According to a new Forrester Research, Inc. (Nasdaq: FORR) report, US firms will spend a total of $35 billion over the next five years to improve business processes that monitor, manage, and optimize their extended supply chains — or supply networks. In the report “SCM Processes Replace Apps: 2003 To 2008,” Forrester expects firms to increasingly extend their supply chain processes across departmental and partner boundaries. For firms this means the end of investments in narrowly focused functional supply chain management (SCM) apps and concentration on supply chain processes that support firms’ migration to adaptive supply networks. The result? Supply chain ISVs will coalesce around four major platforms — IBM, Microsoft, Oracle, and SAP.
The report categorizes and projects the total spending by US firms in supply chain process improvement initiatives that target the entire product life cycle — from decision through manufacturing and distribution all the way to aftermarket service management. In addition to a breakdown by process, spending is also projected by industry. For this report, Forrester interviewed 26 supply chain executives in $1 billion-plus manufacturing firms. Additionally, to calculate spending projections on supply network processes, Forrester surveyed 124 North American executives who work for firms ranging from $500 million to more than $10 billion in revenue.
- Variability and process inflexibility hamper supply chain performance today.
- Forty-six percent of interviewees cited difficulties in getting processes and people adjusted to changes as impediments to supply chain performance.
- Forty-two percent pointed to high variability in supply and demand.
- Fifty-four percent of interviewees say their supply chain apps have failed to meet their expectations, most often citing immaturity of technology standards.
- Only eight percent of interviewees plan to significantly increase SCM apps spending in the next three years. Fifty percent plan a moderate increase, and 27 percent say spending will remain the same.
- Investment emphasis will vary across industries as:
- Medical device makers focus on synchronizing production with outsourcers, spending on product quality and shipment tracking.
- Customer-facing industries like CPG and retail invest in better demand management, including improved forecasting and price optimization.
- Distribution-intensive industries with global shipping operations — like Motorola and Nokia — overhaul logistics activities like order fulfillment.
- Durable good makers like Ford and GM spend on improving aftermarket service management.
- Among all industries, CPG and retail will invest the most on supply network processes, leading spending in hot areas like order and demand management.
- Services will take the lion’s share of supply chain spending.
- Spending on license fees will plummet — and stay there.
- Service spending will grow — especially in process consulting.
- Customers will readily pay for post-implementation handholding.
- In 2005, SCM vendors will rally around four platforms providers: IBM, Microsoft, Oracle, and SAP. The result?
- i2 and Manugistics will end up playing second fiddle to ERP vendors.
- By 2006, Microsoft will give large ISVs a run for their money and corner the midmarket.
- Business process management (BPM) vendors will become acquisition targets for platform providers.
Note to editors: Contact Tina Murphy to learn more about this report or to schedule an interview with Forrester Senior Analyst Navi Radjou. The report “SCM Processes Replace Apps: 2003 To 2008” contains the following data:
- Forecast: US Supply Network Spending By Process, 2003 To 2008
- Forecast: US Supply Network Spending By Stage, 2003 To 2008
- Forecast: US Supply Network Spending By Cost Type, 2003 To 2008
- Forecast: US Supply Network Spending By Industry, 2003 To 2008
- Forecast: US Supply Network Spending By Firm Size, 2003 To 2008