Executive Briefings

On the Road To Supply Chain Excellence: Our Technology Survey Points the Way

To maintain competitiveness, companies must continually strive for the next level of supply chain performance. To do that, they must keep abreast of the latest enterprise technologies.

It is certainly true that supply chain performance depends as much on people and process as on technology, but without superior technology, excellence can never be achieved. Employees need IT infrastructure and application support to perform effectively; and key business processes must be automated and optimized, within and across enterprises, in order to create sustainable competitive advantage.

This means that the journey represented by a company's technology road map is never ending. As supply chains become more global, complex and demand driven, their underlying technologies must likewise evolve. To stay ahead of the curve, companies need to continually look toward the next level of supply chain performance and prepare for the technology advances that will take them there.

To better understand where our readers are on this journey and what capabilities they are adding to their IT footprint, GL&SCS partnered with Aberdeen Group, Boston, to conduct a comprehensive technology survey. Findings from that survey anchor this special report, which also features comments and opinions from numerous technology vendors. Together, we hope these findings provide useful pointers to companies in their quest for supply chain excellence.

The Survey
The more than 100 companies that participated in the Aberdeen/GL&SCS survey represent process, discrete and project-based manufacturers as well as distributors and retailers. A small number of logistics service providers also participated. Almost half of the companies represented have annual revenue of more than $1bn, with 38 percent being in the $50m to $999m range. [Editor's Note: See accompanying box for Enslow's key takeaways from the survey. Complete survey results, along with a full set of charts, can be viewed on the GL&SCS web site: www.supplychainbrain.com.]

Survey results show that investments in supply chain solutions again are picking up. More than four times as many companies plan to increase spending on new supply chain technology in 2006 than decrease budgets, when compared with the prior year. The majority (54 percent) say their budgets will be about the same. Since supply chain technology spending has been flat for the past several years, however, Enslow believes "it is actually a very good sign that 37 percent of companies are increasing their technology investments in this area."

Cost minimization (33 percent) is the top reason companies want to improve their supply chain processes, with other drivers being to meet customers' unique fulfillment requirements (19 percent), streamline fulfillment across multiple channels (13 percent), and minimize supply-demand imbalances, especially stockouts (12 percent).

Six Key Survey Takeaways
Beth Enslow, vice president of enterprise research at Aberdeen Group, Boston, distilled the following key takeaways from the Aberdeen/GL&SCS survey results:

• Companies seek next-generation SCM solutions that will let them cut costs, while at the same time enable them to thrive in an era of complex, multi-party relationships and dynamically changing customer requirements. Key attributes are:
- Removing the gap between planning and execution processes
- 3 Enabling cross-functional management
- Helping manage multiple types of supply chains

• Inventory optimization, distributed order management, multi-channel and collaborative demand management, and personalized performance management top companies' lists on their SCM technology road maps.
• Most companies are not looking at warehousing or internal-focused manufacturing as areas that will drive innovation.

• Companies are overwhelmingly interested in supplier and global trade solutions that help them understand in-process and in-transit inventory, orders and costs.

• Companies seek personalized analytics and dashboards and performance management that help manage forward activity, not just assess past results.

• Companies are valuing infrastructure technology such as business process management, visibility/alerting platforms, and master data management.

• Nearly four times as many companies plan to spend more on new SCM technology in 2006 than plan to spend less. Fifty-three percent of companies are planning six-figure expenditures on new SCM technology projects in 2006.


Inventory Optimization Is No. 1
When it comes to where those investment dollars will go, companies are overwhelmingly interested in inventory solutions to help them better position and monitor inventory and better assign orders across multiple sites. At the top of the investment chart are the related areas of inventory optimization, advanced replenishment and supply chain network design. With a 77 percent rating, inventory optimization also was far and away the top choice when respondents were asked what solution within the inventory management category would drive the most supply chain improvement.

Inventory optimization applications emerged about five years ago, using new mathematical algorithms to help companies optimize the positioning and deployment of inventory to both increase service levels and reduce the total amount of inventory in the supply chain.

The high interest level doesn't surprise Jeff Bodenstab, vice president-marketing of ToolsGroup, an inventory optimization vendor based in Cambridge, Mass. "The whole category did very well last year," he says. Implementations still mostly are among "early adopter" companies, he adds, but as these companies demonstrate the benefits, interest is burgeoning.

"People are understanding that there is only so much they can do to control demand and supply so inventory emerges as one of the critical control knobs of the supply chain," says A.J. Brohinsky, senior vice president of SmartOps, Pittsburgh, Pa. "In a multi-tier supply chain, a company might have thousands of SKUs and hundreds of locations, so very dynamic systems are needed to determine where to best place inventory by item, by location, over time, throughout the supply chain," Brohinsky says.

Inventory optimization also is about getting the right inventory mix to ensure high service levels, says Bodenstab. "One of the things about multi-echelon inventory optimization is that it is global," he says. "It looks at inventory across the echelons to come up with a good global mix of inventory instead of looking at specific locations as a standard ERP [enterprise resource planning] system does."

Manhattan Associates, Atlanta, added inventory optimization to its suite of supply chain execution solutions with its recent acquisition of Evant. By using modeling capabilities in this solution, customers have found that safety stock often can be reduced at each holding point, says Mike Matacunas, vice president of product strategy. "If a customer is trying to keep a 99.8 percent in-stock position on A products, it typically would maintain a 98 percent stocking level in forward DCs and maybe 95 percent in regional DCs," he says. "Now we are finding that it might be possible to drop to the low 90s in forward DCs and the high 80s further back and still meet that 99.8 percent service level."

"This technology allows companies to get away from flat and inflexible rules that say they need 30 days of stock coverage for many products, which creates a lot of waste and unnecessary cost in the supply chain," says Gary Cross, partner at IBM Consulting's Center of Business Optimization, Armonk, N.Y. "These solutions are the next level in terms of supply chain maturity." IBM has developed an inventory optimization solution that it employs during consultancy engagements and also makes available to clients.

The next step forward will be extending inventory optimization to the retail shelf, says Bodenstab. This will be possible in the short term as companies improve the quality of their data (45 percent of survey respondents cite master data management as a key enterprise capability for supply chain excellence) and, long term, as RFID data comes into play.

Dixons, an electronics retailer in Europe, already is using ToolsGroup to implement a better shelf mix of inventory, he says. Within a few months of implementation, Dixons had completely remixed its store inventories and cut stockouts by about half, while at same time reducing total inventory in the system by 15 percent. "When selling higher end electronic items that have very little margin, cutting stockouts in half has a huge impact on the bottom line," says Bodenstab.

Network Optimization
The high level of interest in network optimization, or the location of supply chain facilities, is a reflection of the need for companies to regularly adjust to shifting operations, says Jeff Karrenbauer, president of Insight, Manassas, Va., a pioneer in this field. "Companies today are looking at much more than where to locate warehouses. The models are much, much richer now," Karrenbauer says. "They may look at the entire network design, including issues like how many and which suppliers a company should have or how many outsourced manufacturers."

A new capability being developed by Insight is an evaluation of supply chain vulnerability, says Karrenbauer. "We have modified our supply chain design software with an explicit package of options that can evaluate where the supply chain is most vulnerable and show how to design around those vulnerabilities."

Another inventory management solution mentioned by many respondents (53 percent) is distributed order management.

"With so much sourcing moving offshore, supply chains and lead times are getting longer and companies tend to hedge their bets by increasing inventory, but that ties up a lot of working capital," says Scott Pulsipher, vice president of product marketing at Sterling Commerce, Columbus, Ohio. "Our Distributed Order Management solution addresses that problem by giving companies the information and tools they need to allocate demand against any type of supply, whether it is at the suppliers' location or in production or in transit." This, of course, requires that the order management system be supported by robust inventory visibility. "Most classic order management and fulfillment systems will only allocate orders against on-hand inventory," he says. "We get around that by having more granular visibility. We can allocate demand against planned supply or scheduled supply or expected receipts."

Distributed order management is necessary as organizations operate from and trade with multiple sites around the world, says Evan Puzey, vice president of marketing at Kewill Software, Boston. Kewill delivers a technology platform to take orders and transmit them to anyone anywhere in the world either via system-to-system integration, standard EDI or through an internet-based platform. "We actually set up a trading community between a business and its trading partners and allow users to build their own processes into that platform so they gain the visibility and control that they want," Puzey says. "Alerts are set up throughout the lifecycle of an order to ensure that key milestones are met." Getting better control of the data flow enables better product flow back down through the supply chain to the end customer, he says.

Demand Management/S&OP
The second top investment areas for survey respondents are demand management and sales and operations planning (55 percent). Interest in these solutions is tied to the ongoing trend to make supply chains more demand driven, which requires a "huge mind shift," says Cory Eaves, chief technology officer at SSA Global, an ERP provider based in Chicago.

