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Supply chain globalization leads to boom in demand for SCM software

The ever-changing global marketplace is forcing supply chain management (SCM) vendors to update their software. Discover current trends in the SCM software market and learn how globalization is creating the demand for new and more complex SCM tools.

Supply chains are not new, and neither is the concept of supply chain management nor the software that automates and optimizes this function.

What is new, however, is that supply chains are getting increasingly complex as manufacturers outsource portions of their business and deal with suppliers around the world.

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"The globalization of supply chains has driven [the SCM software] business," said Mark Symonds, president and CEO of SCM vendor Plex Systems.

These increasingly complicated supply chains have not only created a boom in the market for SCM software, they have also led to demand for many different forms of SCM applications. "This is a disorganized part of the market," Symonds said. "We end up competing with lots of people -- ERP vendors as well as people who just sell supply chain stuff."

Along with enterprise suite vendors offering on-premise SCM as additions to ERP systems, there are on-demand SCM products and specialized solutions available. "The supply chain planning market mirrors the ERP market," Gupta said. "To compete in the supply chain space, you've got to be able to plug into other people's ERPs," said Nigel Davies, vice president of supply chain at mid-market ERP provider CDC Software.

SCM software facilitates distribution process

Supply chain management software promises to simplify and optimize the entire process of building and shipping goods. "[A supply chain is] anything that allows you to design and build and distribute products to customers," said Anil Gupta, vice president of marketing at Bristlecone, a supply chain consultant and reseller. And SCM software facilitates the entire process, from the first step of demand planning to executing the plan, which may include inventory optimization, warehouse management and tracking inventory, among other functions.

The manufacturer who doesn't want to gain such SCM benefits is rare. That's why some manufacturing companies are implementing new versions of SCM software to replace legacy supply chain applications and old electronic data interchange (EDI) systems.

But for many manufacturers, their new SCM software is merely a big step up from Microsoft Excel spreadsheets.

"We joke that Microsoft Excel is the most successful SCM application as far as usage," said Mark Averskog, director of solution management for SCM at SAP. Symonds agrees. "People solve problems however they can," he said. "We're replacing spreadsheets and paper," along with old vendor packages and point solutions.

"Our goal is to replace Excel interactions, since they're not tied to an end-to-end perspective," Averskog said. He acknowledges that getting off Excel is a tough task for many manufacturing businesses, which is one reason SAP offers several Excel interaction packages designed to let companies use SAP without giving up Excel.

ERP giants build closed supply chain loop

It was back in the late 1990s that SAP and the other dominant ERP vendor, Oracle Corp., ventured into SCM territory. "The big ERP guys have invested heavily in supply chain planning and execution software," Gupta said. "They build a closed loop" that enables customers to integrate all their enterprise data with linked systems.

Averskog said that the demand and supply planning piece of SCM can often be performed by a basic function in most ERP packages. "When you talk about SCM," he said, "you're talking about advanced features that can do things mathematically, software-wise."

On-demand or Web-based supply chain software can stand alone or augment a company's existing ERP or SCM tools. Either way, the goal is to ease communications between a manufacturer and its suppliers, which can be an increasingly difficult proposition with multiple, far-flung suppliers having different levels of technological know-how. SAP offers a Web-based collaborative tool, Supply Network Collaboration, as one of the modules in its SCM application. Plex Systems' offering, called Plex Online SCM, is entirely Web-based.

Manufacturing businesses want the big picture when it comes to their supply chain. According to Davies, "What's hot and emerging in manufacturing supply chain is the principle of enterprise event management, which is the ability to do collective monitoring of end-to-end processes." When a company buys SCM tools, "the bulk of value comes down to cost reduction," Averskog said. "[This entails] running a business faster and with [fewer] errors, no matter what supply chain application you look at."

SCM challenges for manufacturers these days include globalization as well as shorter product lifecycles. "Supply chain is a big issue," Gupta said, "whether it's to the CEO down to the procurement person." Companies these days must innovate and do R&D much more quickly than in the past, according to Averskog, and they must maintain a supply chain that can stand up to that. "The faster you're trying to do all this, the harder it is," he said. "All those things working together put tremendous pressure on SCM systems."

About the author: Christine Cignoli is a freelance writer based in Boston who writes about IT infrastructures and storage technology. She is a regular contributor to SearchManufacturingERP. Contact her through her website.

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