Supply Chain Management

A look at the state of the Supply Chain Management market.

• By Clara Parkes
• 07/01/2002

Security measures as a result of the Sept. 11 attacks have slowed the movement of materials from source to customer, impacting the corporate supply chain. Although many companies have some type of supply chain management (SCM) systems in place, most of these systems have been optimized to forecast and respond to uncertainties in demand, not supply. The challenge for SCM vendors is to bridge the gap between demand management and supply management.

Who Owns SCM?
Because SCM systems need to integrate with both front- and back-office processes, ERP vendors are making a strong push to claim SCM as part of their solutions. The latest move came in April when Baan announced plans to expand into the supply chain and product lifecycle management market. SAP, Oracle and PeopleSoft are already firmly entrenched.

Although feeling the pinch from ERP vendors, several pure SCM companies remain relatively strong. i2 Technologies, still considered the SCM market leader, has strengthened its planning and execution integration through partnerships with Informatica and webMethods.

Originally established to provide outsourced delivery services, third-party logistics (3PL) providers are also gradually inching their way into the SCM arena.

The ABCs of SCM
The SCM market is one of the most fragmented in the industry, with functional subcategories whose boundaries often appear to blur with one another. The most common divisions are:

SCA—Supply chain analytics: These products enable customers to measure ongoing ROI of operations. Vendors offering SCA functionality include PeopleSoft and Informatica.

SCC—Supply chain collaboration: Already in practice for several years now, collaborative supply chain management is beginning to become a de facto element of other flavors of SCM. It involves the integration of distribution centers, warehouses, and other sites across multiple organizations for a more efficient flow of materials from source to customer.

SCEM—Supply chain event management: SCEM software is designed to addresses strategy and planning for optimal supply chain operation. It takes into account events along the supply chain that can affect supply replenishment calculations. Standalone SCEM vendors are feeling the pinch from ERP and SCM vendors such as i2. This, combined with a bad economy and slow market penetration, has many predicting the collapse of standalone SCEM vendors altogether. Vendors still standing: Saltare and Tilion.

SCE—Supply chain execution: These products focus on automating and managing the actual logistics of the supply chain, including shipping and tracking/ tracing products and containers through international and domestic operations. Pure SCE vendors include LOG-NET, which provides cargo management software; and Pfastship, which provides shipping and tracking functions.

SCP—Supply chain planning: This component involves strategic forecasting, predictions, and complex analysis aimed at improving the overall efficiency of the supply chain while optimizing inventory. Giga Information Group estimates that the SCP market has grown between 30 and 40 percent per year over the past decade. Vendors offering SCP functionality include SAP, i2, Manugistics, Logility, and WebPlan.

Supplier relationship management: This category is essentially a reshaping of CRM technology to help companies manage supplier relationships efficiently. SRM functionality has been legitimized by the likes of SAP, Oracle, and PeopleSoft, but it isn't limited to the larger ERP vendors. Pure SCM vendors i2, Manugistics and Commerce One also offer SRM technology.

Uncle Sam to the Rescue
In April 2002, the United States Customs Service announced the Customers-Trade Partnership Against Terrorism (C-TPAT) to expedite border crossing of goods while maintaining safety. Companies must apply to the C-TPAT and adhere to a rigid set of guidelines. Once they achieve compliance, they're given a trusted status resulting in faster movement of goods through customers, dedicated shipping lanes, and fewer inspections.

Should companies incorporate C-TPAT into their SCM strategy? According to Gartner Inc.'s Dan Miklovic, absolutely. "Global companies should step up to the security challenge as a matter of course," he advises. "Enterprises that fail to join programs such as C-TPAT or participants that post a horrendous compliance record will suffer from a competitive disadvantage."

Flying High or Falling Fast
It's hard to overstate the impact SCM efforts can have on a business. Sun Microsystems Inc.'s supply chain initiative resulted in half of the company's $350 million inventory reduction. But AMR Research estimates that less than 15 percent of manufacturing companies have been successful implementing more than just a few of their supply chain planning software purchases.