"The building block of traditional ERP has been a production order," Eaves says. "Now, in response to what customers are asking for, SSA Global and all of our competitors are having to go in and do heart surgery on our systems to make them operate in reverse of the way they were originally designed. Instead of starting with a production order, we must take customer orders and drive those backward into the manufacturing plant."

The shift of the supply chain from a stocking strategy to a demand-driven approach cannot be done within functional silos, says John Cummings, chief marketing officer at i2 Technologies, Dallas. "In the next generation of technology, you still have to have excellence in the different areas, but supply chain solutions have to span all of those areas and operate across multiple enterprises."

That explains why, within the specific category of demand management, 64 percent of respondents say they are looking for collaboration capabilities-collaboration with customers to enable more real-time visibility to demand and collaboration with suppliers to enable rapid response.

Demand Solutions, St. Louis, Mo., offers several different means of collaboration to meet the technology sophistication of different users, says CEO Michael Campbell. One common theme for all of these is personalization, Campbell says. "Using our web-based collaboration tool, for example, a person, based on his or her role, has access to certain information that is pertinent only to them and they can make changes only to that information."

Interestingly, the survey's highest rated solution within demand management (70 percent) is better forecasting, specifically at the product, customer and channel levels.

"Apparently a lot of companies are still struggling with the blocking and tackling of just getting a decent forecast together," says Enslow. "I find that somewhat surprising."

To help companies that are just getting started with demand management and to guide their progress, John Galt Solutions, Chicago, has incorporated the concepts of Walk, Drive and Fly into its applications. "Often, when we start working with a company, it will really have no formal planning in place," says Kai Trepte, vice president of sales and operations. "They may just be looking at past sales and lead times in order to plan, using Excel spreadsheets." Galt's Drive level starts with its ForecastX Wizard which is an Excel plug-in, he says. As companies get more sophisticated, they move on to more complex forecasting in the Drive and Fly stages.

To meet specific store-level forecasting, Demand Solutions offers DS Stores, a product that uses point-of-sale data to determine replenishment. "That capability is not something that is universally required, but is almost mandatory in the consumer packaged goods area," Campbell says.

TrueDemand Software, Los Gatos, Calif., focuses exclusively on store replenishment with a new program developed under the guidance of Prof. Hau Lee of Stanford University. By merging forecasting and execution into a single platform, users are able to use event-driven data to continually adjust forecasts and reduce out-of-stocks, says Eric Peters, CEO of TrueDemand. "It gives you a much higher level of accuracy in a near-term forecast," he says. The solution is designed to use RFID data as that becomes available, but it also works in a non-RFID environment.

Closing the gap between planning and execution with real-time forecasting (RTF) was pioneered by Terra Technology, Norwalk, Conn. Its RTF product re-forecasts every day using the most current demand signals and pattern recognition mathematics. "Our solution does pretty much what a planner might do today," says President Robert Byrne, "He is looking at very short-term information about order patterns. If you have a blowout week, for example, a normal forecasting model might say demand is going up but a good planner would know that you just moved three months' worth of volume so demand is dropping." By looking at short-term demand data, Terra Technology "generally improves forecast accuracy to about 80 percent," Byrne says.

Sales & Operations Planning
Once companies have a sound forecasting process in place, the next step for many is Sales and Operations Planning.

While only 31 percent of respondents are looking to S&OP to drive innovation, vendors interviewed say interest in this area is high and they believe S&OP will continue to gain traction. While essentially a process, technology is an important enabler, they say.

"Before, we had customers who would use i2 Technologies' tools to support an S&OP process, but they would have to do a lot of workarounds," says Cummings. "Now we have an S&OP offering that provides a standard framework while enabling users to customize it to their business. People like to put their own intellectual property into S&OP."

"Our customers want scorecards to be personalized in a way that links and supports higher organizational goals."
- Paul Hoy of Cognos

"We are seeing increased demand for S&OP as more companies try to get to this connected enterprise state," says Lori Mitchell-Keller, senior vice president of Manugistics, Rockville, Md. "Since S&OP supports corporate goals, that's when they really need it. If a company wants to grow 5 percent next year, for example, it needs to understand what that means for the sales forecast at the product and family levels, and how does the forecast translate into an operational plan in terms of how much the company should manufacture and deploy. It may be that it can't physically produce what is being forecast, so it has to come up with a consensus solution-that's where S&OP is really valuable."

To develop its solution in this area, Manugistics partnered with Oliver Wight, the consulting firm that originated S&OP. "We have coined the term Dynamic S&OP, which involves extending the process out to take information from trading partners," says Mitchell-Keller. "We want to enable companies to use the connectivity with their trading partners to create a better S&OP process that will really enable companies to use the whole supply chain as a competitive weapon."

At that level of capability, companies can do a much better job of shaping demand instead of just predicting demand, she says. "This is when companies really start pushing the envelope in terms of controlling the supply chain-using not just supply levers but also demand levers to shape customer demand and synchronize demand and supply."

Performance Management
The third-highest area for investment among survey respondents is Performance Management and Analytics (49 percent). Within that category companies specifically seek personalized, roles-based dashboards and alerts (59 percent), forward-looking analytics (57 percent) and executive dashboards (57 percent).

Cognos, an Ottawa-based vendor that offers a range of performance management applications and a tailored supporting infrastructure, underscores the importance of personalization in driving value. "Our customers want scorecards to be personalized in a way that links and supports higher organizational goals," says Paul Hoy, director of manufacturing industry solutions. For example, he says, with an organizational metric such as customer satisfaction, there will be any number of individual metrics that drive the result, such as on-time performance or product quality or perfect order fulfillment. "Each of those metrics is a key performance indicator (KPI) in and of itself. So companies want the people responsible for order fulfillment to be monitoring their specific metrics." They also need to have someone who will look across all of the metrics impacting customer satisfaction, Hoy says, and that is where executive scorecarding comes in. "Executive scorecards give you a great way to take those organizational silos, each having its own performance measures, and relate them to higher corporate goals."

Understanding how a company, division or individual is performing is only a third of the equation, Hoy adds. A company also needs analytics to understand why it is performing that way and the forward-looking action piece-what am I going to do about it?

"One of the critical things that business activity monitoring does is to not only detect patterns, but to get rid of them," says Richard Douglass, director of strategic business solutions at webMethods, Fairfax, Va. "Everyone knows if they have late orders, but they often don't know why. With analytics, you can evaluate the patterns to see how to fix them."

We really see it as an operational tactical tool," says John Nadvornik, director of product marketing at Viewlocity, Atlanta. "It allows you to not only run reports and see the performance of the supply chain at any given moment, but it actually feeds that back into the planning tools so you can make adjustments or improve operations. If you see that you are expediting too much freight because of a failure to make sailing schedules, you can attack that problem."

This is another way in which the gap between planning and execution is being bridged, he says. "We take in the plan and the execution that is occurring and let users see how well they are executing against that plan and we can do this across the entire supply chain."

Companies achieve excellence by focusing on the details, says Jerry Hill, director of the Teradata Center of Excellence for Supply Chain Intelligence. Teradata is an NCR company based in Dayton, Ohio. Details, in this context, means what is going on at the SKU and location level within the supply chain. Teradata's recent acquisition of SeeChain helps companies in this regard, while complementing Teradata's forecasting and data warehouse solutions, Hill says. "SeeChain focuses on stock outages at the shelf level and then works back through the supply chain to identify the source of the problem," he says. But the power of applications like this one are only as good as the data they access, he warns. "Visibility has to go deep enough and be in enough detail that you can send a specific instruction to a specific point in the process to solve a specific problem."

In addition to stand-alone products, many application vendors are embedding performance metrics to support closed-loop continuous improvement.

"Embedding performance management capabilities is one of the key themes guiding our product development," says Karin Bursa, vice president-marketing at Logility, Atlanta. "We believe it is too important to be an afterthought or add-on, but needs to be part of the product architecture." Logility's Voyager solutions, she says, are built to not only monitor what is going on and alert users to specific business scenarios, but "to automatically navigate the user into a further evaluation of the problem and potential resolutions."

Bursa believes the trend for the future will be more and more automated resolution of problems identified through performance monitoring and analysis. "Alerts will start becoming predictive in nature, telling users, for example, that because of this current business scenario with these attributes, they will experience an inventory shortfall in two weeks," she says.

GTM, Supplier Collaboration
Forty-five percent of survey respondents say they will invest in technology to improve sourcing and global trade management, including supplier connectivity and collaboration. Companies are strongly interested in visibility to inventory outside of their control (67 percent), total landed costs (59 percent) and supplier/contract manufacturer collaboration (54 percent). These are issues that have taken on added importance with the increase in offshore sourcing and lengthening of global supply chains.

