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Truths When Selecting Supply Chain Management Software

Many companies prefer to purchase separate Supply Chain Management (SCM) software rather than rely on the SCM module in an Enterprise Resource Planning (ERP) system to handle the functions of the supply chain. By its nature, SCM software is generally considered less complex and disruptive than ERP and it is more tightly focused on the opportunities, issues and problems of supply, distribution, fulfillment and pricing.

However the "SCM" acronym conceals nearly as much as it reveals. There are many SCM software products out there for all sizes of companies and ranges of functions. But it's also important to recognize there is no "one size fits all" supply chain management software solution so it remains paramount to know your SMART (Specific, Measurable, Actionable, Realistic and Time-bound) objectives, business requirements and budget before selecting a suitable partner.

The State of Supply Chain Management

Like most enterprise software, the Supply Chain Management software market met the global recession in 2008/9, with the top companies' revenues declining by 0.7 percent between 2008 and 2009 to a 2009 total worldwide of $6.1 billion, according to Gartner Group. 2010 and 2011 resulted in slight upticks of 2 and 4 percent repsectively, but the pain hasn't been evenly spread.

According to Gartner, the large suite-oriented companies, such as Oracle and SAP took most of the hit. Oracle revenue dropped 3.7 percent between 2008 and 2009 and has been inching back up since. Meanwhile the smaller specialist companies that focus on best of breed SCM software solutions generally incurred lesser revenue declines during the recession and have accelerated revenues at a faster pace since.

What this probably indicates is that more companies are postponing or abandoning sweeping business software projects in the face of the down economy and electing instead to pursue a more incremental approach or focus more tightly on specific parts of the company, such as the supply chain. Those numbers also suggest that in spite of economic conditions, companies recognize the need for the kinds of economies and efficiencies Supply Chain Management offers and are willing to invest the money on focused SCM projects that demonstrate and forecast positive ROI.

Despite the state of a lingering software industry, some things remain constant. When considering an SCM software acquisition, it's important to start with a proper supply chain software selection project and begin by asking several questions to get the most return for your investment. Here a few examples to stimulate your thinking.

What must you accomplish?

While all the functions of Supply Chain Management are important, none of them are equally important to your business. You have needs to be met or specific functions you will want to emphasize. To effectively choose the best fit SCM software product its critical to identify, weight and prioritize your business needs—so that they can be aligned with your corporate strategy and objectively evaluated against multiple supply chain software systems.

Some of these business needs will be determined by your industry. Pharmaceutical companies, for example, need the ability to ship products from raw materials to the distribution of finished products and do it at a fine level. Food companies need exhaustive lot controls during the distribution process. Luxury goods companies may need serial tracking while commodity producers may be more concerned about getting products to the customers on agreed-upon schedules, and so on.

Other needs will be determined by your own business and IT strategy—and even influenced by your partners and customers business strategies. If you have customers running a just-in-time operation you will probably need to meet very specific goals for delivery times and quantities. If you're running an operation with multiple highly automated warehouses, your software will need to support those enabling functions.

How well does the software match your needs?

Supply chain management is a very big tent and software vendors have staked out many different approaches. You want to choose a supply chain software vendor whose products are particularly strong in the areas that are most important to your company. To do this right, it's not a subjective decision process but instead on objective and scored fit analysis that ranks vendors in an apples to apples comparison.

For example, one of the fundamental divides in Supply Chain Management is between planning and execution. In many areas of SCM, vendors tend to be stronger in planning for SCM, such as finding the best routes for delivery, or in execution, such as scheduling parts delivery in the right quantity and the right time. This is a macro level example at best, but suggests the varying approaches used by varying software vendors.

Is the software compatible with your existing systems?

Unlike the situation with ERP where you're essentially replacing all or most of the business software in the company, SCM only handles part of the operation. That means that as much as possible it has to work with your existing systems with a minimum of unnecessary disruption. (Note the word "unnecessary". You're undoubtedly going to want to change some things to get more efficiency and better economies. This is necessary disruption and your SCM software should support it.)

Except in the smallest companies, you're unlikely to find an SCM system which is a perfect drop-in fit. Data is going to have to be converted, processes are going to have to change, integrations are going to have to be developed and so on. However where you can minimize the changes by adopting industry standard protocols and technologies, leveraging vendor-managed integrations or tapping into pre-integrated solutions from online ecosystems, you can minimize the amount of change up front and during the life of the software application.

How well does it work with our customers' and suppliers' systems?

As business becomes more integrated, it's important to have as much interoperability as possible with your clients and suppliers. In fact one of the major ways SCM can help your business is by more tightly integrating your supply chain. This means working with your suppliers and customers, first, to find out what systems they are using and what their data requirements and processes are, and second, how your new system can be integrated and benefit with theirs.

The process of data integration, both within and without the company, is likely to be one of the most time-consuming parts of installing a new SCM system and it must be thoroughly tested to make sure everything works properly. Start planning for this integration as early as possible by collecting information from your operation, your customers and your suppliers.

Especially with suppliers and customers it's important to double-check everything. When you ask a supplier about formats for a specific kind of data or transaction, they're likely to tell you something like: "We store that data in a comma delimited format". Which is fine as far as it goes, but there are a lot of variations on ASCII or comma delimited formats and they're not all compatible. Get the details.

How reliable is my provider?

