Dynamic Duo?

July 15, 2003 by admin

The electronic exchange of data among companies will also gain strategic importance for SMBs. Companies which work together in a value-added supply chain by means of electronic data interchange or XML-based protocols, such as single-object access protocol (SOAP), can communicate with one another simply and economically on Internet in real time. Despite the associated savings potential – estimates range between 10 percent and 50 percent – SMBs still shows great reluctance to improve their value chain with the help of SCM systems.
Market researchers at International Data Corporation (IDC), for example, concluded from a survey of nearly 740 businesses that 12.5 percent of the companies with a workforce between 100 and 999 have an SCM system. For companies with fewer than 100 workers, the figure was only 9.1 percent. The consultants at Cap Gemini Ernst & Young (CGEY) also regard SMBs as an SCM problem child. SCM enhancements to Enterprise Resource Planning (ERP) systems are rather rare. SCM is underrepresented with its share of 14 percent, says the study “ERP in small and mid-size business,” which was prepared in 2002. In comparison, according to CGEY, document management systems are already established in 52 percent of SMBs. Daniel Palm of the SCM Competence and Transfer Center of Fraunhofer IPA in Stuttgart (Germany) also sees SMBs as being still on the sidelines regarding SCM.
In his view, the software providers destroy their own market with a steady stream of new marketing terms. For example, no standard definition prevails today for the term supply chain management. The most rudimentary consensus is that integration, meaning a technical combination of information and data, and collaboration, meaning cooperation that spans companies, are the central elements of SCM. Says Palm, the missing transparency in the product offering, its use and costs also deters many SMBs.

SCM has to add up

A propos costs: According to an assessment by business consultant Detecon (previously Diebold), the cost of SCM projects begins near 250,000 euros. For SMBs, this is far too high. Needed are markedly slimmer SCM systems or separate components taken from a complete system and tailored to their requirements and their budgets. A renaissance of software rental (Application Service Providing) as a useful economical model could be on the way here.

Software providers have recognized the SMB market potential because numerous initiatives speak for their newly awakened interest in SMBs. This is also true for SAP that offers a comprehensive supply chain management solution (mySAP Supply Chain Management) as well as specific solutions for SMBs (mySAP All-in-One, SAP Business One).
SCM-applications with few interfaces that are easy to handle and can be readily extended as the need arises bring competitive advantages. These advantages suppress costs with curtailed total cost of ownership (TCO) and transparency, save time with lean production and just-in-time delivery, and raise quality and innovation for networked suppliers, manufacturers and customers.
Professor Werner Hug of FH Südwestfalen (Germany) defines the successful interplay of these and other factors as integrated SCM. SCM and SMBs, the dynamic duo of destiny, will probably still come together this way in the end.

Further information:

www.cgey.de,
www.idc.com
www.sap.com/germany/solutions/scm

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