Kinaxis, Ottawa, specializes in visibility and response solutions for companies that have outsourced all or part of their manufacturing as well as for the contract manufacturers that do the work. "Brand owners all start outsourcing for one reason-lower costs," says David Haskins, chief technology officer. "What they don't anticipate is the difficulty in managing those outsourced supply chains."

Visibility into outsourced operations is essential "to ensure that the activity is still meeting your plan," he says. Moreover, many brand owners have responsibility for managing some Tier II supplier relationships "so they really need multi-tier visibility."

Kinaxis currently enables broad visibility, but this quarter it will enhance its RapidResponse solution to help companies that use more than one contract manufacturer. A new, on-demand version of the solution will be able to access information from multiple CMs and consolidate that information in a single view. "We are calling this the 'glass pipeline' and it will ensure that we provide complete visibility to the brand owner and responsiveness to their contract manufacturers," Haskins says.

Connecting suppliers and customers and facilitating collaboration also is the purview of E2open, Redwood City, Calif. "The complexity of managing a supply chain that relies on external parties is quite different than managing inside the four walls," says Lorenzo Martinelli, executive vice president. "The trick is to get visibility to those critical activities that can impact delivery of the end product and to exert some control over those things. You can't try to manage all the details or you would lose the advantage of outsourcing. You have to manage by exception."

E2open facilitates communications between supplier and customer by enabling and normalizing data exchanges. More importantly, it monitors these exchanges and runs exceptions. "If a buyer asks for 10 units March 1 and the supplier responds that it can only provide five and not until April 1, we alert the buyer to this exception and we manage the workflow to resolve the issue," he says.

Martinelli also stresses the importance of having visibility across multiple tiers. "If a company needs to increase capacity quickly it may have to look four tiers down to understand available capacity," he says. "In a traditional ERP world, you would never get that data."

Supplier connectivity is a necessary enabler for companies to gain control of their inbound supply chains, which can then drive greater operating efficiency and responsiveness, says Nancy Koenig, executive vice president of operations at Click Commerce, Chicago. "Historically, ERP and traditional supply chain technologies have not been able to adequately integrate supplier data and processes and in many cases companies have continued to try and manage these processes using inefficient and error-prone means," Koenig says. "The result is difficulty in controlling material flow, synchronizing inbound and outbound processes, and managing supplier performance."

Click Commerce Supplier Enablement provides a platform for companies and their trading partners to move beyond simple information sharing to creating collaborative execution networks that coordinate and optimize processes, Koenig says. Currently millions of users in 70 countries use this on-demand solution to collaborate with business partners.

Having supplier partners networked so that they can share information in real time is the only way to achieve business agility, according to Scott Westlake, global lead for the manufacturing vertical at Cisco Systems, San Jose, Calif. "As companies increasingly compete as a value chain, winners will be determined by how well they communicate and collaborate and how well they sense and respond," he says.

Cisco has teamed up with supply chain and logistics consulting specialist D.W. Morgan, Pleasanton, Calif., to offer a networking package aimed at providing the manufacturing sector supply chain visibility and secure communications. "Ultimately, the idea is to have a single version of the truth so that your suppliers and partners all are on the same page in terms of inventory requirements and production plans," says Westlake. "All of this is enabled by an underlying, robust, secure networking infrastructure."

A web-based Inventory Collaboration Hub is the way SAP, Newton Square, Pa., enables its clients to collaborate with both suppliers and customers. "The more visibility you have to inventory and events in the whole supply network, the more adaptive you can be," says Hans Thalbauer, vice president for applications solution management. Even smaller suppliers that don't have an EDI infrastructure can be integrated into the supply network with only a web browser, Thalbauer says.

Supplier connectivity and collaboration also is essential for companies to drive the next level of supply chain savings, says Tim Minahan, senior vice president-marketing at Procuri, Atlanta. Once a company has strategically rationalized its supply base and is applying supplier improvement and measurement strategies, it can begin to look at how to work with suppliers to remove waste and inefficiency from cross-enterprise processes, he says. This doesn't mean taking margin from suppliers, but can be accomplished by "focusing on the non-price but definitely cost-related attributes of the supply relationship."

Global Trade Management
Respondents' interest in global trade management is easy to understand, given the growth in international sourcing. "The annual compound growth rate of global trade has been about 9 percent for more than 20 years so it is not a new thing, but the pace today is picking up rapidly," says Duncan Jackson, vice president of business development at TradeBeam, San Mateo, Calif. "Just look at the average retail company," he says. "Eighty percent of the cost of goods sold is sourced overseas. This makes for a highly complex supply chain, but not much of it is yet being managed in an automated fashion."

A key benefit of GTM is that it automates processes that previously were done manually and speeds the physical movement, Jackson says. But the more important, bigger picture that companies are starting to focus on is the working capital cycle. "Moving goods from overseas can tie up that working capital for 60 to 120 days," he says. "If GTM can eliminate two to three days of customs delays or two to three days of delay due to documentation errors, that can be huge to an organization with a lot of working capital tied up in the pipeline. This presents a huge opportunity to drive significant value to a corporation."

Companies also looking to GTM solutions to help them understand the total landed cost of goods bought or manufactured overseas. "When a company first starts to think about sourcing internationally and gets its first proposal from a supplier in China or Indonesia, there is a lot of excitement over prices that may be one-tenth of what they are currently paying," says Jim Preuninger, CEO of Management Dynamics, East Rutherford, N.J. "But until they sit down and factor in the total landed cost, meaning everything that goes into getting it from that supplier to your plant or your DC, they can't really understand what the true savings might be." Landed costs, he says, include not only things like duties, taxes, VAT and freight costs, but also costs associated with supplier risk and performance. "A company really needs to be able to look at all the factors and think, if they had a year of experience, would this be a good decision."

Transportation Management
While survey respondents generally do not see the workhorse applications of transportation management (TMS) and warehouse management (WMS) as driving innovation in their supply chains, they do see them as essential to supply chain excellence. Twenty-five percent or surveyed companies say they will invest in TMS in the coming year while 13 percent will invest in WMS. These numbers reflect the high penetration that these technologies already enjoy in the marketplace.

With transportation solutions, companies are looking for advanced shipment visibility (77 percent) and better carrier collaboration to help control freight rates and secure capacity (58 percent). Interest in inbound freight management also remains fairly strong (35 percent).

While acknowledging the maturity of these solutions, Erv Bluemner, vice president of product marketing for transportation solutions at Red Prairie, a supply chain execution vendor based in Waukesha, Wis., thinks they still can drive innovation. "It is true that optimization has been around now for probably 10 or 12 years," he says. "But when you look at complete systems that tie in visibility and automated exception processing as well as areas like claims management and freight settlement, and that coordinate with yard activities and dock-door appointment scheduling and bring in mobile resources-that sort of interconnection, to me, is very advanced and on still on the frontiers."

To support these capabilities, the application platform "has to be very rich with respect to linking partners, understanding changes and then having automated processing to handle those changes in real time," Bluemner says. "For instance, if I am dealing with a carrier that has committed capacity to me and now has a problem with something in its fleet and can't come through on that capacity, I need to be able to adjust immediately. The software has to recognize the situation and automatically re-tender the load to the next carrier in line.

"So there is this fabric of decisions that gets made and you want to automate as much of that as you can, and in such a way that you preserve the cost equation-that's where people have a really hard time," says Bluemner.

It's not just the breadth but the depth of functionality that is important, says Prashant Bhatia, director of product development at Manhattan Associates. Transportation procurement, for example, "sounds like a basic function-motherhood and apple pie. But when think of a company with hundreds of lanes and hundreds of carriers that are all over the map in terms of their sophistication and assets, you have a pretty complex problem," he says. "Having the ability to really optimize that process and understand which carriers need to be assigned to which lanes is a huge differentiator."

The same is true for shipment planning, says Bhatia. "The key is how far in advance do you have to get shipment orders in order to produce an efficient load," he says. "Our capability allows you to plan shipments hours or days or weeks in advance, depending on your business model." This is particularly important with today's tight capacity, he says.

Another advanced capability is to link TMS to supplier enablement, says Chris Heim, president of HighJump Software, based in Eden Prairie, Minn. "This becomes an equation where one plus one equals three." When you can see what is ready for shipment at a supplier and keep abreast of any unanticipated changes to that, you can achieve higher transportation efficiencies."

As demand-driven models push more companies to adopt flow-through warehouses, transportation management becomes more important, says i2's Cummings, and the integration between planning and transportation has to be much tighter. "Load efficiency will become less important than speed for companies looking to keep shelves stocked," he says. "Increasingly we are seeing companies understand that cash flow trumps transportation costs. In most cases it just doesn't make sense to starve a retail shelf because you are waiting to fill up a truck."

Warehouse Management
Integration also is important for warehouse management solutions, but the capabilities most companies are looking for are tailored warehouse workflows that support individual customer fulfillment requirements (54 percent) and labor management (54 percent).

