To increase market share, vendors are expanding and offering more services to customers. On one hand, enterprise resource planning (ERP) vendors are adding such functionality as warehouse management systems (WMS) and transportation management systems (TMS) into their suites; on the other hand, supply chain management (SCM) vendors are including business intelligence (BI) or supplier relationship management (SRM) functionalities in their applications. Consequently, the IT market is seeing a convergence of functionality for ERP and SCM systems.

In pushing downward into the supply chain space, ERP vendors are incorporating such additional functionality as product lifecycle management (PLM), SRM, advanced planning, WMS, TMS, event and performance management, labor, slotting, yard management, and radio frequency identification (RFID) to their ERP product suites. This business model of ERP vendors pushing downward has expanded, and it is consuming valuable supply chain execution (SCE) market share. This article examines the upward push of supply chain vendors into the ERP space and the downward penetration of ERP into the supply chain market, as well as the overall impact on the market.

The Downward Push of ERP Vendors

ERP vendors are expanding their market share at the expense of SCM vendors. Tier one vendors, aware that their solutions were lacking in detailed supply chain functionality, have spent extensive research and development resources to improve these shortcomings. SAP, for instance, has dramatically increased functionality within its WMS offering.

Figure 1 outlines most of the traditional functionality included with most ERP and SCM systems software.

Traditional functionality of most ERP and SCM systems software.

The left-hand side of the chart shows traditional ERP modules, and the right-hand side displays typical SCM functionality. Within each of these modules, there are sub-modules, as in advanced demand planning (outlined in gray). In demand management alone, several components that were not previously included in earlier versions of ERP have now been incorporated. Likewise, within SCM software, modules such as BI, manufacturing, and SRM are now included as part of SCE software.

The SCM Push Upward

Supply chain vendors of the past only provided a single product that addressed one aspect or function within the supply chain. SCM vendors feeling the tightening of the market have started to address their shortcomings, and are including more ERP-like modules to expand their solutions.

Impact of the Tier Two and Three Vendors

Let’s not forget the important role that the tier two and tier three vendors play. The lower tiers of WMS vendors are adapting to this new model, and are starting to encroach on the larger supply chain market. The tier two vendors have adapted by increasing its own functionality and in most cases can be implemented faster than a tier one vendor.

Companies are realizing that if a tier two WMS vendor addresses most of its needs, then a more expensive tier one solution may not be necessary.

The tier two SCM vendors can now approach larger companies with the increased functionality, and offer lower prices to consumers that may not have considered a smaller solution previously.

Which vendors will emerge victorious?

The overlap of modularity between SCM and ERP solutions has caused further confusion in the SCM market.

The ultimate solution will offer all the functionality needed. It seems that SCM vendors have executed the upward expansion to the ERP market effectively—particularly in comparison to the way ERP vendors have handled the downward penetration to the supply chain market. SCM vendors have incorporated ERP-like modularity, and even offer these modules on a stand-alone basis if necessary.

Summary of a previously published article by:

Dylan Persaud

Senior SCM Analyst for Technology Evaluation Centers