Downsizing in the Supply Chain Planning (SCP) Market

Vendors in the supply chain-planning (SCP) segment are looking at a dreary sales environment through 2006. And even as this market starts to rebound, vendors are facing a drastically different sales environment, one with fewer overall prospects, considerably smaller deal sizes, and very conservative technology buyers. The SCP vendors, namely i2 Technologies and Manugistics, have been forced to downsize (in i2's case), or be acquired (in Manugistics' case), in order to survive. This market is not expected to rebound to the levels of the late 1990s; in fact, the sales landscape has permanently changed. Technology buyers are being very selective and have ruled out the multi-million dollar suite-sized implementations of the past.

Sterling Acquires Nistevo

Why Sterling? Think Nistevo AND Yantra.

Here is another acquisition that indicates that consolidation in the SCM market is gathering pace. Sterling intends to blend Nistevo with Yantra, a provider of software for distributed order management and warehouse management. Some of you will remember that Sterling acquired Yantra last year for $170M. Yantra’s core strength was in the retail space, linking retailers with suppliers and third-party logistics providers (3PLs).

With the Nistevo deal, Sterling now has an attractive offering for retailers, suppliers, and 3PLs. Better yet, in the future all of the software will be supported as software-as-a-service (SaaS), an attractive option for companies looking for lower cost implementation options. (note: the software is also available for deployment behind a firewall).

Conceptually, the Nistevo/Yantra pairing fits nicely with Sterling’s value-added network (VAN) business, which has long provided services on a pay-as-you-go model. Sterling intends to use its VAN to extend the reach of Nistevo and Yantra, especially to midsize business. Today, Sterling’s network has 30,000 customers, with most under $250M in annual revenue.

Click the link in the title of this post for a run-down on this deal.

Worldwide Supply Chain Planning Market to Grow

Over the last few years, the Supply Chain Planning (SCP) market was moderately shrinking. Companies such as SAP, Oracle, Manugistics and i2 did not see much growth in SCP in the last two years. However, the SCP market is still around USD$1.8B in 2005, and that is no small sum. What is interesting is that the SCP market is once again beginning to grow, albeit at a slower pace. Click the link to the title of this post to read about how the research firm ARC sees the SCP market in the next few years. Interesting times are here again for SCP.

Defining Supply Chain Management (SCM)

The supply chain management (SCM) market is a catchall term for an array of software solutions aimed at extending information and cooperation among different supply chain constituents. The market includes many sub-segments, each with different outlook and growth prospects. There are three core segments in the SCM market: 1) the traditional supply planning (SCP) segment, which is most commonly associated with supply chain software; 2) the supply chain execution (SCE) market, which is responsible for what happens after the order leaves the manufacturer; and 3) the supply chain operations (SCO) market, a new market that manages the extended supply chain in real-time, filling the gap between planning and execution

Is there such a thing as a "smart supply chain"?

Supply Chain Management (SCM) is one subject that has given rise to so many buzz phrases. One of these is called the "Smart Supply Chain". First, what does the word "smart" refer to here? Does have complete visibility into a supply chain makes it "smart"? Does have the ability to see events that happen throughout the chain make it "smart"? Follow the link in the title of this posting to see what others are saying about the "smart" supply chain.

Trends to Watch

The years of 2001 and 2002, and the first half of 2003 has seen one of the worse economic recessions that the world has ever seen for over 50 years. With the US and EU economic slow down, coupled with the more than decade long recession in Japan, the war in Iraq, and SARS, it would seem that the only bright light today comes from China. China is fast becoming the shop floor of the world, with much of the world’s manufacturing relocating to its cheap land and labour. With China and India powering the growth in Asia, 2004, 2005 and 2006 are becoming a bit brighter. Nevertheless, what the economic situation brings about is an intense downward pressure on business costs and as a direct consequence, supply chain costs.

This signals that the battle of the future facing most businesses is in the area of Supply Chain Management (SCM), and in particular, Supply Chain Execution (SCE). Enterprises are now actively pursuing outsourcing as a means of survival, focusing instead on their core competencies. Collaboration among enterprises in a supply chain eco-system over international boundaries has now become the order of the day. Over the next few blog posts, I shall describe the fundamentals of supply chain management.

JDA Software to Acquire Manugistics

More interesting news for the supply chain management software industry. The once high-flying supply chain management software provider Manugistics has succumbed to consolidation. JDA software has bought the company for a song. With SSA going to Infor, I wonder who is next.

Infor to acquire SSA Global for $1.35bn

This is another interesting piece of news for the SCM software industry. SSA Global, which went on an acquisition spree over the last few years (acquiring companies such as EXE Technologies) has themselves been acquired by Infor. It sure looks like the SCM Software Industry is consolidating at a rapid rate given that JDA recently acquired Manugistics. Who's next I wonder ...... Manhattan Associates? i2?

Supply Chain Council

The Supply-Chain Council was organized in 1996 by Pittiglio Rabin Todd & McGrath (PRTM) and AMR Research, and initially included 69 voluntary member companies.

The Supply-Chain Council now has closer to 1,000 corporate members world-wide and has established international chapters in North America, Europe, Greater China, Japan, Australia/New Zealand, South East Asia, Brazil and Southern Africa. Development of additional chapters in India and South America are underway. The Supply-Chain Council's membership consists primarily practitioners representing a broad cross section of industries, including manufacturers, services, distributors, and retailers.

Impact of Supply Chain Costs on the Bottom Line

How much does it costs to move goods through your supply chain ? Has there been research on what percentage of sales goes into the supply chain? Well, this table shows that companies that manage their supply chains carefully tend to keep logistics costs to around 9.5% of their sales. Without any substantiated data, I would put forth a guess that many companies which do their manufacturing in China, India or Indo-china would tend to have logistics costs at about 15% of their sales due to the lack of sophistication in their SCM. Anyone want to dispute this ?

