Global Commerce Management - Why ERP just doesn't cut it!

I was thinking the other day about the massive trade deficit that the United States was running and the potential problems that it can create for the economy. It has been an issue for many years now and it isn’t going away anytime soon.

The dependence of the U.S. on global trade and commerce is growing every year as a percent of the economy and it has changed the way business does business. We are outsourcing both trade and services as never before. China, Indonesia, Pakistan, Honduras and every other country vie for the opportunity of selling into this country. And we are only too happy to accommodate them.

Over the past decade the quality of both foreign wares and services have improved to meet the requirements of the American market. Foreign manufacturers and service providers have invested very heavily in infrastructure and have hung out the shingle “READY FOR BUSINESS”.

So what does this mean for business. For one, it means that prices will initially fall Companies that have not adopted a global business strategy will fall under increased margin pressure and their very existence will be compromised.

Secondly, it means that the ability to control the environment has been reduced. Time, culture, distance and government regulations make managing the entire process many times more difficult. Organizations that can bring the best controls to this environment will have distinct advantages that will translate into huge competitive advantage. Those companies that can’t manage the global process well will be marginalized or put out of business.

Looking back on the business landscape over the past 3 decades one can see the changes that have taken place. The once mighty have fallen to previously non-existent or marginal competition. Walmart, Target, Home Depot, Costco were barely noticed in retail. Dell was a basement computer manufacturer. Toyota and Honda were hardly household names. Southwest Airlines was barely flying. Their competitors, that failed to adjust quickly to the changing business landscape fell into oblivion or are severely hobbled. Kmart, Woolco, Winn-Dixie, IBM, Chrysler, GM, Delta, United don’t exist or are clearly weaker than they used to be.

The changes in the business environment that began 30 years ago continue today with globalization. The changes globalization brings to the competitive landscape is no less dramatic that what the kinds of seismic changes in manufacturing and distribution that have gone before. The art of moving sourcing and moving goods across geographies at the best possible prices is what the new globalization is all about.

I came across the following article by Eric Keller in the January issue of Manufacturing Technology Magazine (http://www.msimag.com/flipmag/0105/mbt0105_opf_files/016.html), that talks to the issue of ERP systems and their ability to provide the supporting infrastructure for global trade. If one is to believe Eric, and I certainly am in that camp, this does not bode well for traditional manufacturerees. Companies have invested so heavily with SAP and Oracle, etc. that they can scarcely consider that their ERP solution is not well-suited for the new business paradigm.

What if they don’t adjust? What if they wait for their ERP vendors to understand the environment and deliver the software necessary? What if their competitors move quickly and aggressively to put into place applications that truly manage global commerce?

History has a way of repeating itself. With globalization comes the need to manage global commerce. Without the right equipment to play the global game companies will be a significant disadvantage. The ERP weren’t designed for this purpose.

The ERP solutions just don’t cut it.