Historically, the supply chain software space has been bifurcated into two distinct groups: execution systems and planning systems. Despite the fact that synergies exist between the two, for technological reasons they have not typically been well-integrated or useful to one another. In this article we'll look at aspects of each type of system, (see chart) discuss why there will be more and more integration in the future, and provide a few examples of how supply chain managers can take advantage of the future developments.
Execution systems have been important for a long time. It seems that nearly every major corporation at this point uses SAP, Oracle, JDA, or some other ERP system as the backbone of its operations. The advantages after implementation are numerous: visibility across the entire company, software and operational consistency across departments, various reporting and business intelligence capabilities, modularity and upgradeability, and a single vendor to interact with. However, these do come at a significant cost: Implementations can take several years to complete and are usually quite expensive.
Additionally, ERP systems are difficult to customize, require workers to learn new systems and skills, and the flip side of having a single vendor to interact with is that the user is locked-in with that same vendor. Warehouse management systems (WMS) and transportation management systems (TMS) are similar to ERP systems in terms of costs and benefits, although the costs are orders of magnitude lower for implementation and complexity.
While these systems are well designed and effective for their intended use, they have major drawbacks when it comes to questions that reside a level above operational issues. For instance, assume I have the capability to make a set of products at two different factories. From a transportation perspective, it is of course cheaper to produce in both factories. However, this will require more changeovers at the factory, lowering my productivity. This indicates that in slow periods I should consider utilizing both factories for each product, whereas in peak periods I should single-source for maximum production efficiency. How does the best policy change with oil prices (and hence transportation costs)? How robust is the plan with regards to differing demand forecasts? Typically, executional systems do not provide much support for this type of “what if” question.