Running The Numbers - August/September 2005


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The latest facts, figures and benchmarking data in the procurement/payment, supply chain management, sourcing/logistics, and the supply chain integration & technology infrastructure markets


Fulfillment/Logistics

WMS Market Seen Reaching $1.3 Billion by 2009 Despite Vendor Viability Concerns

The worldwide market for warehouse management systems (WMS) has had its best year in several years, recovering from several slow years to grow by over 5 percent in 2004 and set to continue an upward march through 2009, even as consolidation has roiled the marketplace and left users with questions about long-term vendor viability, according to new study from ARC Advisory Group.

The market was $1.067 billion in 2004 and is forecasted to be over $1.339 billion in 2009, according to the report, "Warehouse Management Systems Worldwide Outlook Through 2009."

Steve Banker, service director for supply chain management at ARC Advisory Group, and principal author of the study, said that based on the number of acquisitions and mergers in this market, which has seen more than 20 deals affecting companies with WMS solutions in the last couple years, the market's growth has been surprisingly strong. Material handling-centric suppliers of WMS were not active in acquiring other WMS companies, the larger ones having made these acquisitions several years ago.

ERP companies that were active in this area in 2004 and 2005 included Oracle, Infor and Retailix.

Depending on the research cited, 50 to 80 percent of acquisitions never produce the anticipated benefits, according to ARC. The WMS market withstood the surge in acquisitions this year, but the research firm says that the true test will be to see how well the acquired companies' revenues hold up in coming years.

Source: ARC Advisory Group

Supply Chain Integration & Technology Infrastructure

Small Companies Increasingly Eye ERP; Focus on Compliance

In a survey of more than 550 companies, conducted by technology consultancy AMR Research and a manufacturing industry magazine, just 27 percent of companies with fewer than 500 employees indicated they use enterprise resource planning (ERP) systems today (Fig. 1), compared to 57 percent of companies with 500 to 2,499 employees, and 70 percent of large enterprises with 2,500 or more employees.

However, the study reports that more than 20 percent of the small enterprises are evaluating ERP systems for the first time in the next 12 months. Overall, 16 percent of respondents said they are evaluating an ERP system for the first time in 2005.

AMR attributed the growing number of small enterprises looking at ERP to the economy's shift to a more demand-driven model. "Many organizations, particularly smaller manufacturing shops, have realized that they do not have the IT architecture needed to compete in the new demand driven world," said David Caruso, senior vice president of research at AMR Research.

Compared to the old push supply chain model, the new business model defined by AMR Research as "demand-driven supply networks" (DDSN) states that consumer demand should drive all supply chain activities. Traditional manufacturing technologies, such as ERP, and business processes need to be amended to operate within this new model, AMR asserts.

The study revealed that nearly 40 percent of all companies surveyed completed their initial ERP investment within the last two years, and almost 50 percent of the respondents interviewed indicated that they would be making substantial changes to their existing ERP systems over the next 12 to 18 months.

Many organizations are making their new ERP systems the data management hub for compliant manufacturing, with investments focusing on providing key stakeholders improved access to operational data and business intelligence.

Source: AMR Research

Procurement

Greater Supply Base Consolidation Yields Greater ROI for Procurement

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