Supply Chain Technology Outlook: Companies to Swap Software
John Fontanella and Eric Klein -- Supply Chain Management Review, 4/1/2008
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Companies to Swap Software
Three quarters of companies surveyed say they plan to replace or upgrade order management functionality in the next two years due to
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obsolescence of the software,
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its high support costs, and
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the need to better integrate it to a technology platform that connects it to other supply chain functions.
This replacement cycle most likely spells the end of 90s (and older)-era order management systems that were built in-house or heavily customized, costly to support, and unable to meet the demands of newer business models. We are also seeing companies rethink and revamp the applications that power their multi-channel distribution networks, where we found in earlier surveys that 75 percent of those polled would be replacing them in the next two years.
Increased sales of warehouse management systems (WMS), growing at a rate of 6 percent a year, is unquestionably due to this active replacement cycle. Almost two thirds of respondents in both the U.S. and Europe say that their current applications are obsolete given the customer demand and the need to improve productivity. Companies are also working to better integrate WMS with other supply chain functions. We found this is particularly true in Europe, where 85 percent of companies cited this as the primary reason for replacement.
Manufacturing and distribution planning systems are also coming under scrutiny by over 60 percent of respondents—not from dissatisfaction of the functionality, but more from the cost and frustration caused by integrating them to key data sources, whether it be external data bases or critical internal applications. Demand planning applications, to a lesser extent, are receiving similar scrutiny, with the trend most pronounced in Europe.
The need to meet the demands of today's customers
Appoximately 60 percent of those surveyed will also be looking to replace currently installed transportation management systems (TMS), primarily because of their inability to meet the service demands of internal as well as external customers. As is the case with order management, many companies have older, home built and packaged TMS deployments that are incapable of dealing with the realities of today's transportation requirements in a global, and green, economy. Lack of web capabilities, and the inability to offer TMS services as Software as a Service (SaaS) or as an internal shared service serving an entire global network is a sure indicator that the application is ready for replacement.
>> Next: Spending to Boost Low-Penetration Software
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Companies to Swap Software
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