Supply Chain Technology Outlook: Spending to Boost Low-Penetration Software

John Fontanella and Eric Klein -- Supply Chain Management Review, 4/1/2008

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Spending to Boost Low-Penetration Software

Applications, technologies and services that facilitate collaboration, not only with external trading partners but those within the boundaries of the enterprise, lead the list for net new functionality that enterprises will adopt over the next year. Vendor managed inventory (VMI) and collaborative forecasting top the list for both the U.S. and Europe, closely followed by international trade compliance and documentation. S&OP also ranks high, but, interestingly, many survey respondents told us that they see this capability as a result of better integrating already existing sources of information. So it is unclear yet whether S&OP will ultimately establish itself as an application class or be a feature of already existing technology.

Technology needs by company size

Both large and midsize enterprises share much of the same needs for integration inside and outside their enterprises. There are some notable exceptions, though. Large companies with more than a billion dollars in revenue rank supply chain visibility and performance measurement high on their list of technologies to adopt. Those companies under $1 billion, on the other hand, seem to show a growing interest in supply chain network design, an application area we recently called out as one of the fastest growing in the supply chain technology industry. Survey respondents also told us that another rapidly growing area, inventory optimization, is under consideration for wider adoption. Even though it has deeper market penetration than some of the other new application classes, on average 35 percent of mid and large size firms both in the U.S. and Europe are considering implementing inventory optimization solutions for the first time.

Companies within process industries are more likely to increase spending on technology that

• raises productivity,
• reduces supply chain working capital requirements, and
• assists compliance to government regulations.

This cuts across logistics activities as well as supply chain planning, including

• transportation management,
• finite capacity planning and scheduling,
• inventory optimization, and
• international trade documentation and compliance.

Discrete industries show a predisposition toward investing in upgrades or adoption of S&OP technologies, service parts planning, and VMI. Nowhere is the trend to build higher levels of collaboration with trading partners more pronounced than among retail and wholesale distribution companies. Over 40 percent said they would increase spending in collaborative forecasting in the coming year.

>> Next: Best of Breed vs. ERP—Both good canidates for replacement

In this article:

• 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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