Back in The Saddle

Supply chain execution software has re-entered the investment spotlight as supply chain partners face heightened pressures. In fact, supply chain execution and demand-driven supply networks attracted the majority of supply chain investment in 2004. AMR Research chalks that up to increased use of outsourcing, which must be carefully managed; supplier collaboration efforts; and the pursuit of perfect demand applications to better hone production and inventory levels.
Post-9/11, investment focused on tactical, measured spending to cut costs. Today cost-cutting is still important, but priorities have shifted to applications that add flexibility and improve service to customers, to fuel growth and competitive advantage.

According to Gartner's April 2004 study, "Supply Chain Initiatives Rebounding in U.S.- Based Companies", enterprises that re-engineer processes and deploy SCM applications strategically will gain more competitive advantage than those that continue to view SCM as a cost-cutting tactic.

Deep Data Exchange
Order management, warehouse management, transportation management and perhaps yard management have traditionally been categorized as separate supply chain execution applications. But developers of these applications continue to group them into suites that, when deployed together, enable a deeper level of data exchange, providing more dynamic and flexible capabilities. These suites have developed in part through consolidation, which is on the rise among best-of-breed supply chain execution developers (SSA and EXE, 3M and HighJump).

An increasingly common add-on module to SCE suites is labor management, to ensure maximum productivity from human resources by relating worker scheduling to fluctuating demands for warehouse activity.

Warehouse management systems are also being more closely integrated with material handling systems software, although contention remains about a proposed standard. That has lead developers to make point-to-point integrations instead, which must be modified when one application is upgraded.

In fact, some material handling equipment/software companies are developing their own versions of warehouse management systems. They join a contentious SCE market now under siege by both best-of-breed specialists and enterprise resource planning technology vendors.

Right now, according to AMR Research, the pendulum is swinging in the best-of-breed direction due to speed advantages in rollout and attaining benefits, and because they are more contained and, therefore, controllable.

RFID Integration
As RFID and automatic sensors become more deeply incorporated into operations, supply chain execution applications will need to learn to accept, manage and share data collected passively. Developers are at work rethinking warehouse and logistics business processes to best take advantage of this paradigm shift in data collection. Gartner is tracking RFID Warehouse Management Systems as a separate application category on its infamous hype cycle since the changes are so profound, and some see RFID-enabled applications as reviving growth in this mature market.

Transportation is evolving from a cost center to an opportunity for customer service excellence in the eyes of the enterprise. At the same time, the U.S. logistics marketplace is challenge by constrained capacity and heightened customer demands for faster shipments, real-time data and more visibility.

As a result, transportation management suites (TMS) are becoming more comprehensive and globally focused, optimizing transportation by incorporating strategic and tactical planning through execution and payment.

Analysts expect TMS applications to increasingly become available through subscription-based and on-demand purchasing and delivery models, and increased use of Web-based architecture to enable transactions with smaller partners. Transportation applications are migrating toward complete automation, where humans only manage exceptions.

That said, however, the traditional divide between supply chain execution and supply chain planning applications is evaporating. Previously, planning applications generally passed decisions to execution applications to enact, with data flowing back only for exceptions and reporting.

But now, planning and executing that plan are becoming nearly simultaneous, helping users react with more agility to fluctuations in supply and demand. Gartner has coined this approach as "plan while executing, execute while planning", while others have termed it "dynamic optimization".

Integration Becomes Easier
Another transition is in the architecture of supply chain execution applications. Developers are increasingly turning to services-oriented architecture, such as Microsoft.NET, to share objects and components among applications. The move is expected not only to prevent integration problems and enable new capabilities and data flow, but to also allow users to assemble solutions taken from a variety of sources.

This transition will lay the groundwork for further integration of supply chain processes with other business applications. In fusion architecture, supply chain applications are interwoven with other business applications that extend beyond the supply chain, reflecting the increasing complexity and dynamics of supply. Demand analytics applications are one example, according to Gartner.

In fact, the days of regarding supply chain execution as an isolated software category may be numbered. According to Gartner's report "Hype Cycle for Supply Chain Management, 2004", the challenge for managers is to focus not just on SCM point products, but to also focus on understanding the component functions that enable the entire supply chain to meet extra-enterprise business needs.