The Next Killer App

Study finds supply chain process management software primed for growth

Dedham, MA  May 11, 2001  The supply chain process management (SCPM) market is set to grow from $125 million in 2000 to $518 million by the end of 2005, according to a new study by the ARC Advisory Group, a strategic planning and technology assessment services firm.

SCPM  also called supply chain event management and supply chain visibility  provides alerting, alert resolution logic and extended supply chain visibility into inventory in motion (incoming raw materials and outbound finished goods) and inventory at rest (inside a factory and inventory in distribution centers), as well as a real-time view of key performance indicators (KPI), according to the ARC study, called the Supply Chain Process Management Global Outlook.

Applications that address SCPM can improve customer satisfaction by helping companies to increase their proportion of perfect orders, according to the study's author, ARC Director of Supply Chain Solutions Steve Banker. The software can help ensure that orders are delivered on time, in the quantities ordered, with no unauthorized substitutions, with the correct value-added services executed and with the correct billing, Banker explained.

ARC believes that SCPM, while still a young and immature market, appears to offer the same kind of robust payback offered by supply chain planning (SCP), a market that grew at about a 40 percent cumulative average growth rate over the first six-to-seven years of its existence, when it offered a payback in less than one year for a high percentage of customers.

"The payback appears to fall into four categories: reductions in inventory, elimination of sources of order fulfillment variance and automation of processes (with an attendant reduction in headcount), and the reduction in the number of costly returns," Banker said.

Even though the forecast for SCPM is among the highest growth rates of all software industries, "if subsequent ROI research shows that the payback period is in fact similar to or better than [supply chain planning software]," Banker says, "then a growth rate of closer to 40 percent would be warranted."

Banker said that providers of such enterprise applications as enterprise resource planning (ERP), supply chain planning (SCP) and warehouse management system (WMS) initially will offer this solution to their installed base.

North America will be the most important SCPM market for the foreseeable future, ARC predicts. Sales to companies with more than $1 billion in revenue will grow faster than sales to smaller companies.

Supply chain visibility a little hazy? Look for "Supply Chain 20/20," the cover story in iSource Business' June 2001 issue.