Supply Chain Management Market Trends


Supply Chain Management Market Trends










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Supply Chain Management
Market Trends

by Rochelle Shaw

Copyright 2018, Faulkner Information Services. All Rights Reserved.

Docid: 00017734

Publication Date: 1809

Report Type: MARKET

Preview

Supply chain management (SCM) encompasses all aspects of the supply chain, from
obtaining raw materials through transporting finished goods to their point of
consumption. Controlling the supply chain to forecast demand, implement business
plans, and collaborate with internal and external players is more critical than
ever as organizations work  to adjust supplies and manufacturing plans to a
changing market environment. Throughout these market
changes, the technology has continued to advance, further complicating the
supply chain management acquisition and planning processes. This report
discusses the benefits of implementing SCM products, identifies the key players
and trends, and provides guidance to organizations evaluating a variety of
solutions.

Report Contents:

Executive Summary

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Supply chain management (SCM) examines the processes conducted by a
business and its trading partners, such as manufacturers and suppliers,
to satisfy the end customer. The supply chain process can stretch from a supplier’s supplier to a customer’s
customer. Although it is a mature technology segment, SCM continues to be
affected by technology advances as well as by mergers and acquisitions. 

Growth in the supply chain management market remains slow, but it is steady. However, continued corporate
cost-cutting could affect companies’ supply chains and trickle up to
affect the SCM industry. The addition of such SCM trends as cloud capabilities and analysis of Big Data will
assist speeding its growth. 

Market Dynamics

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In simplest terms, supply chain management (SCM) is the process of integrating,
or tying together, multiple suppliers of goods and services to create,
distribute, and sell finished products. Because a supply chain process can stretch from
a supplier’s supplier to a customer’s customer, the typical supply chain
consists of five components:

  • Suppliers
  • Manufacturers
  • Distributors
  • Retailers
  • Consumers

Analyst firm Gartner paints a rosy picture of this market segment, stating that
this market grew by 11 percent in 2016 and nearly 14 percent in 2017, reaching
US$12.2 billion by the end of
2017. Additionally, the firm predicts that it will be worth over US$19 billion by
2021. 

Related technologies are influencing – and being influenced
by – developments in the supply chain management sector. These technologies are:

Supplier Relationship Management. Extending business relationships has
become the focus of new activities and collaboration possibilities sparked
by Internet technology. As the new model for supply chain operations,
collaborative commerce is more than just automating company-to-company
connections through the Internet. Rather, it is a strategic approach to
leveraging critical inter-enterprise relationships. Supplier Relationship
Management (SRM) involves defining and managing all aspects of supplier
relationships, from information sharing to embracing mutually beneficial
business processes. SRM is an effective way of doing business that goes well
beyond the traditional collaboration model of design, source, negotiate, and
buy in order to streamline activities such as supply, replenishment, manufacturing,
services management, and analytics.

Supply Chain Reengineering. Installing a sophisticated supply chain
management solution solves nothing if a company’s underlying business processes
are flawed. The business reengineering movement pushed to address such
situations. Just as business reengineering was about intra-company processes,
today’s supply chain environment rests on a foundation of inter-company
processes, a matrix of multilateral dependencies that are difficult to identify,
much less decipher.

Supply Chain Event Management. As an emerging functional component within
the larger realm of supply chain software, supply chain event management (SCEM)
enables enterprises to respond rapidly and automatically to unplanned events in
the marketplace. SCEM applications accomplish this by notifying supply chain
managers of specific events such as when inventories are depleted, shipments
delayed, and market demand changes. This is accomplished by integrating SCEM
software with other business systems, such as purchasing applications.

Transportation Management Systems. Frequently referred to as TMS, this is
a sub-category of supply chain management that deals with the logistics of
getting goods from one place to another. Systems are available to track and
manage every aspect of transportation, whether by air, rail, or ground.
Frequently Web-hosted, these products assist vendors in dealing with
ever-increasing costs, and today’s systems include more sophisticated
functionality than early implementations that focused on total cost of
ownership. This category is expected to grow both in importance and size over
the next several years.

