ERP Software Blog

2011 Supply Chain Management Year End Review

For my year end blog post I've decided to look back on the supply chain management software industry. Overall, SCM software continues to become more relevant in the IT portfolio of business software applications. IMHO, the complexity and size of supply chain software is second only to ERP applications and the line between the two continues to blur. There were no major events or shifts in the direction for SCM software during 2011; but the momentum does continue to advance SCM applications as more companies address needs to participate in the global market, to reduce costs and to rapidly respond to business changes.

Reminded of Risk Management

Natural disasters in 2011, including floods, earthquakes and tsunamis, imposed their wrath on supply chains. The 2011 disasters remind us of the need for information systems to incorporate risk management features to better understand, plan and mitigate natural and man-made risks. High impact risk management preparedness can be aided with software simulation models. To manage common low impact events, supply chain sub-systems can provide real-time updates on events and facilitate the deployment of contingency plans.

Supply Chain Technology Trends

2011 continued several supply chain software themes from prior years. The advances in SCM application development having a transformative impact include convergence, collaboration and visibility. Convergence is the integration of supply chain planning and execution, where planning drives execution and execution feedback becomes the input into real time planning. Collaboration breaks down line of business, trading partner and hierarchical boundaries to improve planning and optimize SCM processes. Visibility delivers real time, accurate information into the supply chain so decision makers can make better decisions and accurately evaluate performance.

Supply Chain Planning (supply management, demand management, sales & operation planning) and Supply Chain Execution (Inventory Management, Order Management, WMS, TMS) applications need to be plugged into the larger supply chain ecosystem with an infrastructure that supports information sharing, business rules, process design, workflow automation, user interfaces and business intelligence. IBM with their Smart Commerce, SAP with Netweaver and Oracle with Fusion are on the cutting edge with underlying SOA infrastructures and new (cloud, social and analytics) technologies to facilitate SCM convergence, collaboration and visibility. The payback is a smaller investment in working capital, higher service levels, shorter lead times, more efficient operations and adaptable systems, all of which contribute to higher margins.

RFID technology has been in the works since the 1960s, and in 2011, got closer to the inevitable tipping point from peace meal deployments to full scale must have adoption. The hurdles holding back RFID from crossing this chasm include the cost of RFID tags, the initial investment cost, and suppliers incurring the costs while customers realize the savings. By replacing barcodes with RFID tags, warehouse stand to reduce costs and improve efficiencies. The real savings will come from a paradigm shift in business software applications such as CRM, Sales Order Management, Inventory Optimization and other traditional ERP capabilities. Using RFID, consider new ideas where applications can retrieve inventory information from items that are actually in stock or identify an items physical location, replacing inaccurate record keeping systems. Once RFID technology is imbedded in middleware and treated as an available service to all business systems, then SCM software can facilitate big savings. For example imagine: intelligent shopping carts, intelligent passive POS, passive real-time check in/out inventory portals, passive real-time asset tracking, plus many other systems that take humans out of everyday mundane processes.

Being a Good Citizen

Green SCM continues to get quite a bit of attention. It's now easy to make the argument that being green has the dual benefit of public responsibility and improving bottom-line profits; for example: using electronic processes to reduce paper, using reusable packaging and containers to reduce waste, reducing inventory levels to decrease overhead, and better network planning and trading partner collaboration to reduce empty transportation miles. The good news is that most SCM software vendors have already addressed many of these needs. Even better, a new frontier in green SCM (and overall cost reduction) is addressing the supply chain ecosystem as a whole, instead of each trading partner focused on reducing their foot print regardless if it increases their trading partners.

SCM Software Industry

SCM software revenues increased in 2011 by what appears to be around 4%—with SAP, Oracle and JDA keeping their top 3 positions in the SCM software market.

Other than Infor Global Solutions' acquisition of Lawson Software, 2011 SCM acquisitions activities were relatively quiet and had little impact on the SCM competitive landscape. Oracle, SAP and other vendor acquisitions in 2011 were minor, filling gaps in SCM offerings. Some notable acquisitions that did not happen: JDA did not acquire a WMS solution, IBM did not acquire Ariba, and Oracle did not acquire a SCM cloud solution.

In 2010, IBM acquired Sterling to shore up its Smarter Commerce initiative. As part of the acquisition, Order Management, WMS and TMS solutions were included in the deal. The question not answered in 2011 is whether or not IBM is going to acquire a full suite of SCM or ERP products to compete with the likes of SAP, Oracle, JDA and Infor. If not, then what becomes of Sterling's Order Management, TMS and WMS? Another unanswered question from 2011 concerns Infor's (the 3rd largest business software maker) business model. Do they continue to operate as a holding company with most of their investments going towards acquiring new brands and cut research and development cost to squeeze out profits, or do they start to model their business in a more traditional software vendor model integrating portfolio products and investing big in one or two solutions?

Future of Supply Chain Software

Not only has Supply Chain Management software improved business efficiencies, but SCM software is also improving strategic planning, operations analysis, global trading and B2B relationships. Thanks to innovations in SCM software, many companies are recasting the way they organize and do business. The future of SCM is in solidifying the advances already made, new opportunities with RFID and keeping up with new business trends such as cloud, social media, mobility and analytics. Another area that looks for improvement is the supply chain ecosystem as a whole. Instead of cost shifting between trading partners, SCM systems may finally tackle benefits that improve the overall supply chain ecosystem.