Editorial from the May 2007 issue of Managing Automation

SAP Vs. Oracle: Tackling the Plant Floor

by Jeff Moad, MA Editorial Staff

Posted on Thursday, February 28, 2008 12:55:29 PM                                     

It wasn't so many years ago that manufacturing executives came to the conclusion that it no longer made sense for different divisions and plants to select, configure, deploy, and run their own enterprise resource planning systems. In an attempt to drive consistent finance, planning, and other processes across the enterprise, manufacturers began to standardize on a single ERP platform. Today's ERP leaders — specifically SAP and Oracle Corp. — proved the most adept at encouraging and cashing in on that consolidation trend.

Today, that scenario is being repeated on the plant floor. Intent on improving plant efficiency by spreading consistent, lean processes across their manufacturing environments, many manufacturing executives have begun to move toward standard manufacturing software systems that can be deployed consistently across the enterprise and integrated with enterprise systems and data.

This, experts say, has unleashed some long-pent up spending on manufacturing execution systems (MESs) as well as enterprise manufacturing intelligence (EMI) software. According to a recent AMR Research survey, companies said their spending on manufacturing operations systems in 2007 will capture a portion of their software budget second only to ERP. Between 2006 and 2007, spending on manufacturing software is expected to grow faster than any other category, including ERP, CRM, performance management, and supply chain management, according to the AMR poll.

"As they've leaned out their supply chains, manufacturers now are focusing on reducing manufacturing constraints," says Alison Smith, senior research analyst at AMR. "They're investing in systems that can tell them what they can make, where they can make it, and what it's going to cost."

Not surprisingly, this increase in manufacturing software spending has attracted the attention of the same big software players that rode the wave of ERP consolidation so successfully just a few years ago. Like gunfighters staking out a new town, Oracle and SAP have squared off to see which company can establish itself at the center of the trend toward standard, integrated manufacturing execution and intelligence applications. The archrivals are investing major financial resources to develop, acquire, and partner for the manufacturing expertise and software they will need to walk away the winner. But the two are taking dramatically different approaches to the market, with Oracle attempting to build substantial MES capabilities directly into its enterprise applications, and SAP preferring to align with partners for much of the manufacturing execution and intelligence functionality it needs.

"SAP and Oracle are far more focused on the manufacturing operations space than they have ever been before," says Carter Johnson, senior vice president for corporate development at MES vendor Visiprise Inc. "But the two companies are coming at the market much, much differently."

In some ways, the real question is not whether SAP or Oracle will prevail, but whether any provider of general, packaged applications, such as ERP, can successfully meet the needs of manufacturing operations software users. That's because software that runs plants is different from typical back-office ERP applications in a couple of important respects.

First, ERP systems focus mainly on automating processes and functions — such as finance, procurement, and supply chain — that are relatively consistent across different organizations. However, MES systems — which direct, track, and monitor materials and orders as they move through production — automate plant processes that are often specific to a given manufacturing vertical or even a given company. So, experts say, it will be a challenge for the likes of SAP and Oracle to understand, for example, the component serialization and traceability requirements that aerospace manufacturers face, much less produce software that can efficiently automate their processes.

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