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SCM integration with ERP simplifies, speeds manufacturing processes

One way for organizations to reduce its number of software packages is by integrating ERP and SCM. The decision for many manufacturers is whether to purchase a system that integrates the two or find a tool that can do so.

Total ERP and supply chain management (SCM) integration is a goal for most manufacturers, but companies take different paths to achieve that integration.

Some manufacturers buy a complete packaged ERP system that includes all the SCM tools they might need. Other companies choose a third-party SCM package with best-of-breed functionality to plug into their existing ERP system. Still other businesses have performed some system integration, but are transferring data between ERP, SCM and other systems.

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Auto parts manufacturer Magna Powertrain has made huge advances toward complete system integration in the past few years, according to quality engineer Greg Palmer. Magna Powertrain uses the Plex Online Saas ERP for its Quality Assurance systems, and SAP ERC ECC 5.0 for its back-office ERP. "We looked at SAP for the Quality side and it didn't have the functionality," Palmer said.

Palmer considers Magna Powertrain's current ERP/SCM setup a big improvement over the previous implementation. "Until 2006, it was rows of file cabinets," Palmer said. "We had to walk to the back of the plant to look up" on paper all the supply chain-related information.

Getting down to only two systems has made Palmer's job much easier. "The ultimate goal was to integrate SAP and Plex where they needed to be integrated," he said. "But we haven't spent the time and resources to do that."

Single-system SCM vs. on-demand SCM

Purchasing a complete package that combines ERP and SCM to replace siloed systems is an alternative to manual integration. For instance, midmarket ERP software vendor Epicor doesn't often run into customer integration issues, according to Rodney Winger, senior director of product marketing. "We completely eliminate that headache because it is one system," he said. "There are none of the best-of-breed or black box issues. We're not hooking different capabilities from different vendors together."

But a single-system approach isn't always possible. Adding on-demand SCM tools has become another method of improving supplier relationship management and system flexibility across global supply chains. According to Palmer, Magna Powertrain's new online supplier portal is "the strongest part of the system," allowing the manufacturer's 400 suppliers to request changes and fix quality issues.

A manufacturer that needs a complex system with certain industry-specific features might have to look outside its ERP vendor, said Anil Gupta, vice president of marketing at Bristlecone, a consulting firm that focuses on supply chain management.

"If they have a regular warehouse, it might be SAP," Gupta said. "But if it's a very sophisticated warehouse, they might go with a vendor that specializes in that area."

Gupta gave as an example a company that would want specialized functions to deal with import and export regulations. "They're giving up on data integration, but what they're getting is specific functionality sooner rather than later," he said. "It might be on SAP's roadmap, but [some customers] are not willing to wait two or three years."

Smaller SCM software vendors might provide niche functionality to augment software from ERP giants SAP and Oracle -- or vice versa. "We find companies that have legacy or inherited systems, that might have gaps from a supply chain standpoint," said Maha Muzumdar, vice president of supply chain marketing for Oracle. "And we have companies coming from a competitor to us and facing certain gaps. It works both ways."

SOA tools aid with SCM integration

Oracle uses its standards-based Application Integration Architecture (AIA) software to ensure integration with other vendors' SCM tools, according to Muzumdar. "When we build applications, we ensure that industry standards are met." AIA includes building blocks and templates to integrate Oracle and non-Oracle applications using service-oriented architecture (SOA) technology.

As for SAP, most of its SCM customers are existing ERP customers, according to Mark Averskog, director of solution management within SCM for SAP. "People have integrated [SCM] with other ERP vendors," he says, "but it's auto plug and play with ours." SAP Supply Network Collaboration (SNC) tool is built on SOA technology to allow supplier collaboration. "The general strategy is to try to unify user interfaces," said Averskog. "And interface technologies all will eventually be Web-based."

ERP roadmap leads to smooth ERP/SCM integration

It's not always technology-related issues that complicate integration. "Software as a Service (SaaS) providers have figured out how to integrate with ERP systems" using well-tested integration adapters," said Nari Viswanathan, vice president at research firm The Aberdeen Group.

According to Viswanathan, Integration is often really about preparedness and planning. "The challenge happens when ERP systems and projects get delayed because parts of the ERP roadmap that are supposed to be implemented are postponed. For companies that have figured out how to align the processes they have with the software…integration becomes really easy."

Issues do come up when systems aren't totally integrated, said Palmer. But he said that Magna Powertrain is dealing with them. "A perfect world would be one system. Our goal was to get to as few systems as possible."

About the author: Christine Cignoli is a freelance writer based in Boston who writes about IT infrastructures and storage technology. She is a regular contributor to SearchManufacturingERP. Contact her through her website.

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