While the supply chain management software market is relatively small (compared to many other markets), the vast disparity in functionality between different SCM programs makes buying decisions much more complicated. Some programs concentrate on business intelligence, others focus on inventory control or transportation management, and there are full-suite systems that do all of the above and more. This buyer’s guide is designed to identify the features associated with supply chain management systems to help navigate the selection process.
Here’s what we’ll cover:
What is SCM Software?
Supply chain software refers to the range of tools that are designed to control business processes, execute value chain transactions and manage supplier relationships. While functionality in these systems varies tremendously, common features include purchase order fulfillment, shipping, inventory and warehouse management, and supplier sourcing.
Many supply chain management systems include forecasting, which helps companies manage the fluctuations in supply and demand by use complex algorithms and consumption analysis to evaluate buyer histories. Supply chain optimization software can be an invaluable tool in maximizing production efficiency and planning for the future.
Supply Chain Management Application Categories
|Supply Chain Planning||Planning systems are used to forecast customer demand and adjust the speed and flow of production accordingly. Simulated demand estimates are run using historical trend data and planned promotion schedules to determine how changes in market awareness will affect your organization's inventory requirements in the future. Example vendors include InStyle ERP, SCP 4.0, VISION SCM, and Clever.|
|Demand Planning||Demand planning software improves the accuracy of potential demand forecasts by reducing biases in the data and providing that data to your organization in real-time. Multi-dimensional forecasting allows users to view information through a variety of different filters--by market, time or customer--and run a series of "what if" simulations to project future demand. Example vendors include Microsoft Dynamics, Geneva BMS, Fishbowl Inventory and SAP.|
|Vendor Managed Inventory||Vendor managed inventory (VMI) systems give suppliers the ability to monitor and replenish the buyer's inventory themselves. Various communication options--such as XML, web portals and email--help multiple business partners increase visibility. Buyers can automate sold inventory reports, and suppliers respond with new shipment notifications and invoices. Example vendors include Datalliance VMI, RedPrairie, SAP and Aravo.|
|Supplier Management||Buyers use supplier relationship solutions to monitor the performance of their suppliers. Users can assess supplier risk through user-defined risk categories. Performance analyses utilize key performance indicators (KPI) and audit trails to monitor spend and supplier performance. The software also helps users keep track of their suppliers' regulatory compliance. Example vendors include R.Portal, Geneva BMS, Fishbowl Inventory and S2K.|
|Procurement||Procurement software carries out purchase orders and maintains the financial side of supplier/customer relationships. Purchasing terms are distributed electronically throughout the organization for instant approval, and expenses are logged for future reference in the next sourcing cycle. As the accounting segment of SCM systems, procurement also handles reporting and compliance issues. Example vendors include Coupa, SphereWMS, Microsoft Dynamics and WISE.|
|Strategic Sourcing||Sourcing software is used before the procurement process to establish cost-cutting goals and to pre-screen potential vendors. Spend analysis pinpoints unnecessary costly supplier relationships by comparing current spend to other market options. Buyers can submit e-RFx, electronic requests for x (quotes, proposals and other information), to potential vendors to gather data for making informed purchases. Example vendors include ShippersEdge, Aravo, Epicor and Lawson.|
|Warehouse Management||WMS systems monitor and control the movement of materials within the warehouse. Shipping and receiving events are controlled with advanced shipment notifications, and picking and putaway are tracked using tools like auto ID data capture (AIDC) and radio-frequency identification (RFID). WMS software also assists with the design of warehouse infrastructure. Third party logistics companies should review our 3PL software guide for a list of systems tailored for 3PL. Example vendors include SphereWMS, WISE, HighJump Warehouse Advantage, Manhattan Associates and RedPrairie.|
|Transportation Management||TMS software guides the movement of materials to and from the warehouse. Logistics software can suggest the most efficient delivery modalities (air, land, sea) and manages multiple delivery variations like heterogenous vehicle fleets and load splitting constraints. Deliveries are monitored using satcomm and other communication devices. Land-based fleets should review our trucking software guide for the top dispatch and routing systems. Example vendors include TMW, Retalix and FreightMaster.|
|Order Fulfillment||Order fulfillment software helps supply chain managers decrease lead times on production orders, resulting in smooth quote to cash processes. The system can determine whether build-to-order (BTO) or engineer-to-order (ETO) is the best solution for each product. After order completion, order fulfillment software keeps track of unpaid orders through revenue recognition processes. Example vendors include SphereWMS, ShipppersEdge and ShipSoft.|
What Type of Buyer Are You?
- Third party logistics. Companies that manage the ordering, warehousing, and transportation of supplies for another business need a robust solution that can handle the data and processes for lots of different companies. These supply chain management tools will include lot tracking, customer profiling, supply management and order fulfillment.
- Manufacturing. Manufacturing software needs to be able to track suppliers, costs and customers. This is where features like collaboration, demand planning and strategic sourcing are most likely to be used.
