- 31 May 2011
Best of Breed vs Enterprise Resource Planning Solutions
By Alan Morris, Managing Director of Retail Assist
A study last year by Martec International indicated that retailers are now returning to strategic IT projects that they had put on the back burner for the previous two years due to the global economic downturn. At the height of the recession, retail IT budgets were estimated to have been cut on average by 20%. The report found that improvements to supply chain software were the third greatest priority for retailers over the coming year, with 11% making immediate plans for improvements. Merchandising and buying software came in as the fifth most important target, with 9% of surveyed retailers wanting to upgrade their existing systems over the following twelve months. With these investments in the supply chain in mind, I wanted to provide some clarity on the available options.
“Best of Breed solutions” and “Enterprise Resource Planning (ERP) solutions” are terms that are widely used within the retail industry in relation to supply chain and merchandising software, however for people who work outside the remit of retail IT departments it may not be immediately obvious what the two phrases mean.Therefore, before comparing the functionality provided by Best of Breed applications with that offered by ERP solutions, I will supply a brief definition of the two terminologies in order to ensure that they are understood.
ERP applications provide a single solution that comprises of the array of functionality needed to underpin businesses core processes. By their nature ERP solutions are procured from a single supplier. In contrast, a Best of Breed Solution is an implementation of a number of specialist applications from a number of specialist suppliers. These applications in isolation provide the functionality needed to meet the specific requirements of the users.
There are a number of advantages of using ERP solutions, the first being that their implementation can lead to increases in efficiency. Even for retailers whose IT projects have not been put on the back burner over the past two years, reducing expenditure is something that most have been tasked with. Efficiency improvements are seen as the Holy Grail for many retailers, as in the majority of cases they result in a reduction in costs.
Once developed, ERP solutions can also be relied upon to provide reliable information for the company and ensure quicker processing of information, which reduces the burden of paperwork, leading to a more driven and even a more environmentally friendly business. Furthermore, ERP solutions are easily adaptable to changing business environments, which is a useful facility within the ever-evolving retail sector. Retailers no longer introduce new lines solely to reflect the four main seasons and merchandising now takes place on a continuous basis, to keep the offer fresh, relevant and customer-centric, so IT systems need to cater to these needs.
The primary disadvantage that retailers are faced with when considering purchasing an ERP solution is that they are expensive to implement. Furthermore, once the ERP application is established, the cost of switching providers would be very high for the retailer. This in turn leads to increased supplier negotiating power in relation to support, maintenance and upgrade charges.
In addition, many ERP solutions have been designed to be applicable to a number of different business sectors, which can make them difficult to customise to meet specific retail industry needs. Devoting the time and energy of personnel to re-engineering these business processes may divert focus for retailers and / or damage their competitiveness within the busy retail marketplace.
Focussing now upon Best of Breed products, one of their advantages is that they provide the optimal solution for each business area as richer functionality is supplied. This in turn satisfies more users working in various different teams within the business. Also, if existing applications have proved popular with certain teams, these can be retained and the new application can be implemented alongside them, which also protects earlier return on investment.
Furthermore, suppliers of Best of Breed solutions can be relied upon to be specialists in their chosen field, which is reflected in the appeal of their applications. This means that suppliers’ development budgets are also focussed upon extending their specialist functionality, and are not expected to be spread across many different features. For example, a supplier of a planning application will invest 100% of their research and development budget in planning functionality, whereas planning functionality would only be one of many areas of focus for an ERP provider.
Nevertheless, there are also several drawbacks for retailers who chose to implement several Best of Breed solutions from different suppliers. The first stumbling block that the company may encounter is integrating the various applications. This is required to ensure that the array of deployed software provides a seamless solution in relation to addressing end-to-end business processes. If integration does not occur, this will lead to frustration for users in the best case scenario, and business risk in the worst.
The support model deployed to look after Best of Breed Solutions also needs to be clearly defined and understood, with ideally a single point of ownership (or primary support partner) being identified, in order to counteract “grey areas” between suppliers and their individual and collective responsibilities. Implementation projects are another area that needs to managed by a single point of contact, who holds the “helicopter view” of the end-to-end solution and who can bridge the gaps between the different suppliers.
In conclusion, the decision that retail IT departments are expected to make when choosing between ERP and Best of Breed solutions has been likened to the choice presented to a potential tourist between a package holiday and a bespoke holiday where they select the flights, the accommodation, the duration and what is included. The package holiday gives the purchaser surety that they have a single point of contact (i.e. the travel agent) who will take care of everything, whilst the bespoke holiday gives them the flexibility to get exactly what they want from the trip, but not necessarily one company to turn to if they encounter any problems. The question retailers need to ask themselves is what sort of journey they are willing to make, and what the ultimate experience they are seeking is.