Market Leaders

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The SCM market is segmented into solutions from traditional enterprise vendors
and those from "best-of-breed" vendors.

Infor

Infor was founded in June 2002 under the name Agilsys, but soon expanded by
acquisition. The company now boasts 90,000 customers and over 16,000 employees
in 61 offices around the world, as well as customers ini 90,000 organizations in
170 countries. Infor’s "claim to fame" is its use of cloud technology,
building complete industry suites in the cloud, and claims 71 million cloud
users.

The company offers a portfolio of networked supply chain solutions, including
warehouse management, transportation, distributed order management, and
inventory visibility, each with its own components. For example, Infor Supply
Chain Planning Suite includes components of Demand Planning, Supply Planning,
Inventory Optimization, Production Planning, Manufacturing Scheduling, and Sales
& Operations Planning (S&OP).

JDA Software Group 

Founded in 1978 as a provider of IBM midrange software, JDA later
morphed into a software vendor specializing in retail solutions such as
merchandising and point-of-sale systems. It has expanded since the late 1990s
through
acquisitions, purchasing Arthur in 1998, Intactix in 2000, and E3 in 2001. In July
2006 JDA wholeheartedly jumped into the SCM
market by acquiring Manugistics. The Manugistics product line included
Fulfillment Replenishment and Allocation, Manufacturing Planning and Scheduling,
Network Design and Optimization, Inventory Policy Optimization (IPO), and Order
Promising. Related Manugistics products fall into the categories of pricing and
promotional planning, collaboration, visibility, performance management, and
revenue management. In January 2007 JDA adopted Manugistics’
architecture program, renamed the JDA Enterprise Architecture, as the underlying
foundation for its solutions.

Two other acquisitions followed: In 2010 JDA acquired i2 Technologies, which offered an
SCM product suite based upon the i2 New-Generation SCM
Solution Framework, as well as the i2 Agile Business Process Platform (ABPP),
the vendor’s service-oriented architecture. In 2012 JDA announced its
merger with RedPrairie, vendor of systems for supply chain execution, workforce
management, store operations, and e-Commerce. Thanks to its acquisitions, JDA now boasts
4,000 customers worldwide across myriad
industries.

In January 2014 JDA announced PerformNOW!, a set of services
designed to speed implementation of its software applications. These services
are available for JDA solutions addressing allocation, assortment, inventory
management, enterprise planning, sales and operations planning, demand, and
fulfillment. More offerings are expected to be added. 

In June 2015 JDA announced
a collaboration with Google, where JDA’s solutions are delivered via the
Google Cloud platform. The first solution powered by Google Cloud is JDA Retail
Me. By March 2016 the company said its cloud business had grown to more than
$100 million in revenue, and that it had 350 cloud customers encompassing over 2
million cloud users.

In August 2016 a deal was nearly cut whereby Honeywell would acquire JDA for
$3 billion; however, the deal apparently fell through. Instead, JDA announced
that private equity firm would provide financing to help eliminate JDA’s debt in
exchange for equity.

Shortly afterward, in early September 2016, JDA released a new version of its
JDA Manufacturing Planning, adding intelligent and prescriptive demand-supply
planning, real-time and collaborative cross-functional scenario anayses, and an
in-memory foundation for an always-on supply chain.

In the first half of 2017, the company introduced JDA Store Optimizer, which
transforms previously disconnected data streams into optimized store associate
assignments, and added capabilities to JDA Intelligent Fulfillment that optimize
the end-to-end supply chain process.

In August 2018 JDA completed its acquisition of Blue Yonder, a provider of
artificial intelligence and machine learning SaaS applications for retail and
the supply chain. JDA says that the acquisition "accelerates JDA’s
Autonomous Supply Chain capabilities" to connect intelligent systems and
data, enabling automated business processes.

Oracle

Part of the Oracle E-Business Suite and available both on-premise and in the
cloud, Oracle Supply Chain Management includes products for:

  • Product Lifecycle Management, for collaboration with suppliers on product
    design.
  • Supply Chain Planning, to help synchronize supplier capacity with market
    demand.
  • Procurement, aiding in supplier relationships.
  • Manufacturing, to optimize manufacturing resources.
  • Order Fulfillment, to assure accurate and timely
    delivery.

