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Gazing Down The Glass Pipeline

Corporations are more willing to spend bucks on cross-enterprise collaboration than expected, according to a new study published by AMR Research. Spending growth on supply chain management (SCM) solutions will more than double this year, from 3 percent in 2005 to 7 percent this year, according to the report. The total market for SCM solutions […]

Written By

Michael Hickins

Sep 1, 2006

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Corporations are more willing to spend bucks on cross-enterprise
collaboration than expected, according to a new study published by AMR
Research.

Spending growth on supply chain management (SCM) solutions will more than
double this year, from 3 percent in 2005 to 7 percent this year, according
to the report.

The total market for SCM solutions will grow to $6 billion this year,
compared with $5.6 billion in 2005.

AMR Research analyst Mark Hillman said the Boston-based research firm had
expected just 1 percent growth this year.

Hillman told internetnews.com that spending on SCM solutions has been
goosed by the prospect of inflation on the one hand and the availability of
better solutions on the other.

Previous generations of SCM solutions were technology-driven, he said, but
“vendors are now focusing more on actual business pain points.”

“If you haven’t done multi-enterprise supply chain optimization, competitors
who have done it can take market share away from you,” said Hillman.

He added that companies now see the need for more real-time
information from their suppliers and channel partners to offset unfavorable
macroeconomic trends.

The rising cost of commodities, for instance, makes inventory control more
important than ever. Using historical patterns to guide purchasing decisions doesn’t cut it anymore.

“There’s a shift from historical statistical demand planning to the use of
real-time demand sensing,” he said.

It’s no surprise then that within SCM, sales of inventory optimization solutions
will grow by 35 percent this year and network design solutions will grow by 21
percent.

Both of those solutions are intended to help control inventory levels and
manage global sourcing.

“When you’re launching short lifecycle or seasonally based products, you
can’t afford to miss the sales window,” said Hillman.

The idea that companies can share true demand data and inventory levels up
and down the supply chain isn’t new by any means, he added.

But until recently, there haven’t been adequate tools to satisfy that
demand.

“There was this vision of the glass pipeline, but people were using old
tools. The tools are now available to make that a reality,” he said.

Industry leaders SAP (Quote, Chart) and Oracle (Quote, Chart) are
increasingly including best-of-breed solutions to augment their platforms.

Smaller vendors like Washington, D.C.-based Vision Chain and TrueDemand,
based in Los Gatos, Calif., are using data from RFID
(define) sensors and advanced demand planning solutions to give
companies more immediate visibility of customer demand and actual inventory
levels.

There is still room to grow, Hillman said, as more companies join the
bandwagon.

“Thirty eight percent of companies are still forecasting at a monthly level
rather than using weekly or daily data,” he said.

AMR Research expects the market for SCM solutions to continue growing at a 6
percent compounded annual growth rate through 2010, when it will be worth
$7.4 billion.

This article was first published on InternetNews.com. To read the full article, click here.