Constant Change

With the Internet, competitive information is easily accessible globally. As a result, companies are finding it increasingly difficult to differentiate their offerings solely on product, location or price. Companies must therefore distinguish their product and service offerings by ensuring that their value chain provides effective and reliable delivery and fulfilment according to the consumers' individual preferences. High-tech companies are especially concerned daily with on-time delivery, time-to-market, system integration, internal and external supply-chain collaboration, and forecast accuracy. The pre-occupation of the management of these enterprises has been how best to achieve value add for their organisations, and to do this fast. For some, the logistics associated with e-business is an extension of strategies already in place.

As such, market trends are beginning to drive organizations to expand collaboration with trading partners along the value chain. In the highly competitive environment created by the Internet, market power has forced manufacturers and distributors to become more responsive to retailers and consumers, which has created a need for improved value chain planning capabilities. Manufacturers are being forced to reduce costs, decrease order cycle times and improve operating efficiencies. They are also increasingly under pressure to better manage the value chain, as they seek to improve manufacturing efficiency and logistics operations while maintaining flexibility and responsiveness to changing market conditions and customer demands. These pressures are compounded by the increasing complexity and globalisation of the interactions among suppliers, manufacturers, distributors, retailers and consumers.

In this context, the term Express brings out two equally important concepts, that of speed, and that of “squeezing out the essence”. Express Value Add therefore signifies the speed at which value is squeezed out of value chains in order to derive maximum benefits from the chain for all its stake holders, namely manufacturers, distributors, service providers, customers, and so on. Technology makes it possible to unleash and express this value so that “time to benefit” is significantly reduced for the eco-system of the value chain. This is a top priority for business executives as it promises to rid companies of excess inventory and minimize the occurrence of shortage, which have direct impact to the bottom line. Effective supply chain management can reduce carrying costs by 20 to 30% over the long term.

The Rules are Changing

The age-old goal of business has always been:

“To provide superior products and services with outstanding customer service whilst achieving profitability”.

While this goal has remained relatively unchanged, what have changed dramatically are the benchmarks by which quality, service, speed, and delivery performance are measured. With the advent of the Internet and advanced supply chain management technology, these benchmarks have now been raised even higher.

Companies are just beginning to realize the potential in adding stronger, yet more flexible links to their supply chains in the form of collaborative capabilities. Firms are re-engineering supply chain processes, trading partnerships, and collaborative relationships, as well as the transactions that support them. The addition of collaborative functions to applications, such as collaborative planning, forecasting, and replenishment (CPFR), new product introduction, and transportation and logistics represents the next stage in supply chain evolution.

"The issues are twofold,'' said Barry Wilderman, senior vice president in META Group's Application Delivery Strategies service.”To succeed in today's economy, companies must develop an outward-facing collaborative culture and make appropriate technology investments. They must also learn to maximize their relative 'positional power,' because channel masters often get to dictate the terms of transactions.''

While supply chain collaboration grows in popularity, most businesses have only a vague understanding of its complexity. Lack of careful planning in collaborative supply chain management can lead to security leaks, risks of exposure to competition, increased complexity in technology integration, and a lack of understanding regarding benefits/ROI in some areas.

Many organizations limit the benefits that can be derived from supply chain collaboration, due to their imprecise understanding and limited application of collaborative activities. As such, these firms have focused collaborative activities primarily on internal supply chain integration. Internal supply chain excellence and an outwardly focused culture are important precursors to true collaboration.

What does supply chain management address?

Supply chain management must address the following problems:

* Distribution Network Configuration: number and location of suppliers, production facilities, distribution centers, warehouses, and customers

* Distribution Strategy: centralized versus descentralized, direct shipment, cross docking, pull or push strategies, third party logistics

* Information: integrate systems and processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, and transportation

* Inventory Management: quantity and location of inventory including raw materials, work-in-process, and finished goods

SCOR is an operations reference model for supply chain promoted by the Supply-Chain Council.

Wikipedia: Supply Chain Definition

Wikipedia (follow the link in the title) definies a supply chain, logistics network, or supply network as a coordinated system of entities, activities, information and resources involved in moving a product or service from supplier to customer.

A definition that I have been personally using for several years now is: a supply chain is a series of links that connect sources of supply of an item to its final end buyers.

Wikipedia also defines supply chain management as the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible.

What is Supply Chain Management?

Supply chain management (SCM) is the process of planning, implementating, and controling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption.

Some experts distinguish supply chain management and logistics management, while others consider the terms to be interchangeable.

From the point of view of an enterprise, the scope of supply chain management is usually bounded on the supply side by your supplier’s suppliers and on the customer side by your customer’s customers.

Supply chain management is also a category of software products.

Welcome to Supply Chain Digest

Everything that you buy from the shops get to you after the items have been manufactured and transported to your favourite shop. Did you ever wonder how things that you buy at your favourite shops get there? How did they arrive at the shops from the various factories? How does one know how much to make and transport in order to ensure that retailers do not run low on your favourite items? Supply Chain Management (SCM) is what makes this happen. Supply Chain Digest is my blog which introduces SCM to the ordinary person in the street.

The materials that I will be putting up in this blog has been gathered over a period of 17 years of my career in the supply chain domain. Supply Chain Management (SCM) is actually quite an interesting topic. Students, supply chain directors, and logisticians will find the documents and materials that I will be presenting very useful.

Hope you enjoy this blog ! Thanks and have a nice day.