"Once you have an integrated suite, it is the ability to personalize, configure and allow those tools to be adapted to individual customer needs that is important," says Todd Gage, vice president of product development at Provia, Grand Rapids, Mich. (Provia was recently acquired by SSA Global). "We have spent a lot of time working on the ability to personalize our system's look and feel, the business rules, and so on and then put all of that in our customers' hands so they don't have to continue to come back to us to make changes," says Gage.

This approach also encompasses the ability to tailor workflows, he says, which allows users to do things out of traditional sequence. "For example, it used to be that when goods were received in the warehouse, the system automatically created and assigned a put-away. This was a pretty rigid procedure. Now, all these tasks are independent, so if a company is cross-docking it can skip the put-away workflow."

Before, he says, users would have to trick the system into having that not happen, "but these things are less monolithic now. You can break them into smaller pieces and then string them back together in non- traditional ways to solve different problems."

Respondents' interest in labor management is a matter of cost-labor generally represents the largest piece of a distribution center's operating budget. Consultants at Tompkins Associates, Raleigh, N.C., estimate that facilities operating without a comprehensive labor management system are losing 30 percent to 40 percent of their potential productivity.

These systems optimize productivity by tracking labor activity and comparing it with engineered labor standards, enabling incentive-based pay programs and supporting labor-planning decisions.

At Provia, labor management is a key part of scorecarding and measurement, says Gage. "The real benefit is in the real-time visibility to how you are doing against your standards so you can adapt more rapidly. We summarize what a supervisor needs to see and give them enough information associated with it that they can intervene if needed."

Manufacturing Planning, Scheduling
Advanced Planning and Scheduling solutions from companies like Manugistics and i2 Technologies were the first applications to be labeled "supply chain management." Twenty-one percent of survey respondents still are looking to invest in these systems, but with the shift to demand-driven business models, the capabilities they want from such applications have changed. In addition to constraint-based planning and scheduling, companies now seek solutions that will enable rapid re-planning based on real-time data (59 percent) and master scheduling across a combination of in-house and outsourced manufacturing. (45 percent).

Cummings, at i2, agrees that fast, incremental planning is a key customer demand. "We see it as the ability to continuously plan, do, check and act," he says. This continuous-loop process enables companies to identify where planning parameters are wrong and to make course corrections. "For example, suppose you do a root cause analysis of why a particular product is shipping late and you find that it is because a component described as having a three-day lead time consistently takes five days to arrive," he says. "Your planning assumption is wrong. So instead of continually having to do gyrations because of that, you need to change the parameter. With i2, we have the ability going forward to be able to continuously monitor and re-parametize across the value chain for continuous improvement. It's pretty exciting stuff."

Kinaxis uses its scenario building capability to try out different options for re-planning on the fly, says Haskins. "Any user can make a copy of the plan and then go in and make a change-maybe increase the forecast by 20 percent-and real-time algorithms automatically calculate the impact on various factors like supply, inventory or delivery date," he says.

"The key trend we see going forward is that the outsourced manufacturing environment will drive the need for multi-enterprise supply chains, which cannot be handled by traditional ERP and SCM systems that are built to operate within the four walls and do things in batch mode, which results in cycles that are measured in weeks. We are saying that with an on-demand service capable of dealing with multi-enterprise data, we can collapse that entire cycle," says Haskins.

To further support rapid re-planning, some vendors are offering new manufacturing floor solutions. HighJump Software recently introduced Manufacturing Advantage. In addition to offering traditional manufacturing execution capabilities, this solution allows supervisors and managers to closely monitor production and make better decisions when unforeseen situations arise, such as a disruption in component supply or demand change that requires a production response. "Tools in our product give users visibility to the as-scheduled work and the actual work and allow them to reprioritize to deal with any disruptions or make necessary adjustments," says Chad Collins, head of manufacturing solutions at HighJump.

"We think we are unique in that we are viewing manufacturing as one node in the broader supply chain and framework for supply chain execution," he says. "Linking the warehouse with Manufacturing Advantage, for example, gives the warehouse visibility into the actual production operations as they are happening, so they can plan around the products coming off the manufacturing line."

As planning lead times become shorter, applications have to run faster, says Lloyd Clark, optimization product manager at ILOG, Mountain View, Calif. ILOG makes the optimization engines embedded in many supply chain solutions. "When you are figuring out what to do this morning instead of next week, your model also has to be very detailed," he says. Fortunately, he says, ILOG's optimization technology has continued to improve. "Our engine has gotten better at solving things, so people get more ambitious about what they want to do with it," he says. "Today we are seeing a very different set of problems being addressed because it addressed the old ones so well."

The Next Generation
Many of the supply chain solutions that survey respondents have on their technology road maps already presage "next-generation" capabilities that these companies see in their futures. Those capabilities include breaking down today's gap between planning and execution to make it easier to reshape demand or redirect supply; crossing business partner boundaries and enabling multi-enterprise processes; and managing multiple types of fulfillment strategies, such as high-velocity daily replenishment, supplier drop-shipments and postponement.

The technology that will deliver these capabilities will be easily configured or personalized by users without having to involve vendors or corporate IT staff. User-created composite applications will allow companies to match the technology to their processes, rather than the other way around, and will enable them to lay those processes across multiple existing applications to give end-to-end visibility and control.

The primary enabler of this level of adaptability is service-oriented architecture, which is being embraced by many solutions providers, including SAP and Oracle, with their NetWeaver and Fusion foundations.

"We are back to an environment where architecture matters," says SmartOps' Brohinsky. "That is the emerging theme for 2006, in part because SAP and Oracle have dedicated billions of dollars to update and convert their software architecture. If you want to play in this market, you have to play within SAP's and Oracle's eco-systems."

Essentially, service-oriented architecture enables companies to break their functionality into individual pieces that can be delivered in a standard, open format as Web services. Each of these services carries its own instructions for how it is to be used or what it is to do. So, instead of the old client/server system where software had to be downloaded onto a PC and was accessible only through that PC, Web services is like a set of Legos that can be deployed and accessed over the web and used in combination with other pieces to enable different processes. This means that information residing in a wide variety of existing systems can be shared without expensive system-to-system integration and, since services can be used over and over again, IT development and maintenance costs are reduced.

"In the old days if you were going to spend $1 on software, 80 or 90 cents of that would be for the software, maintenance and deployment and maybe 10 cents would actually pay for the innovation that was your reason for making the purchase," says i2's Cummings. "With SOA, we have the ability to flip-flop that, so the vast majority of technology investments will go toward innovation instead of the other way round.

"We believe this marks a real inflection point in the history of this industry-and that's not just hype or wishful thinking," Cummings says. "It's very real."

The supply chain is one of the best places for an SOA approach because it involves many companies using different databases and applications, says Cisco Systems' Westlake. "There are all sorts of reasons why it normally would be very difficult to pull data from these different sources, but that is what SOA is all about-coming up with standard interfaces and getting it down to small bits of data that can be shared across applications, across networks, across geographies and that can be changed on the fly. The test of a supply chain today is how well it can synchronize data from disparate databases, disparate companies and disparate applications," he says. The one consistent theme in this is the network, he adds. "That's what Cisco provides and that's why I think we are in a pretty good position."

A number of supply chain software companies already are embracing SOA. Version 7 of Provia's ViaWare WMS, released last November, takes a services-oriented approach. "It's all part of our personalization infrastructure," says Gage. "We have broken down every process in our system and made it a service that can be accessed from anywhere and used as needed."

No one uses all of the modules in a system, he says, and customers no longer want to deal with having to turn things on and off. "Our customers want an application that appears to have been custom-built for them, but in a packaged form," says Gage. "That is what we wanted to deliver and we realized that SOA was the best way to build it. It lets us personalize the user experience while this core of software sits behind and does the heavy lifting."

This kind of adaptability is particularly important for applications like WMS that are functionally mature, says Heim, who also has incorporated SOA in the HighJump solution. "The real issue becomes how easily this product can change in the future. As our customers' businesses evolve, they need to create new processes, new compliance requirements, and so on, so we think the ability to change for the future is actually more important than today's functionality."

Manugistics also has made "very large architectural changes" in its product," says Mitchell-Keller. "The transition from client/server to web-based technology has allowed synchronization to occur more readily because you always have access to the information you need."

i2 is on its third release using SOA, with the most recent being its Agile Business Process Platform, says Cummings. An important aspect of this release is that it has the i2 Business Process Management product embedded. "This enables users to design master workflows and composite applications via a visual design studio tool," he says.

Combining SOA and Business Process Management allows users to continually improve over time, he says. "Systems used to be deployed as if the supply chain was static. Once these systems were in place, you didn't mess with them," says Cummings. Of course, supply chains actually are very dynamic and changing continuously, but these changes couldn't be addressed because of the technology's rigid architecture. "It's only now that we have the ability to easily make those changes and improve processes almost on the fly," says Cummings. "This gives us a lot more opportunity to innovate and create-more than we have seen in years. We're pretty excited about that."

