The supply chain is a critical battleground for software vendors these days, as it begins to overlap with ERP and CRM and gains a greater share of otherwise shrinking enterprise software expenditures. So it’s no surprise that a lot of money and brainpower are going toward customizing supply-chain solutions for various vertical industries — on the part of both the larger ERP players and a host of smaller, specialist vendors.
Much ink has been spilled over the battle between these software behemoths and the smaller supply-chain vendors. And it’s certainly tempting to ask whether horizontal supply-chain solutions, customized with vertical templates, can possibly serve customers better than can vertical solutions that are focused and purpose-built for the business processes of various target industries.
But I’m going to take a radical stand on this one: Supply-chain verticalization isn’t about architecture, it’s about business logic. It doesn’t really matter how you architect this logic into your code base, as long as it’s the right logic. The task of modeling and optimizing vertical supply-chain processes can be so intense and complex, and there’s so much leverage in minor process variations, that the vendors who sweat the details best for any given industry vertical — whether they be large companies or specialized vendors — will come out on top.
At the end of the day, effective SCM (supply-chain management) is about analytics, workflow, and problem solving — and getting those things right means understanding the customer better.
Steve Williams, senior vice president of enterprise product development at Cambridge, Mass.-based Aspen Technology, notes that supply-chain software that is customized for a vertical industry must excel at real-time modeling, problem solving, and integration with various operational systems. Aspen Technology provides supply-chain applications to the process-oriented vertical industries for petroleum, chemicals, and pharmaceuticals.
"You've got to have more sophisticated modeling technology in your supply-chain toolset to take account of the specifics of the industry,” Williams explains. “You’ve got to be able to pull up the constraints that apply in the plants and reflect them in the overall supply-chain optimization problem.”
Pallab Chatterjee, president of solutions operations at Dallas-based i2, concurs: "If you take a whole refinery system, it’s a mammoth problem to optimize.” And, of course, this level of specialization isn’t unique to the oil and gas industry; in textile manufacturing, fabric dyes from different dye lots cannot be mixed because the final product wouldn’t have a uniform color. In the semiconductor industry, where a typical factory produces thousands of different products at once, certain product assemblies require pulling inventory with specific quality characteristics, such as chip speed. These complex “share mix” constraints around how inventory supply and subassemblies can be used to create finished products is found in many vertical industries, affecting their supply chain requirements.