identify trends and resolve issues. One example of this visibility is when an SCM integrates information from RFID devices used to tag containers in a warehouse. The system can monitor the containers and their locations to provide real-time inventory tracking, which allows the business to monitor inventory levels and minimize the risk of stockouts or overstocking. AI tools are also being used to analyze data and improve collaboration in demand forecasting, production planning and inventory management.
- Supply and demand matching — Continuing with the data focus, advanced algorithms powered by AI and ML offer optimization to improve the alignment of supply and demand. Imagine a scenario where products can be instantly and dynamically reassigned to orders to reduce costs and enhance service levels. Traditional inventory management relies on forecasts and pre-allocated channels, which can be unreliable. Dynamic reallocation, by contrast, factors in real-time inventory information and order specifics alongside consideration of any external disruption factors to support more effective decision making.
- Sustainability — I anticipate a growing focus on environmentally friendly supply chains, where ESG factors become integral to SCM systems. Executed well, this will enhance both financial and environmental performance. This shift will involve companies evaluating both themselves and suppliers to ensure sustainability; this can include monitoring use of recycled materials and renewable energy, maintenance of ethical labor practices and support for using local sources to reduce emissions tied to transportation. Implementing green logistics for tracking carbon footprints throughout a product’s lifecycle will also play a significant role. This transition towards sustainability is essential for creating eco-friendly and sustainable supply chain practices, which will be even more important as concerns over climate change and resource scarcity increase.
- Resilience — The disruptions of 2023 emphasized the need for flexible and strong supply chains. This has led to a greater focus on reducing risks, planning for different scenarios and diversifying suppliers and sourcing locations. The goals are to avoid dependence on single sources, to prevent bottlenecks and to bring production closer to demand to improve responsiveness and reduce reliance on long-distance transportation. SCM systems enhance the resilience of supply chains, allowing companies to predict, address and recover from disruptions while maintaining efficient operations and the steady flow of goods and services.
- Blockchain — Blockchain technology significantly impacts SCM by improving transparency, traceability and security throughout the supply chain. It enables tracing products from raw materials to final delivery, promotes real-time data sharing among stakeholders and ensures tamper-proof records, reducing the risk of fraud and cyber threats. I see much potential in blockchain to revolutionize supply chain operations, enhancing trust and security within the ecosystem.
SCM Implementations And Challenges
Introducing a new SCM system is a complex endeavor, yet it can provide a competitive edge, as indicated by 57% of companies surveyed. Additionally, 70% of companies consider a good SCM to be a critical element for providing quality customer service.
However, as with ERP implementations, SCMs are subject to a laundry list of challenges that can lead to failures. The implementation of a new SCM can face technical hurdles, such as integrating it with existing IT systems, migrating data accurately and customizing the software to fit unique business requirements—all of which can be expensive. From an organizational standpoint, overcoming internal resistance to change and getting employees on board with new processes demand effective communication and training strategies. Financially, the upfront and ongoing costs of a new SCM system, including unexpected expenses, can put pressure on budgets. Additional challenges such as project scope creep, vendor selection and new security vulnerabilities further complicate implementations.
To navigate these challenges, a business needs a well-thought-out approach that includes setting clear objectives, engaging stakeholders throughout the process, selecting a vendor with a strong track record, planning carefully for data migration, training users thoroughly, communicating clearly and setting realistic expectations about time and costs involved.
SCM Vendors
Having explored SCM trends for 2024, here is an overview of my recommended SCM solutions.
- Oracle SCM — This cloud-first solution specializes in serving large and mid-sized businesses with complex global supply chains and demanding data management needs. Its global presence and support are valuable for companies operating internationally. It supports multi-location, -language and -currency operations, making it even more suitable for global businesses. Oracle SCM incorporates AI and ML for advanced analytics and predictive capabilities. It also utilizes blockchain technology to ensure secure and transparent tracking and traceability.
- NetSuite SCM — This cloud-based solution for mid-sized businesses offers preconfigurations for manufacturing, retail and wholesale distribution with a range of supply chain features, including demand forecasting, supplier management and transportation management. NetSuite integrates with other Oracle Cloud Applications such as ERP, CRM and HCM, creating a unified business management platform.
