[118] Demand Mgmt S&OP Software Needed    « Back to Category
Author: LCCMod1, Created on: Aug 31, 2005 7:12 AM
Keywords: Next Supply Chain, s&op
Categories: Supply Chain & Logistics Periodicals
Language: English
Rating: Not Rated

Supply Chain Spending Shifts to Demand Management

Aug 30, 2005
Frontline Solutions

Aug. 30, 2005 -- Companies are investing in supply chain management technology, but their focus has shifted from efficiency and cost cutting to broader problems like demand forecasting and product launch management.

According to AMR Research Inc.'s "Supply Chain Management Spending Report, 2005-2006," the supply chain management market will reach $17.9 billion in 2005, including software, services, connectivity, consulting and technology. While nearly half (48%) of the companies surveyed will keep their supply chain spending static in 2005, another 47% plan to increase spending. The increase is 6.4% higher than in 2004, with the average company planning to spend $4.9 million on supply chain initiatives-representing 17% of total business application spending.

That spending isn't in traditional efficiency-focused operations, though, and software and service vendors that survived the last recession need to adjust to a new set of customer priorities.

According to the report, the top four supply chain business drivers for spending are understanding and managing end-user demand, optimizing overall supply chain costs, improving and optimizing product launch, and managing and optimizing an extended supply network.

"In 2003, the priorities were efficiency, speed, and cost control. These are major shifts," said Lora Cecere, research director at AMR. "[Supply chain management] processes have expanded into commercial (sales and marketing) and research and development (R&D) processes. [Supply chain management] is now a wider business initiative, much larger than the processes typically dubbed as 'supply.'"

Software hasn't kept up, according to Cecere. Traditional supply chain planning and execution solutions, in many cases, don't provide the type of demand visibility and forecasting, or sales and operations planning functionality customers are looking for.

The top-rated supply chain investments among respondents were supply chain visibility and event management, and demand forecasting (both 19%), followed by data warehousing and analytics (10%), sales and operations planning (8%), and radio frequency identification (6%).

Line-of-business operations are also taking a larger role in system deployment. In 2004, 27% of the spending was controlled by line-of-business managers (vice presidents of supply chain, CFOs, etc.), and more than 70% of the decisions were made by IT. In 2005, the survey indicates that 43% of the final decisions and 40% of the spending will be driven by line-of-business executives.

Customers are also moving away from the software license model. In the report, 26% of respondents were considering software-as-a-service applications, compared to just 6% in 2004.

Responses varied by sector and size. Process manufacturers will spend more on average ($5.3 million) than discrete manufacturers ($4.5 million). Larger companies with $1 billion or more in revenue will give the supply chain a larger share (18.2%) of total application spending than smaller companies (15.4%).

Process manufacturers and companies with between 1,000 and 4,999 employees were also slightly more likely to increase supply chain spending this year.

AMR surveyed 200 companies for the report.


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