Especially in today's tough economic climate it's important to know that your SCM vendor is going to be around for a long haul. Ideally you want a software company with a history in the Supply Chain Management business, who is used to dealing with companies of your size and complexity and who has the appropriate reach (regional, national or global) for your operation. Investigate potential partners carefully. You're going to be in this together for the long haul. End

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Author By Chuck Schaeffer      Calendar 2/10/2012       Trackback Permalink        Comments (0)        Filed In Posted in HR Industry
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The Year That Was 2011 in Supply Chain Management
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Overall, SCM software continues to become more relevant in the IT portfolio of business applications. The complexity and size of SCM systems is second only to ERP software and the line between the two continues to blur. There were no major events or shifts in the direction for SCM systems in 2011; but the momentum does continue to advance SCM systems as more companies address needs to participate in the global market, to cut costs and to rapidly respond to business changes.

Risk Management

Natural disasters in 2011, including floods, earthquakes and tsunamis, wreaked havoc on supply chains. The 2011 disasters highlighted the need for systems to incorporate risk management features to better understand, plan and mitigate natural and man-made risks. High impact risk management planning can be aided with software simulation models. To manage common low impact events, supply chain sub-systems can provide real-time updates on events and facilitate the deployment of contingency plans.

SCM Technology Trends

2011 continued several software evolution themes from prior years. The advances in SCM software development having a transformative impact include convergence, collaboration and visibility. Convergence is the integration of supply chain planning and execution, where planning drives execution and execution feedback is a new input into real time planning. Collaboration breaks down department, trading partner and hierarchical boundaries to improve planning and optimize SCM processes. Visibility gives everyone real time accurate information into the supply chain so they can make better decisions; most important is management's ability to accurately evaluate performance.

Supply Chain Planning (demand management, supply management, sales & operation planning) and Supply Chain Execution (WMS, TMS, Inventory Management, Order Management) applications need to be plugged into the larger supply chain ecosystem with an infrastructure that addresses information sharing, business rules, process management, workflows, user interfaces and analytics. IBM with their Smart Commerce, SAP with Netweaver and Oracle with Fusion middleware are on the cutting edge with underlying SOA infrastructures to facilitate SCM convergence, collaboration and visibility. The pay back is a smaller investment in working capital, higher service levels, shorter lead times, more efficient operations and adaptable systems, all of which contribute to higher operating margins.

RFID technology has been in the works since the 1960s, and in 2011, got closer to the inevitable tipping point from cutting edge deployments to full scale must have best practices. The hurdles holding back RFID from reaching the tipping point are the cost of RFID tags, the initial investment cost, and suppliers incurring the costs while customers realize the savings. By replacing barcodes with RFID tags, warehouse operations offer a typical area to reduce costs and improve efficiencies. The real savings will come from a paradigm shift in business applications such as CRM, Order Management, Inventory Optimization and others. Using RFID, consider new ideas where systems can retrieve inventory information from items that are actually in stock or identify an items physical location, replacing inaccurate record keeping systems. Once RFID software is imbedded in middleware and treated as an available service to all business applications, then SCM systems can facilitate real savings. For example imagine: intelligent shopping carts, intelligent passive POS, passive real-time check in/out inventory portals, passive real-time asset tracking, plus many other applications that take humans out of everyday mundane processes.

Being a Good Citizen

Green SCM continues to get quite a bit of attention. One can make an argument that being green has the dual benefit of public responsibility and improving profits; for example: using electronic processes to reduce paper, using reusable packaging and containers to reduce waste, reducing inventory levels to decrease overhead, and better network planning and trading partner collaboration to reduce empty transportation miles. The good news is that most SCM vendors have already addressed many of these needs. A new frontier in green SCM (and overall cost reduction) is addressing the supply chain ecosystem as a whole, instead of each trading partner focused on reducing their foot print regardless if it increases their trading partners footprint.

Software Industry

SCM software revenues increased in 2011 by what appears to be about 4%—with SAP, Oracle and JDA keeping their top 3 positions in SCM software revenues.

Other than Infor Global Solutions' acquisition of Lawson Software, 2011 SCM acquisitions activities were quiet and had little impact on the SCM competitive landscape. Oracle, SAP and other vendor acquisitions in 2011 were minor, filling gaps in SCM offerings. Some notable acquisitions that did not happen: JDA did not acquire a WMS solution, IBM did not acquire Ariba, and SAP and HP did not merge.

In 2010, IBM acquired Sterling to shore up their Smarter Commerce initiative. As part of the acquisition, Order Management, TMS and WMS products were included in the deal. The question not answered in 2011 is whether or not IBM is going to acquire a full suite of ERP and SCM products to compete with SAP, Oracle and JDA. If not, then what becomes of Sterling's Order Management, TMS and WMS? Another unsolved answer from 2011 concerns Infor's (the 3rd largest business software vendor) business model. Do they continue to operate as a holding company with most of their investments going towards acquiring new brands and cutting research and development cost to squeeze out profits, or do they start to model their business in a more traditional software vendor model investing big in one or two products?

Future of SCM Software

Not only has Supply Chain Management software improved operating efficiencies, but SCM software is also improving strategic and operational planning, global trading and B2B relationships. Thanks to innovations in SCM software, companies are recasting the way they organize and do business. The future of SCM software is in solidifying the advances already made, new opportunities with RFID and keeping up with new business trends such as social media, mobility and analytics. Another area that looks for improvement is the supply chain ecosystem as a whole. Instead of cost shifting between trading partners, SCM systems may finally tackle benefits that improve the overall supply chain ecosystem.

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Author By Chuck Schaeffer      Calendar 12/31/2011       Trackback Permalink        Comments (0)        Filed In Posted in HR Industry
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