Click Here to view the complete survey results and full set of charts.

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It is certainly true that supply chain performance depends as much on people and process as on technology, but without superior technology, excellence can never be achieved. Employees need IT infrastructure and application support to perform effectively; and key business processes must be automated and optimized, within and across enterprises, in order to create sustainable competitive advantage.

This means that the journey represented by a company's technology road map is never ending. As supply chains become more global, complex and demand driven, their underlying technologies must likewise evolve. To stay ahead of the curve, companies need to continually look toward the next level of supply chain performance and prepare for the technology advances that will take them there.

To better understand where our readers are on this journey and what capabilities they are adding to their IT footprint, GL&SCS partnered with Aberdeen Group, Boston, to conduct a comprehensive technology survey. Findings from that survey anchor this special report, which also features comments and opinions from numerous technology vendors. Together, we hope these findings provide useful pointers to companies in their quest for supply chain excellence.

The Survey
The more than 100 companies that participated in the Aberdeen/GL&SCS survey represent process, discrete and project-based manufacturers as well as distributors and retailers. A small number of logistics service providers also participated. Almost half of the companies represented have annual revenue of more than $1bn, with 38 percent being in the $50m to $999m range. [Editor's Note: See accompanying box for Enslow's key takeaways from the survey. Complete survey results, along with a full set of charts, can be viewed on the GL&SCS web site: www.supplychainbrain.com.]

Survey results show that investments in supply chain solutions again are picking up. More than four times as many companies plan to increase spending on new supply chain technology in 2006 than decrease budgets, when compared with the prior year. The majority (54 percent) say their budgets will be about the same. Since supply chain technology spending has been flat for the past several years, however, Enslow believes "it is actually a very good sign that 37 percent of companies are increasing their technology investments in this area."

Cost minimization (33 percent) is the top reason companies want to improve their supply chain processes, with other drivers being to meet customers' unique fulfillment requirements (19 percent), streamline fulfillment across multiple channels (13 percent), and minimize supply-demand imbalances, especially stockouts (12 percent).

Six Key Survey Takeaways
Beth Enslow, vice president of enterprise research at Aberdeen Group, Boston, distilled the following key takeaways from the Aberdeen/GL&SCS survey results:

• Companies seek next-generation SCM solutions that will let them cut costs, while at the same time enable them to thrive in an era of complex, multi-party relationships and dynamically changing customer requirements. Key attributes are:
- Removing the gap between planning and execution processes
- 3 Enabling cross-functional management
- Helping manage multiple types of supply chains

• Inventory optimization, distributed order management, multi-channel and collaborative demand management, and personalized performance management top companies' lists on their SCM technology road maps.
• Most companies are not looking at warehousing or internal-focused manufacturing as areas that will drive innovation.

• Companies are overwhelmingly interested in supplier and global trade solutions that help them understand in-process and in-transit inventory, orders and costs.

• Companies seek personalized analytics and dashboards and performance management that help manage forward activity, not just assess past results.

• Companies are valuing infrastructure technology such as business process management, visibility/alerting platforms, and master data management.

• Nearly four times as many companies plan to spend more on new SCM technology in 2006 than plan to spend less. Fifty-three percent of companies are planning six-figure expenditures on new SCM technology projects in 2006.


Inventory Optimization Is No. 1
When it comes to where those investment dollars will go, companies are overwhelmingly interested in inventory solutions to help them better position and monitor inventory and better assign orders across multiple sites. At the top of the investment chart are the related areas of inventory optimization, advanced replenishment and supply chain network design. With a 77 percent rating, inventory optimization also was far and away the top choice when respondents were asked what solution within the inventory management category would drive the most supply chain improvement.

Inventory optimization applications emerged about five years ago, using new mathematical algorithms to help companies optimize the positioning and deployment of inventory to both increase service levels and reduce the total amount of inventory in the supply chain.

The high interest level doesn't surprise Jeff Bodenstab, vice president-marketing of ToolsGroup, an inventory optimization vendor based in Cambridge, Mass. "The whole category did very well last year," he says. Implementations still mostly are among "early adopter" companies, he adds, but as these companies demonstrate the benefits, interest is burgeoning.

"People are understanding that there is only so much they can do to control demand and supply so inventory emerges as one of the critical control knobs of the supply chain," says A.J. Brohinsky, senior vice president of SmartOps, Pittsburgh, Pa. "In a multi-tier supply chain, a company might have thousands of SKUs and hundreds of locations, so very dynamic systems are needed to determine where to best place inventory by item, by location, over time, throughout the supply chain," Brohinsky says.

Inventory optimization also is about getting the right inventory mix to ensure high service levels, says Bodenstab. "One of the things about multi-echelon inventory optimization is that it is global," he says. "It looks at inventory across the echelons to come up with a good global mix of inventory instead of looking at specific locations as a standard ERP [enterprise resource planning] system does."

Manhattan Associates, Atlanta, added inventory optimization to its suite of supply chain execution solutions with its recent acquisition of Evant. By using modeling capabilities in this solution, customers have found that safety stock often can be reduced at each holding point, says Mike Matacunas, vice president of product strategy. "If a customer is trying to keep a 99.8 percent in-stock position on A products, it typically would maintain a 98 percent stocking level in forward DCs and maybe 95 percent in regional DCs," he says. "Now we are finding that it might be possible to drop to the low 90s in forward DCs and the high 80s further back and still meet that 99.8 percent service level."

"This technology allows companies to get away from flat and inflexible rules that say they need 30 days of stock coverage for many products, which creates a lot of waste and unnecessary cost in the supply chain," says Gary Cross, partner at IBM Consulting's Center of Business Optimization, Armonk, N.Y. "These solutions are the next level in terms of supply chain maturity." IBM has developed an inventory optimization solution that it employs during consultancy engagements and also makes available to clients.

The next step forward will be extending inventory optimization to the retail shelf, says Bodenstab. This will be possible in the short term as companies improve the quality of their data (45 percent of survey respondents cite master data management as a key enterprise capability for supply chain excellence) and, long term, as RFID data comes into play.

Dixons, an electronics retailer in Europe, already is using ToolsGroup to implement a better shelf mix of inventory, he says. Within a few months of implementation, Dixons had completely remixed its store inventories and cut stockouts by about half, while at same time reducing total inventory in the system by 15 percent. "When selling higher end electronic items that have very little margin, cutting stockouts in half has a huge impact on the bottom line," says Bodenstab.

Network Optimization
The high level of interest in network optimization, or the location of supply chain facilities, is a reflection of the need for companies to regularly adjust to shifting operations, says Jeff Karrenbauer, president of Insight, Manassas, Va., a pioneer in this field. "Companies today are looking at much more than where to locate warehouses. The models are much, much richer now," Karrenbauer says. "They may look at the entire network design, including issues like how many and which suppliers a company should have or how many outsourced manufacturers."

A new capability being developed by Insight is an evaluation of supply chain vulnerability, says Karrenbauer. "We have modified our supply chain design software with an explicit package of options that can evaluate where the supply chain is most vulnerable and show how to design around those vulnerabilities."

Another inventory management solution mentioned by many respondents (53 percent) is distributed order management.

"With so much sourcing moving offshore, supply chains and lead times are getting longer and companies tend to hedge their bets by increasing inventory, but that ties up a lot of working capital," says Scott Pulsipher, vice president of product marketing at Sterling Commerce, Columbus, Ohio. "Our Distributed Order Management solution addresses that problem by giving companies the information and tools they need to allocate demand against any type of supply, whether it is at the suppliers' location or in production or in transit." This, of course, requires that the order management system be supported by robust inventory visibility. "Most classic order management and fulfillment systems will only allocate orders against on-hand inventory," he says. "We get around that by having more granular visibility. We can allocate demand against planned supply or scheduled supply or expected receipts."

Distributed order management is necessary as organizations operate from and trade with multiple sites around the world, says Evan Puzey, vice president of marketing at Kewill Software, Boston. Kewill delivers a technology platform to take orders and transmit them to anyone anywhere in the world either via system-to-system integration, standard EDI or through an internet-based platform. "We actually set up a trading community between a business and its trading partners and allow users to build their own processes into that platform so they gain the visibility and control that they want," Puzey says. "Alerts are set up throughout the lifecycle of an order to ensure that key milestones are met." Getting better control of the data flow enables better product flow back down through the supply chain to the end customer, he says.

Demand Management/S&OP
The second top investment areas for survey respondents are demand management and sales and operations planning (55 percent). Interest in these solutions is tied to the ongoing trend to make supply chains more demand driven, which requires a "huge mind shift," says Cory Eaves, chief technology officer at SSA Global, an ERP provider based in Chicago.

