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This is a million-dollar -- or more -- question for buyers of planning software: Is it better to use an ERP system for demand planning, or select a best-of-breed tool? And the million -- or millions -- is not what you will pay for the software, but about the benefits you will derive from a good demand planning tool.
First, let's look at the myths that supply chain software vendors often promote.
Myth No. 1: With ERP, everything is integrated. Today, with few exceptions, ERP firms have acquired some or all of their supply chain applications. But these may reside on different platforms that can be Web-based, on memory-resident servers or database-centric. One may be cloud-only, the other on-premises. Ultimately there probably will be some -- or a lot -- of integration with ERP.
Myth No. 2: Standalone vendors are best-of-breed. There are so many software companies in the market and, yes, many have unique approaches that are useful for specific problems. But that does not make them the "best." Some are the best, but not all. And we will talk about that in the next section. But many are just another forecasting package with no frills. (Of course, that may be exactly what you want -- but if it's not, be wary.)
Myth No. 3: ERP vendors have a larger development staff than other vendors. This may be true. The problem is, that larger staff might not be working on your product. ERP vendors have a plethora of products, and few resources are allocated to forecasting and planning. An ERP firm may pull all of its resources to focus on a particularly important product release that may have nothing to do with yours.
Myth No. 4: ERP vendors have more staying power in the market. Today most ERP firms have been through so many mergers and acquisitions that they are an amalgam of many products. If company ownership changes, your product may not be picked as one they want to continue investing in.
Myth No. 5: ERP software costs less. Often ERP sales will throw in the planning software as if they're giving you a special deal. The real cost though, is total cost of ownership, not just the purchase price of the software, and return on investment (ROI) is what you want. The real question is, which software package is going to provide the greatest returns?
Myth No. 6: Choosing ERP gives me "one throat to choke." This is true only in some cases. Often there are embedded modules within the software that you either have to pay for or the ERP firm has to manage on an ongoing basis. ERP development personnel tell me that they do have integration issues with partners, either due to conflicting priorities or lack of technology alignment. These issues can hold them back from making necessary updates on the tools.
So, how should users approach the planning software selection process?
Preparing to select the right software
1. Attend as many user sessions and industry conferences as you can that focus on planning (APICS, IBF), as well as those that focus on your industry (which often have sessions dedicated to supply chain management). Listen and ask questions of the users. What did they do? How did they do it? What problems did they encounter? You probably won't learn these things from customer case study libraries on vendor sites, which can be marketing material.
2. Develop your requirements. These should consider the future, but with an emphasis on the present. In many cases, the future is never as users thought it would be, or priorities take over and they never have the time to implement changes. Of course, you should go with a vendor that can serve you now and protect your investment for the future.
3. Do an in-depth survey of the whole market. What's out there? How were these products designed and by whom? Web searches, media and research firms have lots of information. Be open to amend your requirements since the vendor community has some incredibly innovative technology you may not have considered. Here is where best-of-breed vendors often shine. These vendors generally set out to address the planning challenges in their particular industry -- retail, manufacturing, oil and gas, etc. -- so their solutions are very specific to those planning issues. They are often more agile and can pursue industry issues and technology trends and respond quickly to market dynamics. This helps during the implementation process and beyond.
4. Develop your business benefits and ROI. Software implementations usually come with consultants. What kind of business expertise will they provide? Here is a key differentiator. Generally, best-of-breed vendors have more depth of knowledge in their subject matter. This is all they do, after all, and they have the domain knowledge to help enable an improved planning process and get that business result you are seeking. Today, some offer business process management services to help with the ongoing operation of the planning process. A few of the planning vendors have dedicated staff that have worked in organizations like yours in the past and can be allocated to support your team, in the short term or long term.
5. Plan the implementation process. You'll derive benefits only if the solution is implemented. Conduct a pilot. Vendors dislike pilots, but you will learn more than you could possibly imagine and it will immensely assist in the actual implementation. Pilots allow you to understand, then present to management, what is a realistic implementation plan as opposed to a fantasy. Pilots also allow you to create a risk plan -- which is a must. Here is another area where you need to understand the nuances of ERP vs. standalone vendors. What is the true integration work -- if any?
There are, of course more "dos" in an evaluation process. But these particular steps can expose the major decision points to thinking about ERP vs. best of breed.
Finally, don't be overly swayed by "free" offers -- nothing is free. Rapid time to value, the fit of the functionality to your business, and the ability of the company and its software to take care of your team – these are what matters.
Back to those millions of dollars. Great planning systems have profound ROI. And freeing up cash -- as well as improving the overall performance of the supply chain -- allows your firm to accomplish so much more. So, don't skimp on the decision-making process.
Many organizations don't take the steps outlined above and they are later surprised by the results. They may not have made a bad choice. But was it the best choice?
Defining the elements of demand management
Dig Deeper on Demand management
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