Shake out looms in supply chain applications provision

Supply chain planning (SCP) and supply chain execution (SCE), historically quite separate applications, are becoming more compatible and coherent, according to analyst ARC. And ARC’s director of supply chain research Steve Banker says that for users “This integrated capability is a very good thing.” Equally, he adds, “For suppliers, this broadens the number of competitors that will lead to rationalisation.” ARC says the supply chain management IT industry as a whole had software and service revenues of about $4.5bn in 2000, and that this will more than double to almost $11.6bn by the end of 2005. It says SCP has been one of the fastest growing areas in business software over the last 10 years. But it adds that while it will still grow at 20%-plus a year, “there is evidence of saturation at the Tier 1 level in some key verticals and increasing price pressure in other verticals.” However, supply chain execution software vendors have to date had a tougher time. ARC says, “In general, SCE solutions have had a slower pay-back period [and] consequently the SCE market has grown much more slowly.” But ARC says it detects a change now with the emergence of what it terms ‘supply chain process management’ (SCPM), “helping to bridge the gap between planning and execution.” Actually, it’s just another analyst’s name for what’s already been called ‘supply chain fulfilment’ – software providing alerting, business process logic and extended supply chain visibility into inventory in motion, inventory at rest, and a real-time view of key performance indicators (KPIs). IT vendors at the forefront here include Wesupply specifically, with i2 and Manugistics and so forth. “SCPM serves as a bridge by providing alerts on both execution events (late shipment from a supplier) and planning events (the forecast is trending too far out of initial estimates),” says Banker. He says that web-based collaborative commerce is one of the drivers of this development. “The Internet has promoted better visibility as well as a movement toward make-to-order and postponement production strategies. Important customers want granular visibility into the status of their order (has the production run started, has it passed quality tests, have the proper value added services been performed in the warehouse, has the product been shipped). This kind of visibility requires integration with SCE solutions.” And he adds that another driver is the need for many manufacturers that are moving toward make-to-order manufacturing to accurately and quickly be able to promise customers when their goods will arrive. “Robust Capable-to-Promise and Profitable-to-Promise applications will require integration of planning and execution applications, but the execution components will be the true drivers of robust functionality.”