- Distribution. Distributors sit in the middle, connecting manufacturers to retailers and/or consumers. Distributors need to track products and terms for multiple suppliers and customers, and have robust inventory and transportation capabilities in order to ensure the products get to the right person at the right time.
- Retailers. Brick and mortar retailers will want to consider dedicated retail software, but phone- and Internet-order retailers function more like distributors. These buyers will need warehouse & transportation solutions, inventory control, and possibly additional strategic/planning modules, particularly for the larger/volume-based retailers.
Trends You Should Understand
- Online purchases. Over the last decade, online retail sales have exploded, and with them the need for effective warehousing, inventory and transportation control. Suppliers, more often than not, are taking a product from manufacturing not to a store, but to a warehouse where it is stored and ultimately sent directly to the consumer. Ensuring an effective inventory control path is absolutely critical throughout this process.
- Software as a service (SaaS). Cloud-based software – that is, software that’s hosted by the vendor and accessed through a web browser rather than being installed on a local computer – has been adopted by most industries to a large extent. SCM technology has been a little slower to adopt this trend, with major players like Microsoft, Geneva Systems, WISE and Fishbowl yet to develop web-based systems. But as the technology improves, more and more supply chain management software providers will offer web-based applications, with its benefits of collaborative networks and online purchasing integration. Currently S2K and SAP are the biggest SaaS contenders.
- Eco-friendly logistics. With environmental consciousness at an all-time high, consumers are beginning to think about logistics when it comes to purchasing their products. This trend is most noticeable in the food industry, where grocery stores and restaurants are beginning to brand and market products under a banner of being “locally sourced.” As transportation from suppliers is the easiest place for a manufacturer to cut its carbon footprint, buyers may want to look out for a program’s ability to identify suppliers based on proximity or other green factors.
- Improving business intelligence. More and more companies want to know how their business spends money, so sophistication of planning, demand planning and strategic sourcing capabilities will only grow in an effort to meet the demand.
- Increased demand for labor management. Companies using SCM software to track their inventory are now turning their attention toward labor optimization and the ability to manage each worker more efficiently. These systems can create a list of tasks for a worker so he can complete multiple types of work in one trip.
Benefits & Potential Issues
The benefits of supply management software are considerable:
- Increased efficiency. First and foremost, SCM software is designed to improve the efficiency of your operation, from inventory check-in and storage to distribution and transportation. By making the processes electronic and/or automated, the time spent on these tasks drops considerably, which allows you to send more products out faster.
- Reduced costs. The resulting efficiency reduces labor costs. In addition, many of the intelligence features are specifically designed to identify cost waste and eliminate it – for example, where commodities can be procured at lower rates, how to combine shipping to reduce to transportation costs, or where to reduce inventory to maximize storage capacity.
- Trend analysis and business intelligence. The intelligence features, in addition to helping control costs, can help improve revenues by identifying strongly performing products and guiding the user toward meeting market demand.
While these supply chain solutions do come at a price, proper implementation will usually lead to a calculable return on investment within a year.
Recent Acquisitions by Supply Chain Companies
- Descartes. Over the past two years, Descartes has made a number of acquisitions to expand its supply chain solution portfolio. In April 2010, on-demand trade management vendor Porthus was integrated into the Descartes solution. That same month, Descartes also acquired Imanet, a vendor specializing in supply chain technology for international freight forwarders and brokers. The final acquisition in 2010 occurred in June with the purchase of Routing International, a provider of route optimization software. Descartes acquired two more companies in 2011: Telargo, a mobile asset management company, and InterCommIT, a business-to-business (B2B) integration service. Most recently, Descartes acquired GeoMicro, a navigation and geographic information provider, in January 2012.
- RedPrairie. After its own acquisition by New Mountain Capital in early 2010, RedPrairie has since added solutions to expand its retail, warehouse and logistics software functionality. RedPrairie purchased SmartTurn in May 2010 and rebranded it as On-Demand WMS. SofTechnics, a vendor specializing in enterprise-level retail solutions, added mobile-enabled retail solutions when it was added to the RedPrairie portfolio in January 2011. To further diversify its offering, RedPrairie also integrated the Shippers Commonwealth TMS application in January 2011. Escalate Retail was acquired one month later, in February 2011, adding increased retail functionality to its supply chain management solutions.
- Epicor. Epicor was acquired by private equity firm Apax Partners in April, 2011. At the same time, Activant was jointly acquired and merged with Epicor to improve the vendors’ offering of supply chain systems for small business and medium-business users. For its own acquisitions, Epicor has made two big moves since 2010. Spectrum Human Resource System Corporation was acquired in December 2010 to add additional human resources functionality to its ERP solution. Most recently, Internet AutoParts, a B2B e-commerce company that specializes in aftermarket automotive parts and repairs, was acquired in April, 2012.