SCM's Use Broadens Throughout Enterprises
The supply chain management (SCM) market experienced moderate growth in 2005, increasing 3 percent to $5.6 billion, as businesses continue to rely on suite providers for their software solutions. Additionally, enterprises are beginning to understand the benefits associated with integrating SCM with CRM initiatives, according to AMR's report "The Supply Chain Management Applications Report, 2005-2010." This is one reason why suite providers remain a popular choice within this market, according to Mark Hillman, senior research analyst at AMR Research and author of the report.
SAP continues to lead the pack with 12 percent revenue share, followed by Oracle at 10 percent, i2 Technologies at 5 percent, Manhattan Associates at 4 percent, and Infor at 3 percent, according to the report. SAP continues to build out its SCM by focusing on building a partner ecosystem based on NetWeaver, while Oracle has continued to expand its SCM footprint via acquisitions and development. As a result, consolidation within this market will remain strong, as smaller niche players will "drive pockets of innovation," says Hillman, which in turn is being driven by "companies' renewed focus and spending on supply chain initiatives." Conversely, Hillman says companies should expect this market to continue to grow moderately as spending is "tempered by the fact that corporate supply chain organizations maturity is still low, limiting adoption," he says.
Supply chains are becoming increasingly global, complex, and interdependent, as companies outsource manufacturing and shipping functions. As a result, companies are being forced to extend supply chain data to these third-party vendors to ensure the timely arrival of products and services to customers. Enterprises now require integrated solutions that transmit supply information in real time to monitor customer demand on a daily or weekly basis, as opposed to monthly monitoring in years past. "This is all part of cross-company planning to measure spikes in customer demand," Hillman says. "You don't want your customers going to the competition because you're out of stock on a hot item."
New strategies that integrate customer demand with supply chain are taking root as well, Hillman says. Many companies are now practicing what's called demand-driven supply networking (DDSN), or taking customer demand, supply chain, and product development into account to drive products to market. Companies practicing DDSN, such as Dell, Proctor and Gamble, Wal-Mart, and Best Buy, are likely to carry 15 percent less inventory, are 60 percent faster to market with products and/or services, and complete 17 percent more orders, according to AMR Research's Supply Chain Top 25 for 2005.
DDSN represents a new, conceptual approach to SCM. In the past a company would most likely derive its SCM based on its production and manufacturing capabilities and schedules. To compete in today's marketplace, companies must draw from customer demand and service, supply management, which includes sourcing, manufacturing, and distribution, and product design and innovation to catch the eye of the customer, according to Hillman.
For DDSN to work, IT should focus on connecting work processes to increase the speed, quality, and profitability of everything from order management to new product launches. Friscia says businesses should consider electronic data interchange systems, ERP, SCM, CRM, and product life-cycle management solutions as the key pieces of the DDSN puzzle.
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