The market for application software for supply chain management (SCM) is growing rapidly, demonstrating the important role that software solutions play in effective supply chain management.

“The supply chain management software industry is already making us talk about itself as a very serious business area, and the fact that M&A has been taking place in this market lately indicates the beginning of its consolidation for further growth” – as it is mentioned by the founder of SourceMe – a B2B marketplace for industrial components that helps manufacturers optimize the promotion of their products, as well as get rid of deadstock items (more about resource by this link).

We’ve reviewed the 2013 Gartner Software Vendor Sales Assessment Report and would like to share it with you. This assessment is not based on the total income of companies, but only a part of it generated from the sales of SCM systems and excluding the profit from sales of physical equipment.

The total SCM market revenue for 2013 was $ 8.944 billion (including purchasing apps), up 7.4% from 2012 revenue. No purchasing applications – only on products such as WMS (warehouse management systems), TMS (transportation management systems), etc. – in 2013 the market earned $ 6.1 billion, exceeding the figure for 2012 by 9%. According to Gartner’s estimates, the compound annual growth rate from sales of SCM products will be 9.9% over the next 5 years, reaching $ 9.8 billion by 2018.

Top 5 market leaders were:

  • SAP – $ 2.138 billion, with profit growth of about $ 400 million, or roughly 20% thanks to the addition of Ariba to its product portfolio;
  • Oracle – $ 1.455 billion
  • JDASoftware – $ 445 million
  • ManhattanAssociates – $ 167 million excluding income from physical equipment sales, with combined revenues of $ 414 million;
  • ToolsGroup – $ 275 million
  • Epicor – $ 159 million

Here, we especially wanted to point out that such a spread of numbers should not scare or cause distrust of such market players as JDA, ToolsGroup, ManhattanAssociates and Epicor. These are the companies created with “O”, specializing exclusively in supply chain management software. They have proven their worth, the statement that “SAP and IBM are not a panacea”, they can be trusted and they offer no less interesting, effective solutions that are more acceptable to customers in terms of cost. Especially, we believe these companies may be relevant in Russia and the CIS countries.

The most important industry trends

In the past year, the following trends were observed in the categories ERP (Enterprise Resource Planning Systems) and SCP (Supply Chain Planning); WMS (warehouse management systems); TMS (Transportation Management Systems); and MES (Manufacturing Execution Systems).

ERP / SCP / SCM

Planning systems recorded 10% growth last year and $ 3.4 billion in profits. The following trends were observed in this category:

It’s all about stocks. Last year, there was interest in optimizing inventory, resulting in an 11% increase. This is the result of companies’ continued interest in reducing inventory investment while maintaining or increasing service level investment.

Another good year for S&OP (Sales and Operations Planning). For the second consecutive year, S&OP applications, which closely link supply chain work with marketing and sales work, recorded 20% growth. These applications allow you to extract information from various sources and use it for real-time action. With the help of S&OP analytics, applications can create what-if scenarios within hours, which previously took days with spreadsheets.

Collaboration on a multi-business platform. Companies are increasingly looking to take advantage of their supplier and customer networks. SAP’s acquisition of Ariba, which serves 1.5 million companies, is the clearest example of this trend. One such vendor can be highly integrated enough to bring together buyers and suppliers in a given industry. It also contributes to greater business transparency.

The popularity of cloud technologies. The cloud computing environment is growing at about 25% per year. More and more companies are migrating some of their operations to the cloud. However, in today’s marketplace, the cloud is more used for networked applications such as transportation and procurement management.

ERP positions are strengthened. As in the past year, ERP vendors such as SAP, Oracle, Infor and Epicor continue to hold their market share. Manhattan leads the way in revenue, but other ERP vendors are expanding their customer base at a pace faster than market development. Thanks to their reliable WMS solutions, these companies can already recruit very large clients, because if a given client is already using an ERP solution from a vendor, it is much easier to implement a WMS solution from the same vendor.

Single platform. Companies have long sought to optimize silos in their operations such as transportation and distribution. Now they are interested in doing all the different functions on one platform so that they can be synchronized and optimized. Manhattan and SAP have been developing similar platforms for a long time, unlike other developers who offer separate integration solutions.

Work planning. This is a new kind of application developed by Manhattan and JDA that allows you to organize work at all stages (from receiving an order, selecting components on order to transportation): schedule work, ensuring that the necessary labor and equipment are available at the right time and in the right place.

WMS

The warehouse management systems market grew 3% in 2013, reaching just over $ 1.1 billion, and continues to grow.

Combining WMS / WCS. As companies increasingly automate their manufacturing, especially in the area of ​​multi-channel commerce, the distinction between WMS (Warehouse Management System) and WCS (Warehouse Control System) is increasingly blurred, and users are beginning to value WCS more than ever before.

TMS

The transportation management software market grew 12% in 2013, reaching revenue of about $ 820 million.

TMS development for small shipping companies. Over the past year, medium-sized carriers’ transportation costs have grown from $ 25 million to $ 100 million. The industry is currently looking for a leading strategy to serve small and medium sized carriers.

More analytics. Some of the leading TMS developers today offer tools to enable “what-if” scenarios that go beyond traditional planning. For example, what will be the most profitable way of transportation if the fuel surcharge increases by 10%, or what will be the required capacity of this enterprise in 4 months, so that you can agree with a transport agency today.

Mobility. Software solution providers are ditching the custom hardware that needed to be installed in the truck cab. Instead, apps are being developed that run on smartphones and tablets. Less bulky, they offer a more modern interface and can take advantage of social media.

MES

Gartner estimates that MES revenue was $ 1.6 billion last year, about $ 100 million more than in 2012. ERP solutions developers who add MES to their portfolios also have a significant contribution to this. The key incentive is the desire to achieve the promotion of information within the manufacturing enterprise.

The clearest example here is the example of a food and beverage company that in its first year, by improving visibility in the use of its raw materials, managed to save $ 800,000 by adjusting the number of raw materials used in each batch. This is an example of Manufacturing Intelligence that helps you achieve quick profitable results in a year, rather than going through a long MES process of operational management.

TOP-20 Software Solutions for Supply Chain Management