SAP injects AI into its supply chain stack, but legacy ERP is still a drag

In an era of constant disruption—from shortages to tariffs—companies need far more agility in their supply chains. SAP’s response has been to elevate supply chain management to a top-tier focus and overhaul its strategy accordingly. SAP’s vision of a unified, intelligent supply chain platform is timely and on-point, but its real test will be converting a still-skeptical customer base and delivering tangible outcomes. It’s a bold move acknowledging the market’s direction. Now, SAP must prove it can execute and help its clients achieve this promised agility.

An integrated, network-centric supply chain strategy

SAP’s new strategy centers on breaking down the silos in supply chain operations. The company has made the supply chain a dedicated line-of-business unit—a signal of increased investment and C-level attention. It’s also merging its traditional supply chain applications (planning, manufacturing, logistics, etc.) with its business network capabilities (SAP Ariba for procurement and other supplier networks) into one cohesive portfolio.

The idea is to treat the supply chain as an end-to-end networked process, not just a set of internal modules. To address the perennial data silos issue, SAP launched a Business Data Cloud offering in early 2025, aiming to unify data across systems for real-time insights. This trifecta—organizational focus, network-centric processes, and a cloud data backbone—sets the stage for what SAP calls a ‘single cohesive supply chain orchestration’ platform. In short, SAP is stitching together ERP, supply chain execution, planning, supplier networks, and analytics/AI into a unified stack underpinned by its Cloud ERP, S/4HANA Cloud, and the broader SAP Business Suite. The company touts this end-to-end integration (what it dubs ‘design-to-operate’ processes) as a key differentiator, claiming it can drive better efficiency and adaptability than a patchwork of point solutions.

Crucially, SAP is infusing AI and automation throughout this unified supply chain stack. Its dedicated Business AI unit is embedding machine learning and generative AI (e.g. SAP’s new AI copilot Joule) across applications to enable predictive insights and autonomous decision-making. Think demand forecasts that update automatically, intelligent order routing, and exception management handled by AI. This aligns with HFS Research’s vision of ‘Supply Chain Singularity’—where intelligence, integration, and autonomy converge into a self-driving supply chain.

Notably, SAP has the breadth—from ERP financials to shop-floor execution—to attempt this one-stop-shop approach. And it’s not going at it alone; partners are on board. SAP has a series of supply chain partners, such as Everstream and Kinexon, that provide differentiating capabilities that integrate with its supply chain solutions.

Meanwhile, the broader market for cloud-based supply chain solutions is booming, and peers are racing in the same direction. Oracle, for instance, has rolled out advanced AI and automation within its Oracle Cloud SCM suite to accelerate planning—a reminder that SAP’s integrated-platform vision is becoming an industry standard play, not just its own narrative. Nevertheless, SAP’s strategy is precisely where the market energy is headed, emphasizing cloud, AI, and ecosystem-wide connectivity as the recipe for resilience.

Progress and pitfalls—adoption will vary by maturity

As promising as SAP’s new supply chain strategy sounds, not all its 35,000+ customers can seize it overnight. Enterprises sit at very different levels of supply chain maturity. The leading innovators—often those who have already embraced cloud platforms and advanced analytics—are primed to capitalize on SAP’s latest offerings. They’ve been seeking end-to-end visibility and more automated orchestration, and SAP is now providing the blueprint (these are the ‘forward-thinking supply chain leaders’ racing toward a singular, AI-driven model).

In contrast, many firms are still in earlier stages, struggling with fragmented systems and basic process digitization. A huge portion of SAP’s user base remains on legacy ECC ERP environments, which weren’t built for this level of integration. In fact, as of late 2024, only about 39% of SAP’s ECC clients had even purchased licenses for SAP S/4HANA (the modern SAP ERP). This poses a real challenge: those on older SAP platforms can’t fully leverage the new supply chain orchestration and Agentic AI capabilities without a major IT modernization. Simply put, you can’t get to an ‘autonomous, intelligent supply chain’ if your foundational transaction system is stuck in 2005.

Moreover, even for organizations that are technically ready, operating model maturity is a factor. True end-to-end supply chain orchestration requires cross-functional alignment (bridging procurement, manufacturing, logistics, sales, etc.), clean and accessible data, and trust in AI-driven decisions. Many companies are still siloed by function, and their data lives in scattered spreadsheets or disparate tools—an obstacle SAP is trying to tackle with Business Data Cloud, but one that also requires significant customer effort in data management.

Change management shouldn’t be underestimated: getting supply chain planners to hand off certain decisions to an AI or to rely on a centralized ‘control tower’ for actions will take cultural adjustment. Early adopters tend to have leadership buy-in to drive this change, whereas less mature organizations may hesitate despite the available technology. Additionally, SAP’s broad suite approach (while theoretically advantageous) can appear complex. Some customers might be confused about which pieces to implement first or how SAP’s many components (SAP Integrated Business Planning (IBP) for planning, SAP Ariba networks, SAP Extended Warehouse Management for warehousing, etc.) all come together in practice. To build confidence in the larger journey, SAP must guide clients through a phased adoption—perhaps starting with quick-win modules or analytics.

Another consideration is that SAP’s customers have options if they find this vision unattainable on SAP’s terms. Competitors and specialists are targeting segments of SAP’s base with promises of faster cloud deployments or niche functionality. Oracle’s cloud ERP+SCM pitch, for example, has attracted some SAP ERP users who wanted an integrated cloud solution without waiting until 2027. Niche vendors (e.g. Kinaxis, Blue Yonder) continue to offer targeted planning or logistics tools that can overlay on legacy ERPs. SAP’s task is to convince its customers that staying the course with SAP—upgrading to SAP S/4HANA and layering these new supply chain capabilities—will pay off in superior agility and lower total cost in the long run versus stitching together alternatives. That argument will be won or lost on execution and proof points. We’re watching for reference clients that truly run a ‘self-driving’ supply chain on SAP end-to-end—those examples will speak louder than any slideware.

The Bottom Line: For enterprise supply chain leaders, if you’re on SAP, pressure-test your roadmaps for moving to SAP S/4HANA and tapping into these new capabilities; start addressing the data and process gaps that could impede adoption.

What enterprise supply chain leaders must do next?

• Audit ERP readiness
• Map dependencies across SAP suite components
• Pressure-test AI promises
• Demand outcome-based contracting, not module-based licensing