Supply Chain Management Year End Review for 2011

The Year That Was 2011 in Supply Chain Management

Overall, SCM software continues to become more relevant in the IT portfolio of business applications. The complexity and size of SCM systems is second only to ERP software and the line between the two continues to blur. There were no major events or shifts in the direction for SCM systems in 2011; but the momentum does continue to advance SCM systems as more companies address needs to participate in the global market, to cut costs and to rapidly respond to business changes.

Risk Management

Natural disasters in 2011, including floods, earthquakes and tsunamis, wreaked havoc on supply chains. The 2011 disasters highlighted the need for systems to incorporate risk management features to better understand, plan and mitigate natural and man-made risks. High impact risk management planning 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.

SCM Technology Trends

2011 continued several software evolution themes from prior years. The advances in SCM software 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 is a new input into real time planning. Collaboration breaks down department, trading partner and hierarchical boundaries to improve planning and optimize SCM processes. Visibility gives everyone real time accurate information into the supply chain so they can make better decisions; most important is management's ability to accurately evaluate performance.

Supply Chain Planning (demand management, supply management, sales & operation planning) and Supply Chain Execution (WMS, TMS, Inventory Management, Order Management) applications need to be plugged into the larger supply chain ecosystem with an infrastructure that addresses information sharing, business rules, process management, workflows, user interfaces and analytics. IBM with their Smart Commerce, SAP with Netweaver and Oracle with Fusion middleware are on the cutting edge with underlying SOA infrastructures to facilitate SCM convergence, collaboration and visibility. The pay back 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 operating margins.

RFID technology has been in the works since the 1960s, and in 2011, got closer to the inevitable tipping point from cutting edge deployments to full scale must have best practices. The hurdles holding back RFID from reaching the tipping point are 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 operations offer a typical area to reduce costs and improve efficiencies. The real savings will come from a paradigm shift in business applications such as CRM, Order Management, Inventory Optimization and others. Using RFID, consider new ideas where systems can retrieve inventory information from items that are actually in stock or identify an items physical location, replacing inaccurate record keeping systems. Once RFID software is imbedded in middleware and treated as an available service to all business applications, then SCM systems can facilitate real 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 applications that take humans out of everyday mundane processes.

Being a Good Citizen

Green SCM continues to get quite a bit of attention. One can make an argument that being green has the dual benefit of public responsibility and improving 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 vendors have already addressed many of these needs. 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 footprint.

Software Industry

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

Other than Infor Global Solutions' acquisition of Lawson Software, 2011 SCM acquisitions activities were 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 SAP and HP did not merge.

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

Future of SCM Software

Not only has Supply Chain Management software improved operating efficiencies, but SCM software is also improving strategic and operational planning, global trading and B2B relationships. Thanks to innovations in SCM software, companies are recasting the way they organize and do business. The future of SCM software is in solidifying the advances already made, new opportunities with RFID and keeping up with new business trends such as 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.