Supported industries include airlines, automotive, communications,
consumer goods, healthcare, high technology, industrial manufacturing, life
sciences, and the public sector.

Oracle also offers other SCM products as a result of several major acquisitions
in recent years. Oracle’s JD Edwards (JDE) EnterpriseOne Supply Chain Management, a
module of its EnterpriseOne family of applications, includes functionality for
customer order management, manufacturing, food/beverage, logistics, and supply
chain planning. Oracle’s PeopleSoft Enterprise Supply Chain Management consists
of these modules: Customer Order Management, including Billing, eBill Payment,
Order Management, Product Configurator, and Promotions Management; Inventoy and
Fulfillment Management, including mobile inventory management; Manufacturing Solution, including Engineering, Flow
Production, Manufacturing, and Quality; Supply Chain Planning, including Demand
Planning, Inventory Policy Planning, Supply Planning Advanced Multisite Planner,
and Supply Planning Multisite Material Planner; and Supply Chain Warehouse. 

In other SCM-related acquisitions, in 2006 Oracle purchased Demantra, a provider of demand-driven
planning solutions, and in 2007 bought Agile Software, a provider of product
lifecycle management (PLM) software solutions, considered a subset of SCM.

Oracle Fusion Supply Chain Management, part of the Oracle Fusion Suite of
modular applications, comprises Oracle Fusion Distributed Order Orchestration,
Oracle Fusion Product Hub, Oracle Fusion Inventory and Cost Management, Oracle
Fusion Procurement, and Oracle Innovation Management. Oracle Fusion Applications coexist with existing Oracle
Applications and are meant to be used side by side with them.

In addition to software, Oracle offers consulting services and
even software on-demand services, where Oracle manages and maintains its
products for customers, for many of its products. Additionally, Oracle lately
has been looking to increase its presence in the cloud; to that end, in March
2013 the company acquired Nimbula, which billed itself the "Cloud Operating
System company," allowing corporate customers to manage their cloud
assets (private, public, and hybrid) from one dashboard. Oracle has made the
most of its acquisition, launching in July 2015 two products: Oracle Order
Management Cloud and Oracle Global Order Promising Cloud, both extensions of
Oracle’s Supply Chain Management Cloud, provide order management, visibility,
and fulfillment capabilities. These were followed in October 2015 by two new
cloud offerings: Oracle Planning Central Cloud and Oracle Manufacturing Cloud.
At the same time, Oracle announced enhanced capabilities in Oracle Order
Management Cloud and across the entire Oracle Supply Chain Management Cloud.

In August 2017 Oracle rolled out expansions to its SCM Cloud offering, part
of Oracle Cloud Applications Release 13. The new release comprises features that
include supplier collaboration, quality management, maintenance, sales and operations
planning, demand management, and supply planning, as well as expansions across
all existing solutions. New products within Release 13 are Oracle Sales and
Operations Planning Cloud, Oracle Demand Management Cloud, Oracle Supply
Planning Cloud, Oracle Supply Chain Collaboration Cloud, Oracle Quality
Management Cloud, and Oracle Maintenance Cloud. Another minor upgrade (18A) was
announced in early 2018.

SAP

SAP’s Supply Chain Management
enables development of adaptive supply chain networks by offering coordination
and collaboration technology as well as planning and execution capabilities for
managing enterprise operations. Part of SAP Business Suite 7, which is powered
by SAP’s HANA analytic platform, SCM provides critical information about inventory levels,
orders, forecasts, production plans, and other key performance indicators. It includes functions for strategic, tactical, and operational planning, as well as
for service parts planning.

SAP acquired former standalone vendor Ariba in October 2012. Now known as
"Ariba, an SAP Company," it relies on cloud
computing, referring to it as "the Ariba Commerce Cloud," for most of
its solutions. It offers a variety of SCM-related applications divided into
Solutions for Sellers, Solutions for Buyers, and Solutions for Managing Cash.

