FRAMINGHAM (05/01/2000) - For decades, corporations have been using supply-chain management (SCM) software to plan product purchases or sales, and keep track of ordered items through the shipment and billing processes. But now the advent of Web-based e-commerce is leading to a transformation in SCM.
That's because retailers, distributors and manufacturers want to share logistics information by giving trading partners and even consumers direct Web access to their SCM systems. In addition, some industries, such as grocery and apparel retailing, are starting to use shared Web-based online supply chains as hosted business-to-business exchanges. And newcomers, such as Nistevo, offer specialized hosted services to outsource specific touch points in the chain, such as freight management.
It's all bringing a revolution to the SCM software industry, forcing older, established vendors such as Manhattan Associates to rethink their strategies.
Manhattan's PkMS software, available for Unix, Windows NT and OS/400, is used by 450 corporations in retailing, apparel, grocery, manufacturing and other industries for inventory management and order pickup. Customers include Staples, Polo, Nordstrom, Jockey and Mikasa.
According to Manhattan account representative Joel Daffiere, PkMS is used to collect logistics information that gets stored in back-end ERP systems such as those from SAP AG, Oracle Corp. and J.D. Edwards & Co. PkMS users generally access this business data over private lines.
"Today, they don't allow outside suppliers into their systems," Daffiere says about corporations using PkMS. But he acknowledges his customers are demanding Web access for their employees and trading partners.
So Manhattan Associates has embarked on what it calls the Wildwood Project to ship Web-based software later this year that will provide a more open environment.
"There is some risk when trading partners gain access," Daffiere says. "How much do you want them to see?"
Another SCM old-timer, TranScape, got Internet religion last year and made its transportation logistics software Web-friendly.
Analysts generally categorize SCM software into two types: "supply-chain execution," including order management, transportation scheduling, and warehouse packing and shipping; and "supply-chain planning" for forecasting demand, inventory replenishment and manufacturing/production scheduling.
According to Boston firm AMR Research, Manhattan falls into the first category, a segment it shares with EXE Technologies, Industri-Matematik International, International Business Systems and other companies, including start-up Yantra, which is gaining attention with its Web-based PurEcommerce software.
The second category, supply-chain planning, includes i2 Technologies, Manugistics and iLog.
The two SCM software categories together generated revenue last year of $3.1 billion, a number expected to grow to $4.5 billion this year, according to AMR.
In addition, ERP vendors, primarily Oracle and SAP, are also fielding SCM-style products. AMR estimates its SCM sales hit $522 million last year and will increase to $928 million this year. Of course, users also still roll their own SCM programs.
Oracle's 11i, which shipped earlier this year, seeks to cover supply-chain execution and planning in Web-based style. Chicago company Marketing Out of the Box - one of the new generation of fulfillment houses for dot-com retailers such as Blue Fly and send.com - spent millions on this Oracle software.
Marketing Out of the Box receives orders electronically direct from its clients' commerce sites. As the fulfillment house, it also receives goods from manufacturers and suppliers on behalf of dot-coms. Co-CEO David Neuberger says the company's 125 employees work to take these bar-coded items and wirelessly scan data from them into the Unix-based Oracle software. It's a pick, pack and ship operation, charging about $2 per order.
Working with software the e-fulfillment house wrote to report to clients' Web sites, the Oracle application tracks shipping and inventory, which is made available to outsiders, including consumers at times.
"We chose Oracle because we thought it was the only one out there that was really Web-based," Neuberger says, emphasizing his firm did an extensive review of SCM software.
The options for outsourcing fulfillment are mushrooming. Federal Express Corp., well-known for shipping packages, has also gotten into business-to-business SCM.
Hewlett-Packard and garden.com are among the companies using supply-chain services to store goods in a FedEx warehouse, with FedEx shipping inventoried items when an order comes in over the Web.
"We distribute data every 15 minutes to HP to give them the inventory status," says David Roussain, vice president of FedEx e-commerce marketing. "Fast-cycle logistics will demand a new level of visibility and control within the organization to manage inventory in motion."
Online SCM services also are attracting attention from corporations that say their older electronic data interchange-based SCM systems can't give them the kind of real-time activity view they want.
General Mills Inc., for example, will soon start using the Nistevo hosted freight-shipping management service, which is priced at $6,500 per seat, per year.
"It will help dramatically with our contracting with our carriers, such as Crete, Hartland and JD Hunt," says Randy Darcy, a senior vice president at General Mills, who says he encouraged the shippers to link their internal systems to Nistevo.
Until now, General Mills Inc. has relied on EDI-based messaging, or phone and fax, to get business data into its SCM systems. The corporation uses its own SCM software and a package from Manugistics.
"The Nistevo service is going to completely change how we do contracting," Darcy says, pointing out that it should simplify scheduling of back-haul transportation deliveries in cooperation with other corporations willing to share routes.
For users, it's not easy choosing the right SCM software or service as e-commerce alters expectations, acknowledges IBM. The company doesn't sell its own supply-chain software but is often tapped for its systems integration expertise on SCM projects.
It's important to know that SCM vendors tend to cater to specific industries, such as Retek for apparel retailers and Lilly Software for electronics and fabrication, IBM Marketing Manager Richard Ruiz says. He adds that because SCM is global, it makes sense to investigate whether non-U.S.-based SCM vendors might also be the right fit.