Supply Chain Technology Outlook: Spenders Seek Growth, Software Replacement
John Fontanella and Eric Klein -- Supply Chain Management Review, 4/1/2008
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Spenders Seek Growth, Software Replacement
With their top business priorities of increased profitability, productivity, and revenue growth, survey respondents to this year's study are looking to supply chain technologies to impact both top and bottom line performance. Almost 25 percent of small and medium sized businesses (those below $1 billion in revenue) said that meeting varied service delivery requirements among customers was also a prime contributor to increased spending. The reality is that the market gives no free passes on service expectations because of company size. Fortunately, there is a growing vendor community ready and willing to deliver sophisticated functionality at a reasonable price to this portion of the market.
Even deeply penetrated sectors of the supply chain market such as warehousing, transportation and order management will benefit from investments this year. Half of our survey respondents tell us that they will replace legacy applications in the coming year. That, combined with the adoption of new technologies, will increase spending on supply chain technologies at an average of almost 12 percent in 2008. It should be noted here that the 12 percent does not reflect growth of application spending alone, but also includes maintenance, personnel, and hardware. We estimate the overall growth of the supply chain application market alone will be 7 percent in 2008.
Performance Business Goals
Our survey also shows that business goals differ by industry. Those within the process industries ranked overall profitability as the top priority, while companies in discrete and service verticals said revenue growth was the number one goal. This difference will be reflected in the application and technology choices each makes, with process industries focused on improving productivity and those in discrete industries intent on providing unique services to their customers.Our 2008 survey respondents were much more aggressive in their forecasts for supply chain technology spending than in our 2007 survey. Over three quarters of U.S. companies with revenues of $1 billion or more said they would be increasing supply chain technology spending for 2008, with half of smaller companies saying their spending would increase as well. These numbers doubled those of the 2007 survey.
Companies in the United Kingdom and Germany also share the same optimism. In fact, increased spending in Europe is more equally divided between different industry verticals, whereas discrete industries in the U.S. are far more aggressive in their intention to increase spending than their process industry counterparts. Perhaps this difference can be accounted for by each region's perception of their business performance. Across all industries, European companies were much more critical than their U.S. counterparts of how well they met performance goals in areas such as productivity and output, perfect order performance rates, and material cost reduction. They view upgrading and introducing new technology as a major step in closing the performance gap.
>> Next: Vendors To Boost Share and Penetration
- The supply chain technology survey
- Companies increase spending on supply chain technology
- Spenders Seek Growth, Software Replacement
- Vendors To Boost Share and Penetration
- Companies to Swap Software
- Spending to Boost Low-Penetration Software
- Best of Breed vs. ERP—Both good canidates for replacement
- Market Share Winners and Losers
- Key Takeaways
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