best practise

ERP vs. best-of-breed in logistics and global trade

ERP systems form the backbone of nearly every business. So, what is the status quo out there, and how happy are companies with their ERPs in the area of logistics and global trade?

First things first: ERP, of course, stands for “Enterprise Resource Planning”. Now, let's get started. 

Where to look

Looking for the most up-to-date answer, I’ve just come across an interesting research study by Trovarit AG, who also featured a commentary about it in our recent customer magazine “A nach B”. As a spin-off of a renowned research university (Rhine-Westphalia Institute of Technology Aachen), the Trovarit AG follows a long-standing tradition: to link scientifically established business and process models with best-practice methods for software evaluation and IT deployment analyses.

Study: ERP in practice

In a broad-based study spanning more than ten years, Trovarit has been regularly tracking how happy users are with the performance of their ERP systems. And for their latest research, Trovarit surveyed nearly 2,400 users on a wide range of criteria and specifically about their satisfaction with almost 40 “logistics ERP” systems. This actually makes the Trovarit study the biggest independent user survey on ERP deployment in Europe. Despite a prevalence of industrial companies (about 66%), the participants represent all industries and company sizes – making it eligible to speak of a comprehensive overview. OK, so that’s something we can work with here. You can download the study on Trovarit’s website.

Global logistics ERPs?

To spare you some time, here are some findings: the study shows that users are by and large relatively satisfied in the area of logistics. Their ERP solutions deliver the benefit they’re looking for – which is generally end-to-end support for their processes and an integrated database. Drilling down a bit deeper, however, it gets really interesting. Because what the study also shows, is that user feedback in the area of logistics is somewhat critical for some criteria and less enthusiastic overall compared to other business functions.

In think this is most likely based on the fact that ERP solutions with more sophisticated logistics features are much more complicated than, for example, solutions that focus strictly on business administration. The much more individualized nature of logistics processes makes ERP systems technically complex if they try to cover everything out of the box.

Complexity is also one of the reasons that day-to-day work with this type of software is so challenging. That’s why customers often criticize the usability of ERP systems for logistics. Power users don’t tend to have problems, but it can be a real headache for the occasional user. This is reflected in participants’ comments such as “not what I would describe as user-friendly. Mobility is another major weakness of ERP solutions, ranking only mediocre average scores in the study.

Best-of-breed vs. ERP?

So, overall, it seems the level of satisfaction with ERP systems varies widely depending on where the system is being used within an organization. Many companies face a dilemma when it comes to supporting their own logistics and foreign trade operations: Is it better to model the supply chain processes in the ERP system or turn to best-of-breed solutions? By the way, Trovarit also offers “IT match-making”-services for guidance.

My answer to this question is, of course: it depends. But generally, the broader your ERP system is, and the more complex your supply chain becomes, the more likely it is that a well integrated best-of-breed solution may support your business more efficiently. Supply chains with cross-border procurement and global fulfillment usually involve complex customs and global trade procedures in line with continuously changing international laws and regulations.

We’ve learned from the Trovarit study that even customized ERP systems can struggle with mastering such complexity, or can do so only at the expense of usability. And if the system cannot handle the complexity of international, regulatory compliance, for example, it’s likely that the company will work with specialized consultants in this field to avoid compliance violations and penalties. This in turn brings further costs, decreases visibility, and limits flexibility and independence.

Take a good look

I think it’s important to realize that there is no one-size-fits-all solution here, and companies are well advised to carefully scrutinize their individual business units’ needs and identify detailed process and usability requirements before taking a decision.

Specialized solutions for logistics and global trade can offer powerful integration capabilities to ensure smooth communication to and from ERP systems, and can deliver tremendous benefits to the overall business. Both operationally and financially.

So it’s definitely worth taking a closer look outside of your current ERP landscape to make sure you manage all business units to their utmost advantage! Let me know if you have any questions, or would like to discuss this further on XING, or LinkedIn.