Software Advice, a company that analyzes and recommends inventory management software, recently published a report that analyzed 200 prospective supply chain management (SCM) software buyers and found that only 6 percent of small businesses are currently using commercial SCM software. Surprisingly, the study also found small businesses are budgeting $30,000 to purchase new SCM software in 2015 to reduce data entry and automate tasks. Based on this sizable budget, it is apparent SCM software is no longer enticing only to large businesses.
Some of the survey’s most revealing findings include:
- On average, mid-size to large businesses budget $171,000 for new SCM software.
- 24 percent of small businesses want to buy SCM software to improve their warehousing.
- More than 30 percent of small businesses use spreadsheets to meet their supply chain needs.
Forrest Burnson, a market research associate at Software Advice, sat down with Supply & Demand Chain Executive (SDCE) to further discuss the adoption of commercial SCM software.
SDCE: How and by whom was the study conducted? Can you explain the sample?
Burnson: The study was conducted by Software Advice. The data was collected from the interactions we have with prospective software buyers. The sample was a randomized selection of those interactions, though we removed third-party logistics (3PL) firms from the sample as their needs are inherently different from more traditional product- and service-based businesses.
SDCE: Why is SCM software now enticing to small- and medium-sized businesses?
Burnson: It's more accessible than ever for small to midsize businesses (SMBs). The move to the cloud drives immediate up-front costs down and the subscription pricing models tend to be more attractive for SMBs. On top of that, we're seeing a proliferation of highly specialized, niche solutions targeting SMBs emerge from new vendors in this space.
SDCE: Were the results that only 6 percent of small businesses are using SCM software surprising? Why?
Burnson: It's not terribly surprising. Many of the businesses we speak to are growing and expanding their operations, and are, therefore, investing in these types of solutions for the first time. On top of that, many smaller businesses may be unaware of the solutions that are out there, so they're just in the preliminary phase of their research.
SDCE: What are some of the reasons companies are seeking out SCM software?
Burnson: There are many reasons. Increasing supply chain visibility and ensuring supply chain integration is definitely a top concern; many companies are using a variety of disparate systems and they want to improve integration of data flows between their different business processes. Beyond that, if a company's employees are doing a lot of manual data entry, they're simply losing money by not automating those types of tasks, which this software can help accomplish. Regulatory issues are also a concern for many companies as their old systems may not be compliant or otherwise make ensuring compliance more difficult than it needs to be.
SDCE: How are small companies meeting their SCM needs without the software?
Burnson: They're generally using some combination office productivity software (e.g., Excel), a legacy database system and/or basic accounting software to conduct their day-to-day operations. Those solutions can work, but they can become incredibly unwieldy as a business grows and its needs evolve.
Forrest Burnson is a market research associate at Software Advice where he covers the construction, inventory management and supply chain markets. He graduated in 2011 from the University of the South with a degree in political science and French studies. In 2013, he graduated from the University of Texas with a master’s degree in journalism. During his second year of graduate school, Forrest was a fellow for News21. Prior to joining Software Advice, he was a writer and researcher for Global Water Intelligence. He was published in a number of other outlets, including the Texas Tribune, the Austin Business Journal,Market News International and the Austin American-Statesman.