SCM market to hit $5.5 billion as manufacturers aim to reduce costs, boost customer responsiveness, annual AMR survey finds
Boston June 8, 2004 After years of caution, manufacturing companies are finally increasing investments needed to achieve their supply chain objectives, and the supply chain management (SCM) software market will tick up this year as these enterprises invest in technology as a way of cutting costs and boosting customer responsiveness, according to a new report from technology consultancy AMR Research.
The SCM software market will grow 5 percent this year, rising from $5.24 billion in 2003 to $5.5 billion in 2004, AMR said in its supply chain management and enterprise resource planning (ERP) market summaries, part of AMR's annual Market Analytix Market Sizing Report Series.
The bulk of new investment will be in supply chain execution (SCE) initiatives and so-called "demand-driven supply networks," or DDSNs, according to the market summaries, released at AMR's Supply Chain Executive Conference in Scottsdale, Ariz., last week.
DDSN is a shorthand term for what AMR is calling the next-generation supply chain. According to AMR Vice President of Research Kevin O'Marah, DDSN "simply means building all supply chain processes, infrastructure and information flows to serve the downstream source of demand whether a consumer in the supermarket or the Department of Defense rather than the upstream supply constraints of factories and distribution systems."
AMR's annual enterprise market projections conclude that companies seeking profitable growth are investing in technology that allows them to reduce costs while improving customer responsiveness. "An obsession with cost cutting and asset utilization has evolved into a focus on innovation and creating an ability to capitalize on the variability of demand," said O'Marah. "Using technology to leap-frog the competition, reinvigorate growth channels and provide shareholder value is the new earmark for supply chain savvy enterprises."
Factors such as increased outsourcing, supplier collaboration and the pursuit of perfect demand information have spurred the need for applications that provide better management visibility across the enterprise. Vendors who work in these categories are likely to experience the most growth in 2004.
"The good news is that SCM investment is growing; the great news is that companies are grasping what enterprise applications can do for their businesses," said Tony Friscia, CEO of AMR Research. "Using IT to bring great ideas to market will undoubtedly keep technology spending up. Innovations in [radio frequency identification (RFID)] and changes in the retail industry are spurring renewed growth."
Additional findings from AMR's report included:
- ERP vendors, with a strong installed base and maturing supply chain products, will grow 11 percent and consolidate their market share gains.
- A surge of interest in technologies to combat demand uncertainty through better sharing of partner data is fueling the revitalization of the SCM market.
- RFID continues to be a critical driver of SCE spending. In particular, warehouse management system (WMS) applications will grow 6 percent.
- Consolidation is accelerating, especially among supply chain execution vendors, in order to broaden functional footprints, deepen vertical-specific expertise and expand geographic coverage.
Over the next few weeks AMR plans to release additional market summary reports covering product lifecycle management (PLM), human capital management (HCM), customer relationship management (CRM), and procurement and sourcing applications.
The consultancy bases its market forecasts are on surveys of more than 500 software vendors representing the various technology segments. Metrics are based on total revenue, product type, software revenue, applications segments, operating environment, regional market, customer size, vertical industry and sales channel.