Dwight Klappich, vice president of SCM research for META Group, who extends his predictions out to 2008, voices similar points. "For this year and next, external pressures to leverage new technologies (like RFID and UCCnet), provide customized services and improve visibility will drive companies to upgrade supply chain execution applications, for example warehousing, transportation and manufacturing," he explains. "Concurrently, international trade, security and compliance pressures will motivate companies to upgrade global trade, health and safety, and contingency planning solutions. Through 2008, companies will merge information processes among [customer relationship management (CRM), supply chain management (SCM), and product lifecycle management (PLM)] applications to holistically scrutinize demand and revenue flows across customer and product lifecycles."
According to The Yankee Group, organizations have shifted information technology (IT) dollars away from internally oriented technologies to outward-oriented technologies in such areas as lean SCM, distributed order management, collaborative planning and forecasting, and collaborative logistics, or what they call extended supply chain management technologies. In the firm's "IT Budget Shift Drives Extended Supply Chain Management" report, 71 percent of those companies surveyed increased IT investment in the areas just described. What's truly telling is that the portion of the budget allocated to extended SCM, distributed order management, collaborative planning and forecasting, and collaborative logistics grew 75 percent on average, while the overall IT budget grew only 3.7 percent.
According to the report, "Few enterprises were technically or organizationally prepared to embrace extended SCM during the height of dot-com mania. Similarly, no supply chain vendor had the ability to deliver edge-of-the-enterprise solutions, such as extended SCM, without substantial integration and customization costs. Client/server enterprise resource planning (ERP) and SCM applications made it technically challenging to extend processes and functions beyond the four walls of the enterprise."
The report goes on to explain that much has since changed. "The costs of integrating with the extended supply chain are falling. Various protocols and standards reduce the technical cost of supply chain integration. Supply chain application and integration vendors have responded to customer demands that vendors make it easier for customers, suppliers and other parties to access information such as forecasts, inventory levels, order status and capacity."
We get a little bit of a clue, if not clarity, as to why enterprises are shifting their IT budgets from a recent survey conducted by Supply & Demand Chain Executive. When readers were asked what are the primary drivers behind spending on solutions to improve processes and operations for their organizations, 63 percent said it is to reduce costs, 19 percent said to increase efficiency, 12 percent said to use logistics solutions to gain competitive advantage, and 6 percent said they invested in additional IT to scale upward because their business is growing.
RFID, Outsourcing Lead Hot Topics
According to Forrester Research's Tohamy, "I think RFID would take first prize when it comes to hot topics this year. The craze started around Wal-Mart's suppliers meeting in November of 2003. For a few months there was a lot of confusion, partly caused by vendors who were looking to capture as much of the market share as they can and to differentiate themselves in a very young market. User companies worked hard to figure out what their long-term strategy should be besides retail compliance and ensure that there are no throw-away efforts."
Tohamy and the analyst community expect more clean up in this area, as well as a better definition of such solution components as reader integration, middleware, business process management and functional application.
Additionally, RFID will drive increased interest in wireless solutions. "Companies will evaluate the radio frequency technology, including other wireless or mobile technologies with RFID initiatives," says Dominy.
Since outsourcing is a hot topic for everyone, including the mainstream media during this election year, the analysts are also tackling it, but in relation to how it's impacting fulfillment and logistics. Many believe the outsourcing trend is forcing companies to re-evaluate their supply chain management portfolios. "Enterprises must redesign their portfolios around a virtual network model where they focus more attention on the externalization of processes and information flows," says META's Klappich, "not around internal processes."
Klappich goes on to explain that business cases should be developed around end-to-end process improvement (e.g., order-to-cash cycle time, total pipeline inventory reduction, improved delivery on promise date), which
in a virtual network would span multiple enterprises and systems.