Winners and Losers

Forrester offers good news, bad news for supply chain solution providers

Tempe, AZ  January 31, 2002  The past year thinned the ranks of supply chain solution providers, leaving many struggling to survive or out of business altogether, but 2002 promises to reward certain niche players in this market, according to a report from Forrester Research.

Analysts at the Cambridge, Mass.-based technology research firm believe that companies will move forward with narrowly defined supply chain projects this year, benefiting those providers that offer targeted solutions.

In the report, authored by Stacie Kilgore, with Laurie Orlov and Meredith Child, Forrester acknowledges that 2001 was a tough year for the supply chain solutions market in general. "Overall, 2001 was a year to reflect and regroup," the analysts wrote.

Proposed mergers between solution providers addressing direct and indirect spending never went through last year, with Agile Software and Ariba calling off the wedding, along with FreeMarkets and Adexa. Only i2 Technologies' takeover of RightWorks went through, although the merger produced an integrated product only recently. Forrester concludes that the processes associated with direct and indirect procurement differ sufficiently that the mergers ultimately didn't make sense.

The analysts noted that cuts in supply chain-related IT projects struck solution providers across the board, with larger players such as i2 and Ariba seeing marked declines in revenues and some smaller players, such as Spaceworks and Metiom, closing down. e-Marketplaces also failed to reach the critical mass of users necessary to generate sustainable revenue levels, forcing companies such as eSTEEL to become software providers.

Supply chain suites, on the other hand, were a bright spot in the market, with firms such as SAP, Oracle and J.D. Edwards that offer integrated solutions gaining momentum and customers, although at the expense of providers offering suites targeted strictly at the supply chain, such as i2, Manugistics, and Synquest.

In addition, certain "best-of-breed" solutions on the demand-chain side saw increased sales in 2001, with Forrester citing Global Logistics Technologies (G-LOG) and Nonstop Solutions as examples. Another bright spot: Continuous demand management. "Firms like United Parcel Service and Eaton began deploying [applications] from suppliers like Manugistics and Metreo that focused on improving price and revenue management to reduce demand variability," Forrester wrote.

The analysts interpreted this to mean that the demand-side providers benefited from companies' requirements for demand planning to avoid stock-outs and lost sales during good times, while the decision-support providers offered companies the means to better manage their orders and pricing during tough times.

Companies also looked to solutions from companies such as Celarix and Yantra, which offer supply chain visibility or monitoring combined with such capabilities as route optimization or dynamic order allocation. "Firms need visibility linked to their industry-specific logistics, inventory and sourcing requirements," Forrester wrote.

In 2002, Forrester's oracles see certain niche players offering broader functionality and greater depth of processes, while "suite" providers such as i2 and Manugistics shedding some of their "non-core" offerings to focus on their supply chain suites. In the meantime, the e-sourcing market is likely to see consolidation, according to the analysts.

Forrester also sees companies becoming more focused in their supply chain-related technology projects this year. "Users will want to buy and implement apps like pricing engines and multisite order aggregation in smaller chunks, with well-defined scope and value," the analysts wrote. "This will open the door for smaller suppliers and consultancies like Revenue Technologies and Inforte to compete with Manugistics and Accenture."

The research consultancy further believes that in 2002 solution providers such as Manugistics and QAD will work to provide application suites that link buy- and sell-side processes such as distributed order management and dynamic replenishment.

Finally, as demand in the economy begins to increase as the year moves forward, streamlined supply chains will have to scramble to meet growing inventory flows, placing a premium, at least in the short term, on the third-party logistics and network optimization services offered by suppliers such as Menlo Worldwide Logistics, Ryder and and Optiant.

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