Supply chain planning market growing despite soft global economy

Dedham, MA— Despite a weak macroeconomic environment during the past two years, the supply chain planning and collaboration (SCP&C) market is expected to grow at a 2.8% cumulative annual growth rate (CAGR) from more than $1.9 billion in 2003 to just under $2.2 billion by the end of 2008, according to a new market study by ARC Advisory Group . The SCP&C market’s more than $1.6-billion industrial manufacturing sector accounts for 85% of the overall market.

ARC says the study’s projections are particularly interesting because the recession in the U.S. has triggered reductions in capital spending, especially spending on information technology. Also, despite this slow, challenging market, the study found that many companies reportedly view the current business climate as a good opportunity to revamp their operations, and make them more cost effective.

“The biggest difference between the situation a couple of years ago and now is that companies are investing almost exclusively to generate greater cost effectiveness,” says Steve Clouther, ARC’s analyst and author of “SCP&C Software & Services Worldwide Outlook.” “Despite the weak economy, industry today is facing a significant need for change due to the substantial increase in business transaction costs over the past few years. As a result, companies are investing primarily to make the value-added chain from supplier to end customer more efficient, while at the same time reviewing relevant internal processes.

“Geographically, the study found that North America accounted for most of the SCP&C market’s 2003 revenues for software and services, followed by Europe, Middle East and Africa. “In 2004, the European Union expands by 10 countries, and, as a result, it will be the region of growth opportunity for SCP&C vendors.”

The report adds that services make up most of the SCP&C market, and are likewise projected to increase revenues and market share. The software license average selling price (ASP) has been steadily eroding, as has the number of million-dollar-plus deals, so SCP&C vendors are aggressively seeking more service revenues. This is putting pressure on third-party service providers. This new SCP&C-vendor strategy provides clients with comprehensive solutions for internal and external supply and demand chains by offering implementation services for their products. When implementing software, users typically make changes to their business processes and overall operations, including planning and pricing functions. To help users make these changes, vendors offer implementation services. Some of these new services help clients redesign their operations to take advantage of the SCP&C software.

There are four suppliers among the top 10 SCP&C vendors. While they represent only 20% of the market, they are increasingly taking market share away from smaller, best-of-breed vendors. Those that are also ERP suppliers can offer solutions for processes, such as procurement-to-pay and order-to-cash, while providing the enterprise with the capabilities to monitor and analyze the extended supply chain. This is preferred over dealing with supply chain problems that are more limited in scope, which is the traditional best-of-breed approach. Consequently, larger suppliers should continue to gain a larger percentage of the market during the study’s forecast period.

For more information on the study, visit https://www.arcweb.com/research/ent/scpc.asp .

Control Engineering Daily News DeskJim Montague, news editorjmontague@reedbusiness.com

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