Gazing Down The Glass Pipeline

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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.

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