"The building block of traditional ERP has been a production order," Eaves says. "Now, in response to what customers are asking for, SSA Global and all of our competitors are having to go in and do heart surgery on our systems to make them operate in reverse of the way they were originally designed. Instead of starting with a production order, we must take customer orders and drive those backward into the manufacturing plant."

The shift of the supply chain from a stocking strategy to a demand-driven approach cannot be done within functional silos, says John Cummings, chief marketing officer at i2 Technologies, Dallas. "In the next generation of technology, you still have to have excellence in the different areas, but supply chain solutions have to span all of those areas and operate across multiple enterprises."

That explains why, within the specific category of demand management, 64 percent of respondents say they are looking for collaboration capabilities-collaboration with customers to enable more real-time visibility to demand and collaboration with suppliers to enable rapid response.

Demand Solutions, St. Louis, Mo., offers several different means of collaboration to meet the technology sophistication of different users, says CEO Michael Campbell. One common theme for all of these is personalization, Campbell says. "Using our web-based collaboration tool, for example, a person, based on his or her role, has access to certain information that is pertinent only to them and they can make changes only to that information."

Interestingly, the survey's highest rated solution within demand management (70 percent) is better forecasting, specifically at the product, customer and channel levels.

"Apparently a lot of companies are still struggling with the blocking and tackling of just getting a decent forecast together," says Enslow. "I find that somewhat surprising."

To help companies that are just getting started with demand management and to guide their progress, John Galt Solutions, Chicago, has incorporated the concepts of Walk, Drive and Fly into its applications. "Often, when we start working with a company, it will really have no formal planning in place," says Kai Trepte, vice president of sales and operations. "They may just be looking at past sales and lead times in order to plan, using Excel spreadsheets." Galt's Drive level starts with its ForecastX Wizard which is an Excel plug-in, he says. As companies get more sophisticated, they move on to more complex forecasting in the Drive and Fly stages.

To meet specific store-level forecasting, Demand Solutions offers DS Stores, a product that uses point-of-sale data to determine replenishment. "That capability is not something that is universally required, but is almost mandatory in the consumer packaged goods area," Campbell says.

TrueDemand Software, Los Gatos, Calif., focuses exclusively on store replenishment with a new program developed under the guidance of Prof. Hau Lee of Stanford University. By merging forecasting and execution into a single platform, users are able to use event-driven data to continually adjust forecasts and reduce out-of-stocks, says Eric Peters, CEO of TrueDemand. "It gives you a much higher level of accuracy in a near-term forecast," he says. The solution is designed to use RFID data as that becomes available, but it also works in a non-RFID environment.

Closing the gap between planning and execution with real-time forecasting (RTF) was pioneered by Terra Technology, Norwalk, Conn. Its RTF product re-forecasts every day using the most current demand signals and pattern recognition mathematics. "Our solution does pretty much what a planner might do today," says President Robert Byrne, "He is looking at very short-term information about order patterns. If you have a blowout week, for example, a normal forecasting model might say demand is going up but a good planner would know that you just moved three months' worth of volume so demand is dropping." By looking at short-term demand data, Terra Technology "generally improves forecast accuracy to about 80 percent," Byrne says.

Sales & Operations Planning
Once companies have a sound forecasting process in place, the next step for many is Sales and Operations Planning.

While only 31 percent of respondents are looking to S&OP to drive innovation, vendors interviewed say interest in this area is high and they believe S&OP will continue to gain traction. While essentially a process, technology is an important enabler, they say.

"Before, we had customers who would use i2 Technologies' tools to support an S&OP process, but they would have to do a lot of workarounds," says Cummings. "Now we have an S&OP offering that provides a standard framework while enabling users to customize it to their business. People like to put their own intellectual property into S&OP."

"Our customers want scorecards to be personalized in a way that links and supports higher organizational goals."
- Paul Hoy of Cognos

"We are seeing increased demand for S&OP as more companies try to get to this connected enterprise state," says Lori Mitchell-Keller, senior vice president of Manugistics, Rockville, Md. "Since S&OP supports corporate goals, that's when they really need it. If a company wants to grow 5 percent next year, for example, it needs to understand what that means for the sales forecast at the product and family levels, and how does the forecast translate into an operational plan in terms of how much the company should manufacture and deploy. It may be that it can't physically produce what is being forecast, so it has to come up with a consensus solution-that's where S&OP is really valuable."

To develop its solution in this area, Manugistics partnered with Oliver Wight, the consulting firm that originated S&OP. "We have coined the term Dynamic S&OP, which involves extending the process out to take information from trading partners," says Mitchell-Keller. "We want to enable companies to use the connectivity with their trading partners to create a better S&OP process that will really enable companies to use the whole supply chain as a competitive weapon."

At that level of capability, companies can do a much better job of shaping demand instead of just predicting demand, she says. "This is when companies really start pushing the envelope in terms of controlling the supply chain-using not just supply levers but also demand levers to shape customer demand and synchronize demand and supply."

Performance Management
The third-highest area for investment among survey respondents is Performance Management and Analytics (49 percent). Within that category companies specifically seek personalized, roles-based dashboards and alerts (59 percent), forward-looking analytics (57 percent) and executive dashboards (57 percent).

Cognos, an Ottawa-based vendor that offers a range of performance management applications and a tailored supporting infrastructure, underscores the importance of personalization in driving value. "Our customers want scorecards to be personalized in a way that links and supports higher organizational goals," says Paul Hoy, director of manufacturing industry solutions. For example, he says, with an organizational metric such as customer satisfaction, there will be any number of individual metrics that drive the result, such as on-time performance or product quality or perfect order fulfillment. "Each of those metrics is a key performance indicator (KPI) in and of itself. So companies want the people responsible for order fulfillment to be monitoring their specific metrics." They also need to have someone who will look across all of the metrics impacting customer satisfaction, Hoy says, and that is where executive scorecarding comes in. "Executive scorecards give you a great way to take those organizational silos, each having its own performance measures, and relate them to higher corporate goals."

Understanding how a company, division or individual is performing is only a third of the equation, Hoy adds. A company also needs analytics to understand why it is performing that way and the forward-looking action piece-what am I going to do about it?

"One of the critical things that business activity monitoring does is to not only detect patterns, but to get rid of them," says Richard Douglass, director of strategic business solutions at webMethods, Fairfax, Va. "Everyone knows if they have late orders, but they often don't know why. With analytics, you can evaluate the patterns to see how to fix them."

We really see it as an operational tactical tool," says John Nadvornik, director of product marketing at Viewlocity, Atlanta. "It allows you to not only run reports and see the performance of the supply chain at any given moment, but it actually feeds that back into the planning tools so you can make adjustments or improve operations. If you see that you are expediting too much freight because of a failure to make sailing schedules, you can attack that problem."

This is another way in which the gap between planning and execution is being bridged, he says. "We take in the plan and the execution that is occurring and let users see how well they are executing against that plan and we can do this across the entire supply chain."

Companies achieve excellence by focusing on the details, says Jerry Hill, director of the Teradata Center of Excellence for Supply Chain Intelligence. Teradata is an NCR company based in Dayton, Ohio. Details, in this context, means what is going on at the SKU and location level within the supply chain. Teradata's recent acquisition of SeeChain helps companies in this regard, while complementing Teradata's forecasting and data warehouse solutions, Hill says. "SeeChain focuses on stock outages at the shelf level and then works back through the supply chain to identify the source of the problem," he says. But the power of applications like this one are only as good as the data they access, he warns. "Visibility has to go deep enough and be in enough detail that you can send a specific instruction to a specific point in the process to solve a specific problem."

In addition to stand-alone products, many application vendors are embedding performance metrics to support closed-loop continuous improvement.

"Embedding performance management capabilities is one of the key themes guiding our product development," says Karin Bursa, vice president-marketing at Logility, Atlanta. "We believe it is too important to be an afterthought or add-on, but needs to be part of the product architecture." Logility's Voyager solutions, she says, are built to not only monitor what is going on and alert users to specific business scenarios, but "to automatically navigate the user into a further evaluation of the problem and potential resolutions."

Bursa believes the trend for the future will be more and more automated resolution of problems identified through performance monitoring and analysis. "Alerts will start becoming predictive in nature, telling users, for example, that because of this current business scenario with these attributes, they will experience an inventory shortfall in two weeks," she says.

GTM, Supplier Collaboration
Forty-five percent of survey respondents say they will invest in technology to improve sourcing and global trade management, including supplier connectivity and collaboration. Companies are strongly interested in visibility to inventory outside of their control (67 percent), total landed costs (59 percent) and supplier/contract manufacturer collaboration (54 percent). These are issues that have taken on added importance with the increase in offshore sourcing and lengthening of global supply chains.

Kinaxis, Ottawa, specializes in visibility and response solutions for companies that have outsourced all or part of their manufacturing as well as for the contract manufacturers that do the work. "Brand owners all start outsourcing for one reason-lower costs," says David Haskins, chief technology officer. "What they don't anticipate is the difficulty in managing those outsourced supply chains."

