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Ch-ch-ch-chaining....Projected revenue for supply-chain management software

"The one way the Web factors in is transparency," says Darryl Praill, vice president of marketing for WebPlan Inc., a Kanata, Ontario, Canada, developer of a suite of Web-based supply chain tools. "With transparency, suppliers no longer have to guess what's needed because they know exactly when a manufacturer needs components. With visibility up and down the supply chain, no one gets hit with excess inventory--they can see seasonal demand and react to trends."

Streamlining operations

There are obstacles to getting trading partners and customers to play by the new rules of the open and extended supply chain, however. While some still worry about security, most companies are relatively comfortable with the idea of passing critical business information over the Internet. Of more concern is the issue of trust, since most employees and trading partners are accustomed to cultures that discourage sharing of key business data. Modifying business processes so companies can actually respond to dynamic product demand is another key challenge.

Nevertheless, experts say companies must deal with these obstacles in order to remain competitive. "The key issue of survival going forward is you have to open your kimono to customers--that's how they gain trust," says Bruce Bond, vice president and research director of Gartner Group Inc.'s Enterprise and Supply Chain Management Service, in Stamford, Conn. "Web-based supply-chain technology is the enabler and will become a standard for doing business."

The Web's role in streamlining operations is expected to jump-start companies' deployment of supply-chain management software. According to AMR Research Inc., a Boston-based consulting firm, revenues in the SCM market were $2.6 billion in 1998 and are projected to soar to $18.6 billion in 2003, much of that fueled by companies adopting new Web-based solutions (see chart, "Ch-ch-ch-chaining").

According to AMR, this online cooperation will happen on three levels. The first level is transactional, where companies automate sales transactions, purchase orders, invoices and payments--steps traditionally done via EDI. Second is informational cooperation, where companies report on production schedules, forecasting, and the like. The third level is collaboration, where companies work together on forecasts in real time, as Timberland does with its retailers.

A fragmented market: Leading suppliers of supply-chain management software

Existing vendors of supply-chain management and enterprise resource planning software are frantically working to overhaul their product lines to support the new Web paradigm (see chart, "A fragmented market"). Initially, most vendors refurbished their client/server offerings to make them accessible via a browser. Now, companies are rearchitecting their product lines to make real-time collaboration a core capability of their programs and to make their components perform optimally in a thin-client architecture.

In June 1999, as part of its announcement of Manugistics6, Manugistics released its e-chain architecture that brings Web and e-commerce capabilities to key components in its SCM suite. Walldorf, Germany-based SAP AG, for its part, is still lagging somewhat, promising new Web capabilities for its advanced planning and optimization (APO) package by the end of 1999. Other companies, like Ottawa-based WebPlan Inc., have introduced Web-based supply-chain suites designed from the ground up to support online collaboration via a browser.

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