The Drivers of Next-Generation Enterprise Resource Planning

Analyst Insight: Enterprise resource planning (ERP) arose from material requirements planning (MRP), evolved into manufacturing resource planning (MRP II), then scaled globally. Now comes ERP4, drawing on Business 4.0 technologies to meet the next “Connected Age” wave of change: Ecosystem Resource Planning. While not on many markets’ radar screens, these new platforms are being put into play by innovators and early adopters.  

Supply chain management is rapidly transforming into supply network management. The unintended consequences of regulatory decisions by government officials during the pandemic highlighted the network effect. Supply professionals became painfully aware that their supply chains were linear and sequential in nature, and not responsive to the complexity and dynamics of modern-day supply network ecosystems. 

Instead of the bullwhip effect, which results from delays originating upstream, the cat o’ nine tails effect demonstrated the consequences of downstream supply shortages. Material flows, governed by the networked ecosystem of multi-echelon intersections and relationships, are more representative of current reality than the old supply chain structure metaphor. 

Just as we saw the market for batch mainframe legacy enterprise applications implode due to the adoption of network-based applications or ERP, we’re about to experience the “Connected Age” wave of change, bringing digital transformation. It’s manifested by pervasive cloud and mobile technology, multi-enterprise ecosystem commerce platforms (ECP), plug-and-play composite applications, ecosystem platform data (versus enterprise big data), cognitive technology and analytics, and the demand for sustainable, profitable, and resilient ERP4 applications. 

We see companies embarking on a five-phase digital maturity journey: 

Digital transformation and digital twins, including:

• Digitization: Converting manual process data to electronic forms,
• Digitalization: Using process automation data for robotic process automation, and 
• Simulation: Involving business modeling and scenario analysis. 

Connected commerce, including:

• Collaborative supply network management,
• Analytics and decision support, including integrated business planning & execution, and
• Enterprise supply network (ESN), realizing that the traditional supply chain is inadequate. 

ESN control towers, including:

• End-to-end visibility and network optimization,
• Cognitive analytics, deploying artificial intelligence and machine learning, (AI/machine learning)
• The internet of things, including process automation, and track-and-trace capability, and
• Ecosystem realization. 

Ecosystem commerce, including:

• Community of commerce with ESN orchestration,
• Link to ecosystem commerce platforms (ECPs), and
• Network of networks ecosystem visibility. 

Ecosystem resource planning (ERP4), including:

• Ecosystem federated data enabling ecosystem network optimization,
• Cognitive autonomous supply network, and
• Ecosystem shared services and value savings. 

Participants who successfully navigate the path toward digital ecosystem commerce maturity will be rewarded with optimal resource capacity utilization for the total ecosystem, through the digitization and democratization of commodity resources. We don’t compete on transportation lanes; we compete at the point of demand and sale. Resource capacities are facing shortages, and only optimal resource capacity utilization — powered by ecosystem commerce and collaboration — will enable efficiency and resilience in the face of competition and disruption. 

Outlook: In 2023, expect additional entrants into the multi-enterprise ecosystem commerce platform market. ERP providers are diligently migrating their applications to the cloud, and the best-of-breed providers are being rolled up or acquired. While not on the majority-market radar yet, the innovators and early adopters are aggressively deploying digital transformation for ecosystem commerce and resource planning. You don’t want to be on the wrong end of the cat o’ nine tails.