From the Back Office to the World

Enterprise Resource Planning (ERP) software is a business manager's fantasy. Imagine perfect, timely information flowing everywhere it's needed. A customer order comes in through a salesperson or the Web. Software automatically checks inventory and customer credit, the order is sent to the warehouse, and the product is picked and packed for shipping. If items in the order must be manufactured or assembled, the data is routed to materials-requirements planning software, generating a list of the raw materials needed, which may prompt a procurement system to buy supplies. Meanwhile, software generates an invoice and updates the accounts receivable ledger to reflect the sale. The marketing department gets the order data too, to correlate it with a sales promotion it just ran. There's no reentering data; everyone has complete information.

With a dream like that in mind, five managers left IBM in 1972 to found SAP and invented ERP software. SAP R/3 helps companies move operational data everywhere it needs to be and plan the use of resources, including materials, manufacturing capacity, people—even conference rooms. Any applications suite that integrates internal company functions—automating the back office—falls to some extent under the ERP umbrella.

Peregrine Employee Relationship Management helps employees reserve conference rooms, order business cards, and arrange travel. The Lawson Software 8 Series handles financials, HR, distribution, procurement, and CRM. Oracle E-Business Suite applications are designed to replace nearly every piece of software you use to run your business. PeopleSoft and Siebel Systems have moved beyond their specialties to offer ERP suites. Other big players are J.D. Edwards and Baan. Navision offers an ERP suite for midsize companies that covers everything from customer relations and financials to supply chain management. Agilera is an application service provider (ASP) that offers a wide array of hosted ERP applications.

Traditional ERP deals only with internal processes. The Web lets companies go further—taking the automation scenario we started off with, for example, beyond that manufacturing company's walls to link its systems with those of suppliers, so they can collaborate on planning, production, transportation, and product design. This is what supply chain management is all about. Optimizing a supply chain saves money through efficiency—it also gets products to customers faster and builds market share. Consider how Dell Computer grew by connecting with its component suppliers to create custom-built PCs quickly.

SAP's new mySAP.com suite can augment or replace R/3 with applications for the "extended enterprise" like collaborative sales forecasting and SCM.

Gaining Purchase

The first big B2B application was e-procurement, enabled by software from companies including Ariba, Commerce One, PurchasePro, Atlas Commerce, and GE Global eXchange Services. Coordinating companywide purchasing can save big money—sometimes more in reduced processing costs than in the price cuts a company can negotiate by aggregating its buys. These systems generally set up a master catalog of products on the buyers' computers and make it available to employees. Orders are routed and aggregated internally, then fed directly into suppliers' systems.

Suppliers need to format their catalogs to work with customers' procurement systems. They can use supplier-enablement—or "sell-side" B2B—software to help. A2I, Arbortext, Enigma, Enterworks, Entigo, i2 Technologies, Poet Software, Requisite Technology, Saqqara, Trigo Technologies, Velosel, Venetica, and Wiznet offer such solutions in varying forms.

ICG Commerce's Web-based procurement connects multiple buyers to multiple suppliers. MarketMile e-procurement from American Express is aimed at midsize companies.

FreeMarkets and Procuri set up "reverse auctions" that let a company receive real-time bids from suppliers competing to provide services or products. eBreviate also enables auctions and real-time negotiations. An important part of procurement can be sourcing: finding the right supplier. Perfect Commerce Perfect Sourcing lets buyers and suppliers go back and forth on product and contract terms. Aspen Technology ProfitAdvantage, aimed mainly at process manufacturing (chemical and pharmaceutical) companies, helps with materials sourcing and supply and demand forecasting.

Industry-specific online marketplaces like those set up by Verticalnet have seen mixed success compared to more fruitful private exchanges created by individual companies. SAP SAPMarkets lets a company set up exchange-based buying and selling.

The Supply Chain Gang

i2 and Manugistics are the big names in supply chain management, though offerings from ERP vendors including mySAP SCM and Oracle Supply Chain Management are making inroads. i2's products help manufacturers and suppliers forecast demand and coordinate production and delivery of materials. Manugistics manages logistics, letting companies and shippers do a better job sharing information.

There's a growing movement to provide visibility into supply chains so companies can see if things are going as planned. Categoric's Xalerts software sends out real-time alerts to highlight supply chain problems, such as a mismatch between the number of products ordered and the number delivered. Celarix, Descartes Systems Group, Optum, SeeCommerce, Tilion, and Vigilance also offer collaborative supply chain and logistics management.

Software from Apexon and SupplyWorks helps companies get orders to suppliers quickly. Yantra handles multienterprise order management, making sure orders are passed along to the right suppliers. Kinzan software ties together internal systems with those of distributors. Pakana is a supply chain optimization consultancy that builds Web-based systems. Adexa helps with supply and demand planning. Nonstop Solutions Score helps companies move inventory where it's most needed by forecasting demand.

Logistics.com is a Web-based service for transportation procurement that lets shippers seek competitive quotes from carriers. Arzoon's logistics software ties together transportation and collaborative inventory management.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in Ziff Davis Smart Business.