In March 2016 SAP released SAP Integrated Business Planning 6.1, an
application for response and supply that is now part of SAP’s cloud-based
planning suite. 

Research firm Gartner says that SAP has the largest market share in this
segment, with 26.6 percent (almost double SAP’s nearest competitor, Oracle, with
13.7 percent). Gartner attributes SAP’s position to its "success enabling
digital supply chains." 

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Cloud Computing

The facts that SCM rivals SAP and Oracle have both recently made substantial
acquisitions of cloud-based companies and that cloud vendor Infor is now a
market leader indicate that cloud computing is a trend
in SCM, as it is in many other software industry segments. 

Oracle’s CEO, Mark Hurd, stated in 2016 that while 24 percent of enterprise
applications are in the cloud, by 2025 that number will increase to 80 percent,
and by then, virtually all enterprise data will be in the cloud, while IDC
predicts approximately 80 percent of supply chain interactions will be across
cloud-based commerce networks by 2020. 

Other analysts forecast that the cloud-based SCM software market will reach
more than US$7 billion by 2023.

Artificial
Intelligence

Analysts tend to agree that the use of artificial intelligence (AI) will
increase in this market segment. For example, analytics firm IDC predicts that
by 2019 AI will change the way one-quarter of merchants, marketers, and planners
operate. Furthermore, AI will improve productivity by 30 percent. Research firm
Gartner states that it expects that, as AI technologies and tools mature, it
will drive revenue growth.

The executive director of the Supply Chain Resource Cooperative at North
Carolina State University, Robert Handfield, expects machine learning (another
term for AI) to grow significantly during 2018. 

Blockchain

Forbes defines blockchain as "a public register in which transactions between two users belonging to the same
network are stored in a secure, verifiable and permanent way." Wikipedia
goes a bit further: "A blockchain… is a growing list of records, called
blocks, which are linked using cryptography. Each block contains a cryptographic
hash of the previous block, a timestamp, and transaction data." 

One
of the hottest topics of 2018, it is considered a tool that allows creating
records that cannot be modified, and because a blockchain resides in a
distributed ledger, it lets  all participants in a supply chain track the
movement of goods.

IDC
predicts that by 2021, about a third of manufacturers and retailers will be
tracking goods through blockchain.

Robotics

IDC also predicts that by 2019, robots will be used in about 50 percent of
fulfillment centers, resulting in productivity gains of up to 30 percent.

The Ecological Supply Chain

Concerns about waste and the environment–as well
as how the combination affects the bottom line–are the latest trend in supply
chain management. Two ecology sub-topics of special interest to this market
segment are sustainability and remanufacturing.

Sustainability

APICS, a professional association for supply
chain and operations management (which merged with the former Supply Chain Council
[SCC], an international organization
comprised of hundreds of industry members, to become APICS SCC) joined together with consulting firm
PricewaterhouseCoopers (PwC) in 2013 "to study how current management thinking leads to different priorities for advancing
supply chain sustainability." Based on the results of surveys the two
organizations conducted in June and September of 2013, their published report, Sustainable
Supply Chains: Making Value the Priority, states that more than two-thirds of 500
surveyed supply chain executives said sustainability would play an important
role in how they manage their supply chains through 2015. This makes
sustainability one of the fastest-growing trends in this industry.

Other findings of the still-relevant report are based on
responses to the survey questioning how sustainability initiatives added value to the supply chain in the
last several years: 43 percent of operations professionals attributed cost reduction to sustainable supply chain
initiatives; 35 percent reported improvements in their company’s environmental impact; and
25 percent saw improved customer satisfaction as a result of programs tied to improving supply chain sustainability. 

