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ERP Suppliers and E-Procurement

Lumbering along with (and slightly behind) these procurement specialist companies are the many ERP suppliers. These giants—SAP, Oracle, PeopleSoft, Baan, J.D. Edwards, and others—have a long history of providing procurement functionality, because purchasing was an integral part of their supply chain modules that have been developed over the years to integrate with Material Requirements Planning (MRP) and Computerized Maintenance Management (CMM) systems. Not only do ERP suites provide financials (general ledger, accounts payable, accounts receivable, etc.), but they also specialize in automating functions throughout the supply chain (warehouse management, procurement, manufacturing, order processing, etc.), and so provide both the transaction backbone and data source for decision support systems.

Their extensive supply chain and procurement expertise, although never based on Internet technologies in the past, nonetheless gives them reason to claim that their software platforms are the rightful place for procurement functionality, particularly—because their systems provide the backbone for both supply chain and financials—if it involves complex procurement and replenishment of direct materials for manufacturing companies. They also claim a rightful inheritance to e-procurement participation because not only have ERP software suites traditionally contained a good deal of procurement functionality, but in order to be effective, any e-procurement system will still need to tie directly into the ERP systems of both buyers and sellers in order to track order receipts and payments.

Accordingly, there has recently been a scramble for strategic alliances between all the major ERP and e-procurement software vendors. For example, ProcureWorks integrates with Oracle, PeopleSoft, and SAP; and Ariba has a three-way partnership with i2 (tying into its TradeMatrix supply chain software) and IBM, which provides a transaction engine with its WebSphere Commerce offering. Ariba also has partnerships or alliances with PeopleSoft, Oracle, and J.D. Edwards. Commerce One supports SAP's ERP suite under its Global Trading Web portal.

Worth noting also is that both Oracle and PeopleSoft have already begun to pursue a bold dual strategy—integration with major e-procurement suites and a parallel strategy of building their own e-procurement capability. PeopleSoft has a standalone e-procurement product that is tightly integrated with its ERP and financial modules, and Oracle boasts of interoperability with other e-procurement packages, but also has a strategy of providing a variety of Internet-enabled procurement products, such as OracleExchange.com, a marketplace that supports procurement for indirect materials.

Supply chain management specialists have also joined the race to produce e-procurement platforms. i2, for example, leverages its knowledge and software designed for direct procurement (TradeMatrix Procurement Services), and apart from its alliance with IBM and Ariba, also has merged with Aspect Development for even greater MRO and direct materials purchasing capability. Metiom and Manugistics, the manufacturing and supply chain decision support software group, announced an alliance designed to help sellers and buyers integrate their e-procurement and supply chain capabilities.

During the past few years, the development of powerful forecasting and planning tools has brought important productivity advances to the manufacturing sector. Over the past decade, demand forecasting has moved from a rudimentary dependency on historical production data used to predict broad, macro trends to a much more sophisticated approach to forecasting and planning production needs using causal data (promotions, seasonal changes, etc.). Today's powerful APS systems—from Manugistics, SynQuest, Numetrix, and many others—can now provide a firm with sophisticated, real-time, computer-driven predictions for production and purchasing demand driven by actual sales or distribution needs. As sales force automation or online order fulfillment systems capture orders, these are now transmitted directly via the Web, essentially providing a "pull" for the purchasing and manufacturing groups. These systems therefore complete what is essentially the full automation of the supply chain, greatly reducing the need to maintain costly safety stock because of uncertainty about demand. Of course, to create this type of fully collaborative supply chain, a firm needs to tightly integrate a suite of products that extends from sales force automation through to forecasting tools, the ERP backbone, the online e-procurement system, and ultimately, into the suppliers' systems.

For this reason, another group of software vendors—those involved in planning and forecasting—have entered the direct e-procurement scene, with companies such as i2, Manugistics, and any number of point of sale (POS) vendors now joining alliances with other platforms to complete the Internet-based supply chain.

Moreover, because in the future customers will both initiate and drive their own purchases through the entire supply chain, and because instant or customized sales require customer service agents to be able to provide real-time availability and delivery information to customers, CRM systems are now being seen as critical to the full integration of the e-procurement process. In fact, in great measure because of the interrelated nature of CRM with the growth of B2B e-commerce market, the CRM marketplace is predicted to have a sweeping renaissance, growing from $2.3 billion in 1998 to $16.8 billion in 2003 (Baljko, Jennifer, "Software Firms Seek to Move Beyond ERP," http://www.ebnews.com, October 14, 1999.) For that reason, there have been any number of moves by both e-procurement and ERP vendors to align with CRM platforms.

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