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SAP Announces New Version of Supply Chain Applications

mySAP SCM 5.0 gains ground on best-of-breed vendors.

VentanaMonitor™

Summary
At the CeBIT 2006 trade fair, SAP AG, the market leader for enterprise resource planning (ERP) software, announced the latest upgrade of the supply chain management (SCM) applications in its mySAP Business Suite product line. Scheduled for general release in June, mySAP SCM 5.0 includes major new capabilities that support planning, execution, trading partner collaboration and visibility and supply chain analytics. What's new, beyond the footprint expansion and functional enhancements, is SAP's focus on solutions for specific industries and support for business processes. From both business and IT perspectives, SAP SCM is finally moving beyond playing catch-up with the best-of-breed products and beginning to offer the features needed for integrated supply chain management.

Assessment
In release 5.0, mySAP SCM will contain a new set of tools that integrate supply chain analytics, planning and execution. Using SAP's Business Warehouse, Inventory Collaboration Hub, Event Management and SAP NetWeaver Exchange Infrastructure (SAP XI) middleware, the new version will be able to extract data from the supply chain and present it to managers in the form of preconfigured key performance indicators (KPIs) that can be used to guide supply chain planners, warehouse managers and transportation managers. Building on this framework, later this year SAP will add a new module for sales and operations planning (S&OP). Using SAP xS&OP, supply chain planners and senior managers should be able to develop plans that balance stable and efficient operations with adaptability to rapidly changing business conditions.

SAP also announced the addition of new functionality for extended warehouse management, supply network collaboration, transportation management and service parts management. For example, enhancements targeting high-tech and consumer product manufacturers allow OEM manufacturers to order components for suppliers and to track their use of those components. The product also allows for collaborative replenishment between manufacturers and suppliers. These new supply network collaboration capabilities are critical for distributed manufacturing and visibility of order fulfillment; that visibility keeps companies apprised of the health of their supply chain, sends notifications when exceptions occur and tracks KPIs to help manage efficiency of the supply network.

In the past, most customers purchased SAP's flagship R/3 ERP software because of its customer- and supplier-facing execution components, such as customer order management in sales and distribution and purchasing in materials management. But R/3's shortcomings in planning, warehousing and transportation capabilities drove them to choose best-of-breed systems from third parties. Over time, however, SAP has responded to the needs of its major customers and focused on the major supply chain capabilities and manufacturing enhancements that improve productivity and usability in planning and scheduling transactions, maintenance of the planning environment and support for integrated business planning.

SAP is making progress in addressing the larger supply chain integration needs of global organizations. The upcoming new offering incorporates an array of sensible developments. SAP's core SCM customers also will benefit from the creation of new composite applications like xS&OP; many of them will leverage SAP's Enterprise Services Architecture (ESA), which goes a step beyond service-oriented architecture (SOA) in providing the business semantics necessary to organize and execute business processes. These new composite applications match up more closely with current business processes.

Market Impact
SAP's SCM solution is beginning to mature to meet the changing integration requirements of global companies. In doing so, SAP is gaining ground on the best-of-breed vendors who have ruled the field of mature warehouse management and planning solutions. However, it remains to be seen what the new xS&OP application will really do in its first release. Historically SAP has not been in this market and will have to prove it can compete with mature offerings in this area from companies such as Demand Solutions, Interlace, Silvon and Steelwedge, especially in ease of use and integration of multiple data sources. It also is important to note what else mySAP SCM does not do currently. For instance, it cannot optimize multi-tier inventories or handle supply chain simulation or supply chain design - all critical elements for supply chain performance management. For these capabilities SAP customers will still rely on SAP point-solution partners including Llamasoft, Optiant, SmartOps and ToolsGroup.

Recommendation
Upon release, mySAP SCM 5.0 will be available as a maintenance upgrade to customers currently covered by maintenance contracts. Ventana Research recommends that companies committed to SAP but using best-of-breed systems to fill gaps reassess their SCM core applications in light of SAP's new offerings. Specifically, we recommend that you look at the cost benefit of SAP's integrated warehouse management, transportation management and supply chain planning applications. Those that are looking to purchase or upgrade their best-of-breed investments should also consider the benefits of SAP's new integrated capabilities before committing.

Related Research Notes:
From Monolithic to Business Process Applications
SAP is redefining the enterprise applications industry.

S&OP: A New Approach to the Single Enterprise View
S&OP integrates fragmented plans to improve operational performance.

What's BI Missing for Global Businesses?
Visibility and control are keys to global supply chain performance.

About Ventana Research
Ventana Research is the leading Performance Management research and advisory services firm. By providing expert insight and detailed guidance, Ventana Research helps clients operate their companies more efficiently and effectively. These business improvements are delivered through a top-down approach that connects people, process, information and technology. What makes Ventana Research different from other analyst firms is a focus on Performance Management for finance, operations and IT. This focus, plus research as a foundation and reach into a community of over two million corporate executives through extensive media partnerships, allows Ventana Research to deliver a high-value, low-risk method for achieving optimal business performance. To learn how Ventana Research Performance Management workshops, assessments and advisory services can impact your bottom line, visit www.ventanaresearch.com.
2006 Ventana Research

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