- SAP SCM — With a global network and integrated ecosystem, this SCM is designed for large and complex businesses with intricate global supply chains. It emphasizes sectors including aerospace, automotive, food and beverage, chemical, healthcare and retail. It features AI-powered analytics, blockchain integration, demand forecasting and real-time inventory visibility in the supply chain. SAP SCM’s cloud-based approach also ensures accessibility and scalability.
- Blue Yonder — This cloud-based solution focuses on helping companies utilize AI and advanced analytics for data-driven supply chain decisions. With expertise in sectors including retail, manufacturing, distribution and logistics, Blue Yonder prioritizes sustainability and ethical sourcing, emphasizing green logistics and waste reduction. Its open platform facilitates third-party integrations, improving service levels and visibility of orders.
- E2open — E2open’s SCM is designed for mid- to large-sized businesses dealing with complex global supply chains in manufacturing, aerospace, automotive and high tech. It offers a global platform for international transactions, real-time supply chain visibility and collaboration among teams and partners. E2open integrates with various business applications, providing advanced analytics for efficient operations, including demand forecasting and inventory optimization. It also simplifies global trade management and supports supplier collaboration within its network for cost-effective operations.
- Infor SCM — This SCM is for mid-sized businesses that need an industry-specific solution in manufacturing, retail, healthcare or food and beverage to address specific regulations and workflows. It features planning, sourcing, manufacturing, logistics, warehousing and fulfillment functionality. It leverages AI and ML for advanced analytics and integrates with other Infor CloudSuite applications including ERP, CRM and HCM.
- Logility SCM — This cloud-based solution is designed for mid-sized businesses that use a demand-driven approach; it harnesses real-time market data and advanced forecasting algorithms to optimize inventory, production and logistics based on actual demand. Logility provides industry-specific solutions for food and beverage, consumer packaged goods, retail and apparel that feature AI and ML for demand planning, inventory optimization and warehouse management.
- Descartes Systems Group — This company specializes in logistics and global trade management solutions for simplifying international trade processes, including customs clearance and compliance for the transportation, retail, manufacturing and e-commerce industries. It has an integrated platform that connects businesses with trade partners. Descartes provides deep regulatory expertise and automated trade compliance features with a global logistics network that optimizes routes and provides advanced analytics. Its SCM solution is offered in both cloud-based and on-premises deployments.
- Manhattan Associates — This solution focuses on mid-sized and large enterprises, emphasizing warehouse management, omnichannel fulfillment and distribution for various industries, including retail, e-commerce, manufacturing and logistics. Key features include its advanced warehouse management system; order fulfillment capabilities for efficient picking, packing and shipping; a transportation management system for cost-effective shipment planning; and labor management solutions powered by AI.
Summary
Looking ahead, I’m enthusiastic about the developments for 2024 in the ERP and SCM markets. Vendors in both segments have been rapidly implementing new technologies and creating solutions tailored for specific industries. In particular, we should see even more innovation in the use of embedded AI, cloud-based delivery, sustainability practices and integrations with third-party software.
AI and ML are streamlining enterprise management and supply chain operations, while cloud computing offers scalability, flexibility and the ability to connect users anywhere. Improving environmental standards resonates with my own commitment to sustainability, but it goes beyond that. I recommend that businesses enthusiastically embrace sustainable practices, not just for the sake of the environment but also as a strategic decision to ensure future competitiveness. ERP and SCM systems are evolving to better integrate with other software, enhancing data exchange, minimizing manual errors and streamlining workflows. This efficiency not only conserves time and resources but also enables businesses to customize these systems to fit their specific requirements, resulting in more adaptable operations.
As we all navigate 2024, embracing advanced technology to enhance business operations and competitiveness is more important than ever. I urge businesses to modernize and adapt their ERP and SCM systems to maintain a competitive edge, because those that hesitate to embrace new technologies risk being left behind in a quickly changing market. Keep an eye out for future articles in this series, as I continue to discuss the ongoing evolution of ERP and SCM and its implications for business.
