AN EXECUTIVE'S GUIDE TO SUPPLY CHAIN MANAGEMENT SOFTWARE SYSTEMS
According to AMR Research, the Supply Chain Management (SCM) software market in 2007 was $6.5 billion and is projected to grow 7% per year to $9.2 billion in 2012. The top 20 software suppliers in 2008 account for over half of the total market. Currently most SCM vendors fall into either supply chain execution (SCE) or supply chain planning (SCP). Industry analysts expect that SCE and SCP solutions will eventually consolidate. SAP and Oracle lead in market share and both are well on the path to a fully integrated and full feature suite of products. SCM activities not addressed by SCE and SCP are relationship management and product lifecycle management; these activities are addressed by CRM, SRM and PLM systems.
Breakdown of SCM Software
SUPPLY CHAIN PLANNING
SCP software vendors address long-term, mid-term and short-term planning. The systems focus on three major areas: demand, supply and the consolidation of demand and supply.
The three main functions of demand management software are predicting demand, using what-if analysis to model sales plans and using what if analysis to shape demand. Forecasts are typically 24 month rolling projections. Modern supply chain systems are evolving to a demand driven model; thus demand management is evolving from a forecasting tool to full feature innovative solutions to optimize and shape demand.
The goal of distribution software is to help service demand with minimal working capital for the lowest cost. Common functionality across industries is Supply Network Planning (SNP), Distribution Planning, Replenishment and Procurement. Manufacturers also need production scheduling capabilities.
Sales & Operational Planning (S&OP)
Sales and Operational Planning (S&OP) is a best practice that facilitates monthly executive planning meetings to consolidate and synchronize the sales, operation and financial plans, along with the related tasks. Input is collected from demand, capacity and financial forecasts. The end product is a consolidated sales and operational plan.
SUPPLY CHAIN EXECUTION
SCE software addresses warehouse management systems (WMS) and transportation management systems (TMS). Key features include planning, scheduling, optimizing, tracking and performance monitoring.
Warehouse Management Systems
WMS interface to the material handling equipment and control the flow of goods through the warehouse. Other labor saving features include automated processing of inbound and outbound shipments and the efficient storage of goods. Administrative features include processing EDI (electronic data interchange) transactions, planning shipments, resource management and performance tracking.
Transportation Management Systems
TMS address global transportation needs including the management of air, sea, ground and carrier shipments. Procurement and dispatching features include planning, scheduling and optimizing shipments. Key tracking features include managing exceptions, managing constraints, collaborating with partners and monitoring freight. Administrative tasks include cost allocations, freight settlement, and contract management.
Financing SCM Systems
Once you add up planning, training, customization, interfaces and configuring the software, implementing SCM software is almost always more costly than the actual software license. Some of the cost can be amortized over the life of the applicatoin software or built into a lease. In addition to the onetime charge for licensing and implementation cost, software vendors charge annual or monthly fees for software maintenance and support.
A new option is SaaS, or Software as a Service SCM. This on-demand software model allows you to pay for the application software based on consumption as fees are normally based on usage. Currently most SCM vendors do not offer this as an option, although this is likely to change in the near term. Some vendors are offering portions of their SCM modules in the SaaS delivery model.
Best-In-Class versus Single Integrated Solution
The selection of SCM software vendors with a single integrated solution is limited; but most SCM application vendors are steadily moving in this direction. Selecting one vendor for SCP and another for SCE is a viable alternative. Best-In-Class software costs more to implement, because of the additional system integration and interfaces that need to be built and maintained. Having an Enterprise Application Interface (EAI) system reduces some of the interface cost. Other considerations in favor of single integrated solutions include having a single point of contact, common user interface and common IT architect.
Role of Consultants
There are three primary types of SCM consultants: SCM experts (typically management consultants), application software consultants (either from the software vendor or third party) and IT consultants. SCM experts help with the planning and modeling. Consultants employed by the software vendor or third party are application subject matter experts (SME) and help configure and implement the software. IT technical consultants help with data conversions, system integration, interfaces and custom programming.
Continue to Supply Chain Management Software Defined and Explained
SCM Executive Summary
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