Visibility into outsourced operations is essential "to ensure that the activity is still meeting your plan," he says. Moreover, many brand owners have responsibility for managing some Tier II supplier relationships "so they really need multi-tier visibility."

Kinaxis currently enables broad visibility, but this quarter it will enhance its RapidResponse solution to help companies that use more than one contract manufacturer. A new, on-demand version of the solution will be able to access information from multiple CMs and consolidate that information in a single view. "We are calling this the 'glass pipeline' and it will ensure that we provide complete visibility to the brand owner and responsiveness to their contract manufacturers," Haskins says.

Connecting suppliers and customers and facilitating collaboration also is the purview of E2open, Redwood City, Calif. "The complexity of managing a supply chain that relies on external parties is quite different than managing inside the four walls," says Lorenzo Martinelli, executive vice president. "The trick is to get visibility to those critical activities that can impact delivery of the end product and to exert some control over those things. You can't try to manage all the details or you would lose the advantage of outsourcing. You have to manage by exception."

E2open facilitates communications between supplier and customer by enabling and normalizing data exchanges. More importantly, it monitors these exchanges and runs exceptions. "If a buyer asks for 10 units March 1 and the supplier responds that it can only provide five and not until April 1, we alert the buyer to this exception and we manage the workflow to resolve the issue," he says.

Martinelli also stresses the importance of having visibility across multiple tiers. "If a company needs to increase capacity quickly it may have to look four tiers down to understand available capacity," he says. "In a traditional ERP world, you would never get that data."

Supplier connectivity is a necessary enabler for companies to gain control of their inbound supply chains, which can then drive greater operating efficiency and responsiveness, says Nancy Koenig, executive vice president of operations at Click Commerce, Chicago. "Historically, ERP and traditional supply chain technologies have not been able to adequately integrate supplier data and processes and in many cases companies have continued to try and manage these processes using inefficient and error-prone means," Koenig says. "The result is difficulty in controlling material flow, synchronizing inbound and outbound processes, and managing supplier performance."

Click Commerce Supplier Enablement provides a platform for companies and their trading partners to move beyond simple information sharing to creating collaborative execution networks that coordinate and optimize processes, Koenig says. Currently millions of users in 70 countries use this on-demand solution to collaborate with business partners.

Having supplier partners networked so that they can share information in real time is the only way to achieve business agility, according to Scott Westlake, global lead for the manufacturing vertical at Cisco Systems, San Jose, Calif. "As companies increasingly compete as a value chain, winners will be determined by how well they communicate and collaborate and how well they sense and respond," he says.

Cisco has teamed up with supply chain and logistics consulting specialist D.W. Morgan, Pleasanton, Calif., to offer a networking package aimed at providing the manufacturing sector supply chain visibility and secure communications. "Ultimately, the idea is to have a single version of the truth so that your suppliers and partners all are on the same page in terms of inventory requirements and production plans," says Westlake. "All of this is enabled by an underlying, robust, secure networking infrastructure."

A web-based Inventory Collaboration Hub is the way SAP, Newton Square, Pa., enables its clients to collaborate with both suppliers and customers. "The more visibility you have to inventory and events in the whole supply network, the more adaptive you can be," says Hans Thalbauer, vice president for applications solution management. Even smaller suppliers that don't have an EDI infrastructure can be integrated into the supply network with only a web browser, Thalbauer says.

Supplier connectivity and collaboration also is essential for companies to drive the next level of supply chain savings, says Tim Minahan, senior vice president-marketing at Procuri, Atlanta. Once a company has strategically rationalized its supply base and is applying supplier improvement and measurement strategies, it can begin to look at how to work with suppliers to remove waste and inefficiency from cross-enterprise processes, he says. This doesn't mean taking margin from suppliers, but can be accomplished by "focusing on the non-price but definitely cost-related attributes of the supply relationship."

Global Trade Management
Respondents' interest in global trade management is easy to understand, given the growth in international sourcing. "The annual compound growth rate of global trade has been about 9 percent for more than 20 years so it is not a new thing, but the pace today is picking up rapidly," says Duncan Jackson, vice president of business development at TradeBeam, San Mateo, Calif. "Just look at the average retail company," he says. "Eighty percent of the cost of goods sold is sourced overseas. This makes for a highly complex supply chain, but not much of it is yet being managed in an automated fashion."

A key benefit of GTM is that it automates processes that previously were done manually and speeds the physical movement, Jackson says. But the more important, bigger picture that companies are starting to focus on is the working capital cycle. "Moving goods from overseas can tie up that working capital for 60 to 120 days," he says. "If GTM can eliminate two to three days of customs delays or two to three days of delay due to documentation errors, that can be huge to an organization with a lot of working capital tied up in the pipeline. This presents a huge opportunity to drive significant value to a corporation."

Companies also looking to GTM solutions to help them understand the total landed cost of goods bought or manufactured overseas. "When a company first starts to think about sourcing internationally and gets its first proposal from a supplier in China or Indonesia, there is a lot of excitement over prices that may be one-tenth of what they are currently paying," says Jim Preuninger, CEO of Management Dynamics, East Rutherford, N.J. "But until they sit down and factor in the total landed cost, meaning everything that goes into getting it from that supplier to your plant or your DC, they can't really understand what the true savings might be." Landed costs, he says, include not only things like duties, taxes, VAT and freight costs, but also costs associated with supplier risk and performance. "A company really needs to be able to look at all the factors and think, if they had a year of experience, would this be a good decision."

Transportation Management
While survey respondents generally do not see the workhorse applications of transportation management (TMS) and warehouse management (WMS) as driving innovation in their supply chains, they do see them as essential to supply chain excellence. Twenty-five percent or surveyed companies say they will invest in TMS in the coming year while 13 percent will invest in WMS. These numbers reflect the high penetration that these technologies already enjoy in the marketplace.

With transportation solutions, companies are looking for advanced shipment visibility (77 percent) and better carrier collaboration to help control freight rates and secure capacity (58 percent). Interest in inbound freight management also remains fairly strong (35 percent).

While acknowledging the maturity of these solutions, Erv Bluemner, vice president of product marketing for transportation solutions at Red Prairie, a supply chain execution vendor based in Waukesha, Wis., thinks they still can drive innovation. "It is true that optimization has been around now for probably 10 or 12 years," he says. "But when you look at complete systems that tie in visibility and automated exception processing as well as areas like claims management and freight settlement, and that coordinate with yard activities and dock-door appointment scheduling and bring in mobile resources-that sort of interconnection, to me, is very advanced and on still on the frontiers."

To support these capabilities, the application platform "has to be very rich with respect to linking partners, understanding changes and then having automated processing to handle those changes in real time," Bluemner says. "For instance, if I am dealing with a carrier that has committed capacity to me and now has a problem with something in its fleet and can't come through on that capacity, I need to be able to adjust immediately. The software has to recognize the situation and automatically re-tender the load to the next carrier in line.

"So there is this fabric of decisions that gets made and you want to automate as much of that as you can, and in such a way that you preserve the cost equation-that's where people have a really hard time," says Bluemner.

It's not just the breadth but the depth of functionality that is important, says Prashant Bhatia, director of product development at Manhattan Associates. Transportation procurement, for example, "sounds like a basic function-motherhood and apple pie. But when think of a company with hundreds of lanes and hundreds of carriers that are all over the map in terms of their sophistication and assets, you have a pretty complex problem," he says. "Having the ability to really optimize that process and understand which carriers need to be assigned to which lanes is a huge differentiator."

The same is true for shipment planning, says Bhatia. "The key is how far in advance do you have to get shipment orders in order to produce an efficient load," he says. "Our capability allows you to plan shipments hours or days or weeks in advance, depending on your business model." This is particularly important with today's tight capacity, he says.

Another advanced capability is to link TMS to supplier enablement, says Chris Heim, president of HighJump Software, based in Eden Prairie, Minn. "This becomes an equation where one plus one equals three." When you can see what is ready for shipment at a supplier and keep abreast of any unanticipated changes to that, you can achieve higher transportation efficiencies."

As demand-driven models push more companies to adopt flow-through warehouses, transportation management becomes more important, says i2's Cummings, and the integration between planning and transportation has to be much tighter. "Load efficiency will become less important than speed for companies looking to keep shelves stocked," he says. "Increasingly we are seeing companies understand that cash flow trumps transportation costs. In most cases it just doesn't make sense to starve a retail shelf because you are waiting to fill up a truck."

Warehouse Management
Integration also is important for warehouse management solutions, but the capabilities most companies are looking for are tailored warehouse workflows that support individual customer fulfillment requirements (54 percent) and labor management (54 percent).