Remanufacturing

The APICS Foundation, a nonprofit organization
that is part of APICS, finds that remanufacturing–defined as "the process of
restoring used or worn products to like-new condition"–is key to
continued growth in supply chain operations. Through surveys, the Foundation
announced its three key findings:

  • Remanufacturing
    drives sustainability.     Sixty-eight
    percent of respondents felt that sustainability was the primary advantage
    associated with remanufacturing, and 41 percent already consider it a
    formal component of their organization’s sustainability policies.
  • Remanufacturing
    provides vast organizational benefits.     While
    59 percent of respondents noted the additional complexity remanufacturing
    brought to reverse supply chains, the process was commended for the
    additional benefit it brings to an organization: increases customer
    satisfaction (66 percent), enhances product and organizational value chain
    (47 percent), and reduces production costs in relation to new
    manufacturing (46 percent).
  • Remanufacturing
    adds career versatility.     Remanufacturing
    requires new skills in forecasting, planning, and inventory management.
    With these skills, a supply chain and operations management professional
    can better identify potential for opportunity and innovation in forward
    and reverse supply chains.

Big Data Analytics

The term "Big Data" refers to the large
amounts of information stored in disconnected databases. But companies now
realize the importance of being able to make connections between disparate
databases in order to improve supply chain performance. The use of advanced
analytic tools to uncover hidden patterns and gain insights lets companies
leverage the vast amount of supply chain-related information out there. Some
software vendors are also beginning to offer big-data analytics applications for
use in the cloud, saving companies money.

According to Forbes magazine, big
data provides supplier networks with "greater data accuracy, clarity, and
insights, leading to more contextual intelligence shared across supply chains."

Tighter Process Integration

Tighter process integration is becoming increasingly important to ensure that
supply chain processes are streamlined in order to meet rising market demand.
Business process integration extends the concept of application integration down
to the process level, and also extends that integration beyond the enterprise to
link suppliers and customers. The increased reliance today on process
integration means that applications automatically connect to other applications
(whether inside the enterprise or outside) and execute the functions necessary
to complete a specific business process. This means, for example, that as part
of product requisition, the supplier file may be verified to ensure that a
product is or will be available when required; the requisition is placed and
sent to the supplier; a purchase order is cut; payment is made when the product
arrives; and a quality management function is performed to ensure that the
product meets specifications.

Performance Measurement

Market competition has also resulted in improved supply chain-specific business
performance measurement tools. Today, many SCM vendors offer complete
performance measurement product suites with data warehouses that collect,
aggregate, and store data from a variety of supply chain participants, and from
the enterprise’s back-end systems, as necessary. Some vendors offer a balanced
scorecard as part of their business intelligence suite. The scorecard is a
strategic management tool that integrates financial and non-financial aspects of
the business in order to help enterprises understand the relationships between
strategic goals and tactics, and to recognize how strategic goals relate to one
another. It also shows the progress of strategic objectives. Analytic
applications can evaluate the warehoused data, using pre-defined and
pre-integrated supply chain-specific metrics to help strategically and
operationally measure supply chain performance. These measures can include
factors such as evaluation of supplier on-time delivery or payment; spend
analysis on procured goods; and assurance that inventory costs are meeting
strategic corporate goals.

Radio Frequency Identification

Radio
frequency identification (RFID), which is increasingly being adopted as an
alternative to bar coding, remains an emerging technology in SCM. An RFID system enables identification through
exchange of radio frequency signals between a reader (usually comprising an
antenna and transponder) and a tag (incorporating a transceiver). The advantage
of RFID is that, due to the pervasive nature of radio waves, it precludes the
need for line-of-sight scanning. RFID promises many innovative applications in
the future. In terms of e-commerce, for example, RFID will ultimately replace
retailers’ current inventory, order management, and e-payment systems to enable
a customer to enter a store, select merchandise, and have the purchase tallied
and payment processed automatically, so that the customer can exit without
stopping at a checkout station.

A logical solution to supply chain bottlenecks, RFID has the potential to
revolutionize the way manufacturers, retailers, and other supply chain partners
interoperate. Most enterprise vendors now offer RFID as part of
their product lines, and it is expected to become an increasingly mainstream
technology.

While the last ten years have seen retailers including Wal-Mart, Saks, and
J.C. Penney implement RFD, perhaps the biggest boost to its use occurred with
the great expansion of RFID devices implanted in credit cards, passports, and
driver’s licenses. All this use raises other issues, of course; chief among them
is the possibility of electronic pickpocketing, where criminals with RFID
readers can steal credit card information or even identities. 

