Jim D’Addario, Sr. Director Product Marketing, Oracle SCM Cloud
“It’s not if; it’s when . . .”
You’re probably tired of seeing and hearing that phrase. It’s almost always attached to bad news: something terrible that will, sooner or later, mangle your organization’s supply chain, menace your career and, just for good measure, rain on the nearest parade.
Some of this doom and gloom is exaggerated, of course, but some of it is quite real: An annual survey of more than 400 supply chain decision-makers found that 65% experienced at least one significant supply chain disruption last year, and many of these firms even dealt with multiple disruptions.
Reviewing this survey data makes two things clear: First, many of these incidents are quite costly, with 32% reporting at least $300,000 in direct financial losses and 20% paying $1 million or more to deal with supply chain disruptions.
Second, supply chain leaders contend with threats and risks of all kinds—at least two dozen, in fact. These run the gamut from unplanned IT outages and cyberattacks, to civil unrest and (believe it or not) animal diseases.
Clearly, it’s useful to have an SCM environment that can handle unexpected departures from business as usual. Sometimes, that might mean switching suppliers quickly and on very short notice; redeploying transportation and logistics resources to route around bad weather; or hunting down the source of a quality-control lapse. In other cases, it might mean pursuing the advanced analytics or machine-learning capabilities that could have given you a few more hours to recognize and respond to an imminent disruption—an eternity when you measure downtime costs by the minute.
How Legacy SCM Limits Supply Chain Resilience
We encourage organizations to think about these types of scenarios in terms of supply chain resilience: the qualities and capabilities that enable a supply chain to persevere through disruptions, disasters and off-script events. (We discuss the concept in greater detail here.) Not surprisingly, a firm’s SCM technology choices have a decisive impact on its supply chain resilience and end-to-end capabilities—and this can quickly become a major concern for organizations that currently use a legacy application and traditional architectures, such as SAP ERP, to manage their supply chains.
The sticking point is the architecture that defines previous generations of on-premises SCM environments: powerful and capable of supporting immense complexity, but with limited responsiveness and flexibility when dropped into a highly dynamic competitive environment. Bringing about transformational change in the business operating model is hard in these scenarios. This was an acceptable tradeoff at a time when software upgrade cycles routinely consumed months or even years. That’s hardly ideal for building resilient SCM applications in a dynamic marketplace—but it didn’t matter when everybody had the same problem.
Today, however, legacy SCM environments are much more likely to turn a lack of resilience into a major crisis. First, an inability to respond in a timely manner takes a much higher toll than it did in the past as technology innovation moves more quickly, and disruption from competitors and market dynamics hit harder and faster.
Second, and more to the point, when your competitors have either shed their legacy SCM burden or never had one to begin with, the resulting supply chain “resilience gap” can pose a risk to your business.
This is an area where it’s more useful to see examples of these issues within your own supply chain operations, rather than considering them as abstract concepts. Let’s look at three areas where a legacy SAP ERP environment poses clear challenges to supply chain resilience. We’ll explain where to look for signs that a legacy SCM application is limiting your supply chain resilience—and what these can mean to your supply chain and general business performance.
- Is your SCM environment a barrier to innovation?
What to look for: Legacy SAP ERP environments typically require a long and arduous process to implement new capabilities. Even simple upgrades may take months to test and deploy; major upgrades can take years to deploy across heavily customized SCM environments that have multiple deployments across the business. By the time “cutting-edge” technology actually appears in your SCM production environment, it may be two or three generations out of date, and catching up can be expensive.
Why it matters: Cloud-based applications have transformed our expectations regarding when and how we get access to the latest technology. In the case of a product like Oracle end-to-end SCM Cloud, a rapid development and deployment process puts new capabilities quickly and regularly into the hands of users. This can be a critical advantage in an area such as predictive analytics, where firms that get immediate access to cutting-edge tools can sharpen their decision-making capabilities, respond more quickly to changing business conditions, and stay ahead of competitors – all traits associated with supply chain resilience and business agility.
- Are legacy SCM data and application integrations an ongoing concern?
What to look for: Legacy SAP ERP environments often employ a heterogeneous architecture that cobbles together multiple databases, data interchange formats, APIs, and other integration methods. Your integrations may tend to be highly targeted and specific; attempting to modify them to incorporate different data formats or sources is typically an arduous undertaking. Look carefully at multiple instance architectures deployed by different partners across the business.
Why it matters: An organization’s supply chain data represents a valuable resource—a repository of insights that can yield new business opportunities, process improvements, and other continuous improvement advantages. A heterogeneous SCM architecture can make the integration process far more costly, complex, and time-consuming. Adding more data sources and applications can make an SAP environment more valuable, but it also introduces more potential points of disconnect and even greater complexity during the next round of integrations and upgrades. Eventually, this cycle can become unsustainable. A cloud-based SCM environment, by comparison, employs a single, overarching end-to-end architecture, that can pivot from supply-driven to demand-driven, depending on maturity and needs—one that is open and standards-based—to ensure that your business has a relatively simple and predictable path for integrating new data sources, processes, and applications.
- Does your legacy SCM application give you options or keep you locked in?
What to look for: Most enterprise application migrations are designed to be strictly a one-way trip. Vendor lock-in is, of course, a bad thing as a matter of principle. But it can also create serious issues for supply chain resilience and business agility when a legacy solution fails to keep pace with technology innovation, disruptive competitors, and other market changes, leaving an organization with vulnerable obsolescence.
Why it matters: Oracle SCM Cloud actually has the potential to dramatically increase your freedom and flexibility to look beyond the SAP ecosystem for solutions to your supply chain challenges. Many firms use their Oracle environment to supplement and reinforce SAP in areas where the latter lacks key capabilities—transportation and global trade management, for example, or product lifecycle management and, more recently, planning.
Through careful and diligent planning, Oracle has repeatedly proven its ability to integrate with SAP ERP and to combine its cloud-based capabilities with SAP’s on-premises model – a point illustrated by thousands of Oracle customers around the world that have performed precisely this type of integration. And, once completed, firms running legacy SAP environments have a path to migrate to the cloud while keeping total control over when, how, and to what extent that migration happens.
Build Resilience, Minimize Risk
One point we emphasize again and again for SAP ERP users is the fact that adding Oracle SCM Cloud to your supply chain technology portfolio is an extremely low-risk investment. At a time when market forces in many industries are getting even more dynamic and unpredictable, and when technology innovation keeps accelerating, your business needs an end-to-end supply chain that can embrace innovation, seamlessly extend across data sources and applications, pivot to customer-focused processes, and adopt the best available SCM technology whenever and wherever it happens to be. Oracle SCM Cloud makes all of this possible—without sacrificing or endangering your existing SAP systems, data, and supporting processes.
For more information on Resilience and SCM transformation download the new eBook: Resilience – The New Imperative for Successful SCMTransformation