"Once you have an integrated suite, it is the ability to personalize, configure and allow those tools to be adapted to individual customer needs that is important," says Todd Gage, vice president of product development at Provia, Grand Rapids, Mich. (Provia was recently acquired by SSA Global). "We have spent a lot of time working on the ability to personalize our system's look and feel, the business rules, and so on and then put all of that in our customers' hands so they don't have to continue to come back to us to make changes," says Gage.

This approach also encompasses the ability to tailor workflows, he says, which allows users to do things out of traditional sequence. "For example, it used to be that when goods were received in the warehouse, the system automatically created and assigned a put-away. This was a pretty rigid procedure. Now, all these tasks are independent, so if a company is cross-docking it can skip the put-away workflow."

Before, he says, users would have to trick the system into having that not happen, "but these things are less monolithic now. You can break them into smaller pieces and then string them back together in non- traditional ways to solve different problems."

Respondents' interest in labor management is a matter of cost-labor generally represents the largest piece of a distribution center's operating budget. Consultants at Tompkins Associates, Raleigh, N.C., estimate that facilities operating without a comprehensive labor management system are losing 30 percent to 40 percent of their potential productivity.

These systems optimize productivity by tracking labor activity and comparing it with engineered labor standards, enabling incentive-based pay programs and supporting labor-planning decisions.

At Provia, labor management is a key part of scorecarding and measurement, says Gage. "The real benefit is in the real-time visibility to how you are doing against your standards so you can adapt more rapidly. We summarize what a supervisor needs to see and give them enough information associated with it that they can intervene if needed."

Manufacturing Planning, Scheduling
Advanced Planning and Scheduling solutions from companies like Manugistics and i2 Technologies were the first applications to be labeled "supply chain management." Twenty-one percent of survey respondents still are looking to invest in these systems, but with the shift to demand-driven business models, the capabilities they want from such applications have changed. In addition to constraint-based planning and scheduling, companies now seek solutions that will enable rapid re-planning based on real-time data (59 percent) and master scheduling across a combination of in-house and outsourced manufacturing. (45 percent).

Cummings, at i2, agrees that fast, incremental planning is a key customer demand. "We see it as the ability to continuously plan, do, check and act," he says. This continuous-loop process enables companies to identify where planning parameters are wrong and to make course corrections. "For example, suppose you do a root cause analysis of why a particular product is shipping late and you find that it is because a component described as having a three-day lead time consistently takes five days to arrive," he says. "Your planning assumption is wrong. So instead of continually having to do gyrations because of that, you need to change the parameter. With i2, we have the ability going forward to be able to continuously monitor and re-parametize across the value chain for continuous improvement. It's pretty exciting stuff."

Kinaxis uses its scenario building capability to try out different options for re-planning on the fly, says Haskins. "Any user can make a copy of the plan and then go in and make a change-maybe increase the forecast by 20 percent-and real-time algorithms automatically calculate the impact on various factors like supply, inventory or delivery date," he says.

"The key trend we see going forward is that the outsourced manufacturing environment will drive the need for multi-enterprise supply chains, which cannot be handled by traditional ERP and SCM systems that are built to operate within the four walls and do things in batch mode, which results in cycles that are measured in weeks. We are saying that with an on-demand service capable of dealing with multi-enterprise data, we can collapse that entire cycle," says Haskins.

To further support rapid re-planning, some vendors are offering new manufacturing floor solutions. HighJump Software recently introduced Manufacturing Advantage. In addition to offering traditional manufacturing execution capabilities, this solution allows supervisors and managers to closely monitor production and make better decisions when unforeseen situations arise, such as a disruption in component supply or demand change that requires a production response. "Tools in our product give users visibility to the as-scheduled work and the actual work and allow them to reprioritize to deal with any disruptions or make necessary adjustments," says Chad Collins, head of manufacturing solutions at HighJump.

"We think we are unique in that we are viewing manufacturing as one node in the broader supply chain and framework for supply chain execution," he says. "Linking the warehouse with Manufacturing Advantage, for example, gives the warehouse visibility into the actual production operations as they are happening, so they can plan around the products coming off the manufacturing line."

As planning lead times become shorter, applications have to run faster, says Lloyd Clark, optimization product manager at ILOG, Mountain View, Calif. ILOG makes the optimization engines embedded in many supply chain solutions. "When you are figuring out what to do this morning instead of next week, your model also has to be very detailed," he says. Fortunately, he says, ILOG's optimization technology has continued to improve. "Our engine has gotten better at solving things, so people get more ambitious about what they want to do with it," he says. "Today we are seeing a very different set of problems being addressed because it addressed the old ones so well."

The Next Generation
Many of the supply chain solutions that survey respondents have on their technology road maps already presage "next-generation" capabilities that these companies see in their futures. Those capabilities include breaking down today's gap between planning and execution to make it easier to reshape demand or redirect supply; crossing business partner boundaries and enabling multi-enterprise processes; and managing multiple types of fulfillment strategies, such as high-velocity daily replenishment, supplier drop-shipments and postponement.

The technology that will deliver these capabilities will be easily configured or personalized by users without having to involve vendors or corporate IT staff. User-created composite applications will allow companies to match the technology to their processes, rather than the other way around, and will enable them to lay those processes across multiple existing applications to give end-to-end visibility and control.

The primary enabler of this level of adaptability is service-oriented architecture, which is being embraced by many solutions providers, including SAP and Oracle, with their NetWeaver and Fusion foundations.

"We are back to an environment where architecture matters," says SmartOps' Brohinsky. "That is the emerging theme for 2006, in part because SAP and Oracle have dedicated billions of dollars to update and convert their software architecture. If you want to play in this market, you have to play within SAP's and Oracle's eco-systems."

Essentially, service-oriented architecture enables companies to break their functionality into individual pieces that can be delivered in a standard, open format as Web services. Each of these services carries its own instructions for how it is to be used or what it is to do. So, instead of the old client/server system where software had to be downloaded onto a PC and was accessible only through that PC, Web services is like a set of Legos that can be deployed and accessed over the web and used in combination with other pieces to enable different processes. This means that information residing in a wide variety of existing systems can be shared without expensive system-to-system integration and, since services can be used over and over again, IT development and maintenance costs are reduced.

"In the old days if you were going to spend $1 on software, 80 or 90 cents of that would be for the software, maintenance and deployment and maybe 10 cents would actually pay for the innovation that was your reason for making the purchase," says i2's Cummings. "With SOA, we have the ability to flip-flop that, so the vast majority of technology investments will go toward innovation instead of the other way round.

"We believe this marks a real inflection point in the history of this industry-and that's not just hype or wishful thinking," Cummings says. "It's very real."

The supply chain is one of the best places for an SOA approach because it involves many companies using different databases and applications, says Cisco Systems' Westlake. "There are all sorts of reasons why it normally would be very difficult to pull data from these different sources, but that is what SOA is all about-coming up with standard interfaces and getting it down to small bits of data that can be shared across applications, across networks, across geographies and that can be changed on the fly. The test of a supply chain today is how well it can synchronize data from disparate databases, disparate companies and disparate applications," he says. The one consistent theme in this is the network, he adds. "That's what Cisco provides and that's why I think we are in a pretty good position."

A number of supply chain software companies already are embracing SOA. Version 7 of Provia's ViaWare WMS, released last November, takes a services-oriented approach. "It's all part of our personalization infrastructure," says Gage. "We have broken down every process in our system and made it a service that can be accessed from anywhere and used as needed."

No one uses all of the modules in a system, he says, and customers no longer want to deal with having to turn things on and off. "Our customers want an application that appears to have been custom-built for them, but in a packaged form," says Gage. "That is what we wanted to deliver and we realized that SOA was the best way to build it. It lets us personalize the user experience while this core of software sits behind and does the heavy lifting."

This kind of adaptability is particularly important for applications like WMS that are functionally mature, says Heim, who also has incorporated SOA in the HighJump solution. "The real issue becomes how easily this product can change in the future. As our customers' businesses evolve, they need to create new processes, new compliance requirements, and so on, so we think the ability to change for the future is actually more important than today's functionality."

Manugistics also has made "very large architectural changes" in its product," says Mitchell-Keller. "The transition from client/server to web-based technology has allowed synchronization to occur more readily because you always have access to the information you need."

i2 is on its third release using SOA, with the most recent being its Agile Business Process Platform, says Cummings. An important aspect of this release is that it has the i2 Business Process Management product embedded. "This enables users to design master workflows and composite applications via a visual design studio tool," he says.

Combining SOA and Business Process Management allows users to continually improve over time, he says. "Systems used to be deployed as if the supply chain was static. Once these systems were in place, you didn't mess with them," says Cummings. Of course, supply chains actually are very dynamic and changing continuously, but these changes couldn't be addressed because of the technology's rigid architecture. "It's only now that we have the ability to easily make those changes and improve processes almost on the fly," says Cummings. "This gives us a lot more opportunity to innovate and create-more than we have seen in years. We're pretty excited about that."

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