The use of standards impacts the growth of RFID technology. Chief among
these standards is Electronic Product Code (EPC) technology. GS1, a non-profit standards
organization formerly known as EAN International, and the Uniform Code Council
(UCC) have entered into a joint venture called EPCglobal with the goal of
driving global adoption of EPC technology across multiple industries. To this
end, the organization announced its UHF Generation 2 specification, a protocol
that describes capabilities required to meet needs set by end users and is
intended for use as a base platform for products to be built. Additionally, a
number of industry-focused global RFID standards groups have been developed
under the EPCglobal standards framework, assuring that standards will be
compatible with the requirements of partners and customers of complying
organizations. Now called GS1 EPCglobal, it is available as a suite of RFID
standards and services for increased visibility
and efficiency throughout the supply chain.

Strategic Planning Implications

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Success Factors

In August 2015 APICS SCC released findings from its industry report
"Supply Chain Leadership Report: Many Styles Generate Success," which
examines critical success factors of supply chain leaders. In the report the
organization identified core themes for effective supply chain leadership,
including:

  • Applying certainty to uncertain situations affecting others, such as in
    forecasting or decision making.

  • Balancing risk and reward in careful analysis using hard and soft skills.

  • Aligning tactics to strategy in planning and harmony with organizational culture.

  • Maintaining and improving relationships of supply chain partners.

  • Satisfying competing priorities and stakeholders on an ongoing basis.

Supply Chain Management Best Practices

APICS SCC now is the "keeper" of the Supply Chain
Operations Reference (SCOR) model originally published by the Supply Chain Council
(SCC). This model helps companies in their supply chain
management process by mapping their processes to determine strengths and
weaknesses, as well as by indicating best practices and offering industry
benchmarks against which to measure performance. SCOR simplifies the various
processes making up the supply chain by identifying and defining five key
processes:

  • Plan – Demand/supply planning and management, including balancing
    resources with requirements and establishing plans for the entire supply
    chain.
  • Source – Sourcing for stocked, make-to-order, and engineer-to-order
    products, identifying and selecting supply sources when not predetermined.
  • Make – Product execution of make-to-stock, make-to-order, and
    engineer-to-order, including scheduling of production activities, issuing the
    product, producing and testing of the package, staging the product, and
    releasing the product to deliver.
  • Deliver – Order, warehouse, transportation, and installation management
    for stocked, make-to-order, and engineer-to-order products, including all
    order management steps from processing customer inquiries and quotes to
    routing shipments and selecting carriers.
  • Return – The return of raw materials and receipt of returns of finished
    goods, including all return steps from source and managing return business
    rules and performance.

In May 2017 APICS announced plans for a new version of SCOR. This new version
would encompass "many emerging drivers of supply chain success such as big
data, omni-channel, and automation." SCOR 12.0, to be released before the
end of 2017, will include:

  • Sourcing and procurement processes for the
    SCOR framework
  • Metadata, digitization, omni-channel, and
    supply chain maturity model
  • Data analytics, data acquisition, data
    science, and predictive analysis as staff skills related to organizational
    supply chain initiatives
  • Continuing education and improvement of
    supply chain manager skills and abilities

Security

Securing the supply chain globally has taken on a new urgency in
the years since 9/11. The U.S. Bureau of Customs and Border Protection (CBP),
which replaced the Customs Service, has initiated a program called the
Customs-Trade Partnership Against Terrorism (C-TPAT, but also known as C-PAT)
that offers minimum security criteria for importers, foreign manufacturers, and
carriers by sea, highway, and rail. The CBP stresses that C-TPAT is a voluntary
initiative, but offers business benefits to those businesses that comply with
it. More information on compliance and requirements can be found on the CBP’s
Web site, listed below.

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About the Author

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Rochelle Shaw is a
Web developer and freelance author who has been tracking high technology
for over 30 years as a writer, editor, and industry analyst. She is a
frequent contributor to Faulkner Information Services.

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