The supply chain market continues to grow, but is changing in the types of technology that users are interested in and the value they require...
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Supply Chain Market 2014
Gauging the size of the supply chain technology market is a problematic exercise—determining what technology components to include and what to leave out, which companies to include and who to leave out. In addition, user needs and the technology portfolios they acquire to meet those needs are shifting, and therefore, new providers are entering the traditional market to address them. Many of the providers in this market were not considered part of a supply chain portfolio in the past.
Take, for example, social networking. 2014 will be a big year for social adoption. The shift will be to more inclusive architectures that combine social with an application.1Transportation is another. Users are looking for and getting visibility in a whole new way, leveraging geospatial/location-based technologies, which often come from different solutions providers.2 TMS providers are reaching into inventory visibility if they have the architecture to get down to item level.
Speaking of visibility, the manufacturing sectors were low buyers of cloud and inter-enterprise connectivity in the past, but we have seen that market take off as well.3 Manufacturing Quality Systems as well as Manufacturing Execution Systems (MES) have begun to be available in the cloud. And that will allow plant-to-plant visibility within a company or between customers and their contract manufacturers.
The tech providers’ “space” or market segment definition becomes fuzzy as they move into an adjacent space and become competitors, whereas in the past they may have partnered. Solutions providers who were information service providers, for example, or partnered to provide a single module, now are expanding their footprint.4
Demand Planning solutions players also are stretching their footprint with consumer-oriented social sentiment, mobile engagement, and big-data analytics. In those markets, this represents newer territory. Supply chain vendors have been hesitant to play in the consumer side. Yet, de facto, a demand planning solution that supports consumer products attempts to predict consumer demand.5
The manufacturing marketplace, as well, is a blending and batching of architectures—front office software managed by IT vs. MES applications (automation/operations/shop floor control).6 Though considered part of the manufacturing market, manufacturing automation was its own space. Many companies buy the whole stack: the hardware and the software. (Again, it becomes difficult to clarify the specific revenue for the software when these spaces converge.)
At the item level, RFID and sensors continue their steady growth. Users are combining the technology with their Omni-channel, Supply Chain, Inventory Management, and Retail applications.7
B2B, which has been cited by buyers as an important area for focus, has seen big changes in the provider landscape in the last year. GSX was acquired by Open Text last year, with Open Text now joining the ranks of Attachmate and IBM (Sterling) as a provider, linking the B2B with other business applications. The standalone leaders such as Axway, CLEO Communications, DiCentral, and Liaison Technologies, for example, spread their application footprint to create not just EDI and MFT, but supply chain collaboration extensions.
Cloud platform application providers often provide these B2B capabilities, either by leveraging their partnerships with the B2B players or organically building their own.
Markets converge and diverge. Figure 1 shows many of the common overlaps. Purchasing software can be challenging, of course, if users choose to configure their own components, which is the choice with about half of the buying market. That is, they buy modules and integrate them instead of using a single, integrated comprehensive platform.8
Figure 1 - Convergence of Technology
What Users Tell Us about Benefits
ChainLink conducted an end-user survey to determine what supply chain professionals felt were the strategic and tactical benefits of the software implementation across the functions—procurement, manufacturing, fulfillment, transportation, demand, and supply planning. Top benefits by function are seen in Figure 2. Interesting common areas have emerged and key value issues are:
Spend—whether for transportation, materials, or labor, getting a baseline as well as an ability to understand spending is key. Many firms just don’t have a baseline of all their spend associated with materials and/or transportation. Post getting the base line, managing spend is an ongoing issue.
Inventory, inventory, inventory—still cited as a key driver.
Cycle time, on time, all the time—from supplier lead times, responsive manufacturing, and on-time delivery. Time is seen as a key that unlocks many doors.
Benefits can be strategic, with these types of needs/goals mentioned in the top areas:
Customer experience—these tend to center around inventory availability, choice, and responsiveness.
Visibility—elusive in terms of metrics, but cited as numero uno by all functions and critical to managing day-to-day execution.
Risk management—an increasing area of concern is the ability to understand and mitigate risks.
Figure 2 - Top Benefits by Function
How Long Does It Take to Derive Benefits?
Also of interest is the diversity in time to benefit among companies. Small companies’ projects are shorter in duration, but can have profound benefits. Larger companies who have been chipping away at problems or are upgrading vs. those who are doing their first project showed longer implementation times and a lower percentage of benefits. Of course, a 2% benefit for a Fortune 500 vs. 8% for a $50M enterprise can represent significantly more dollars. And if the reductions are not the result of just passing inventory around the chain—i.e., transfer of inventory—but real reductions, they represent an economic impact across the total supply chain. Figure 3 shows the difference in time to benefit by company size.
Of note regarding the larger firms’ rollout times: the largest enterprises or government projects, not surprisingly, do projects that can run three or more years in duration.9
Figure 3 - Time to Benefit
There are also huge variations in the types of technologies and/or the rollout strategies deployed, notably:
Cloud—Time to benefit was significantly better in cloud deployments. Though not much of a surprise from a technical perspective, companies still have to deal with process change issues, which again, are more complex in larger firms.
Track and trace—These types of projects are interesting variants of implementation times. “Going live” has a different context, since connecting cloud software to devices can represent a “formal” project duration of under a month. However, tagging assets is an ongoing endeavor. Many firms will tag only specific routes or assets and stabilize (or plateau) in one area for months or even a year before they decide to look at other areas of the business. ROI in these technologies should be considered an ongoing opportunity for benefit.
Big bang vs. one at a time—Another interesting variant of time to benefit is the rollout strategy for multiple departments, divisions, or geographies. There is no right answer, but companies have tended to take the conservative approach and done one division at a time.10 They may declare victory at each go-live or defer declarations of benefits until the whole roadmap is done.
S&OP—Here is an example of the detrimental effect of the lack of definitive goals. S&OP and other process-oriented and cross-functional type projects often suffer from the “never quite done syndrome.” Two interrelated factors were highlighted here. Firstly, was the lack of clarity among senior management of what, ultimately, would determine a successful outcome for the project and process. For example, in a decision-making process/meeting what decisions should be made and how should they be implemented? Then the obvious question becomes what data are required to support these decisions. From a technical perspective, ill-defined workflow and poorly defined reports are often an outcome of these projects that have poor guidance from “the top.”
In the next segment of this series, we will continue the discussion on how solutions are being designed and changed to solve today’s supply chain challenges.
We will also provide the market and growth perspective for supply chain.