Within the software industry, many SCM and enterprise resource planning (ERP) vendors are following the economic shift. They are developing new functionality—ERP - distribution software—to meet the recent demands and needs of the changing manufacturing and distribution industries.
SCM and ERP software are converging to better address these new demands in the manufacturing industry. In the enterprise software market, ERP software vendors have reached a point of saturation; their installs are slowing down and they are seeing a reduction in sales. Therefore, ERP providers are developing new functionality in order to remain competitive with other ERP vendors, in addition to looking for new opportunities. ERP vendors are trying to adapt to the changing market in order to increase their revenues. They are integrating SCM functionality into their ERP offerings, creating ERP - distribution software that can span the entire production process across many continents (if necessary), and that is able to track final goods, components, and materials.
Traditional ERP solutions included some SCM functionality, which was needed to distribute the companies' produced goods. These systems also allowed components and parts to be imported in order to assemble these goods. But offshore manufacturing and expansion into new markets has required SCM functionality in ERP software to be extended. Some larger vendors have acquired other companies in order to meet these changing demands. For example, Oracle acquired G-Log, a transportation management systems (TMS) vendor and Agile, a product lifecycle management (PLM) vendor; and Activant acquired Intuit Eclipse. SCM software vendors, in contrast, have felt encroached upon by ERP vendors. The situation has posed a real threat to SCM providers in the market, forcing them to extend their ERP functionality to compete with ERP vendors and to try to gain new clients in the distribution and logistics industry.
ERP - distribution software has integrated SCM functionality into its existing functionality to navigate through the complex global manufacturing environment. SCM software maps five processes into one solution: planning, sourcing (obtaining materials), producing, delivering, and returning final products if defective. These processes help to track and manage the goods throughout their entire life cycles. In addition, ERP solutions are used to manage the entire operations of an organization, not only a product's life cycle. This gives users the broad capability to manage operations and use the SCM functionality to manage the movement of goods, whether components or finished product.
With the ability to gain accurate inventory visibility and SCM production, ERP - distribution software is able to see the whole chain of manufacturing and distribution events, from supplier to manufacturer, all the way to the final consumer. Figure 2 illustrates this process.
Figure 2: The merging of a distribution and manufacturing business model
Figure 2 depicts three business models. The first is the SCM model, which includes the manufacturing process. The second is the retail model, which is the distribution of final products to the consumer, business, or retailer. The third model is a combination of the first two business models, joined by the ERP - distribution software solution into one seamless process.
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