As the global pandemic, labor shortages and rising freight rates forced companies to rethink their supply chain management approaches in 2021, supply chain management (SCM) rose to the top as a way to cure at least some of these woes. Charged with managing the flow of goods, data and finances from raw material to final delivery, this software category encompasses enterprise resource planning (ERP), warehouse management (WMS), transportation management (TMS), global trade management (GTM), procurement and other applications.
Working independently or together, these solutions help companies manage and automate their end-to-end supply chain activities. In an era where disruptions and labor shortages have become the norm, demand for these applications is on the rise. In many cases, supply chain visibility—that ability to see where anything is at any time and from anywhere—is the end game for these organizations.
“The biggest thing everyone wants is better, more actionable visibility earlier,” says Terri Hiskey, VP, SCM and manufacturing product marketing at Oracle. “What we saw in 2021 was that even if companies felt like they had that visibility, that visibility wasn’t [accessible] early enough for them to take action or do anything about it.”
For example, a company may have received alerts that its imported cargo was entering a particularly busy ocean port on a certain day, but by the time it received that information it was already too late to pivot. “If the ship was already in port,” says Hiskey, “there was no way to just back it up and move it somewhere else.”
These points of frustration have directly affected end customers, many of whom have come to appreciate the value of a smooth-running supply chain and the technology that supports it. According to an Oracle survey from September 2021, 87% of Americans were negatively affected by supply chain delays and disruptions, with worries over delivery delays, product shortages and heightened disruptions topping their list of concerns.
And while supply chain disruptions have clearly had a widespread impact on day-to-day life, nearly half (45%) of the respondents said that they never thought about how products were delivered prior to the COVID-19 pandemic. “Now,” Oracle reports, “nearly everybody [91%] considers the supply chain when making a purchase.”
Money flows into logistics technology
End customers aren’t the only ones to gain a better understanding of supply chains over the last two years. Wall Street has also taken notice and put logistics and supply chain applications squarely in its sights in recent months.
According to the Wall Street Journal, investors are literally “piling” into supply chain technology, with some of the 2021’s target investments involving e-commerce fulfillment specialist ShipBob Inc., digital warehouse and distribution provider Stord Inc., and Flock Freight, a platform that matches shipper loads to trucks.
“Backers including big investment funds are pumping money into logistics technology at a rapid pace,” WSJ reports, “driving up valuations for digital-focused ventures across freight, delivery and warehousing.”
Koray Köse, senior director and analyst, supply chain research and advisory at Gartner, Inc., credits supply chain visibility gaps with creating at least some of the interest in investors’ parts. For example, he says that 50% of organizations have visibility into about 90% of their tier 1 suppliers, and that those percentages drop significantly for tier 2, tier 3 and beyond. And, only 8% of companies are familiar with 25% of the suppliers that they contract with on an ad hoc basis.
“If you ask a supply chain organization whether it knows a specific supplier, there’s a 75% chance that the answer is ‘no,’” Köse explains. “This means many companies out there are flying blind and it gets worse when you start talking about tier 2 and tier 3 vendors.”
Of course, the yin and yang of all this is that as companies continue to struggle with visibility gaps, someone else recognizes the problem and is helping them do something about it. Right now, that “someone” includes software providers that are honing their solutions, adding new features to them and marketing them to an audience of shippers that are hungry to invest in and adopt these solutions.
“When it comes to any type of supply chain visibility software right now, the [software developer] that makes four cold calls is probably going to make three sales,” says Köse. “The sales opportunities are real, which is likely why we’re seeing money pouring into the [sector] from Wall Street.”
The question is, just how long will this boom continue? Köse estimates that by 2025 at least half of supply chain operations will have a dedicated risk management function stacked with the people, processes and technologies needed to effectively run their end-to-end supply chains and maintain competitiveness in their respective industries.
Breaking down the other 50% of shippers into two different categories, Köse also expects the selling environment to shift over the next three years.
“Post-2025, the dynamics of the market will shift and SCM buyers will fall into two different groups,” Köse predicts. “About half will be companies that aren’t satisfied with the software investments that they’ve already made, while the rest will be the organizations that are investing in new technologies that they don’t have in place yet.”
What shippers want
Some industries have suffered major disruptions and losses during the pandemic, but the SCM sector has largely remained strong and stable for the reasons cited above, plus other drivers that have pushed technology to the forefront of supply chain and logistics managers’ minds.
Bill Brooks, VP, North America transportation portfolio at Capgemini, says software that incorporates predictive analytics, real-time data, artificial intelligence (AI), machine learning (ML) and other advanced technologies are in particularly high demand right now.
“Companies realize the importance of being analytical about what’s going on in the world, predict what’s going to happen next and then align themselves accordingly,” says Brooks. To achieve these goals, companies need software that integrates with the rest of their business operations and gives senior leaders visibility into all aspects of the business—be it transportation, warehousing, procurement or another function.
Companies also need access to real-time data that can not only be used to make accurate predictions, but also factors in more than just basic data points and numbers. For example, organizations want to be able to incorporate voice calls, e-mails, purchase histories and other metrics into their data banks and use them for good decision-making.
“Companies want better analytics and predictability than they’ve ever had in the past,” Brooks adds, “and are getting more and more creative with how they use those analytics to plan, save money and enhance their bottom lines.”
Vendors are answering the call and coming up with solutions that integrate well with other applications and that support a more centralized data management approach. When logistics managers don’t have to pull data from a WMS, TMS, and procurement system—and then use spreadsheets and e-mails to combine and assess that data—they get the information when it’s fresh, relevant and actionable.
“Vendors know that for best results their systems have to be compatible not only within their own modules, but also with outside applications,” says Brooks. “They understand that when data can be readily extracted and used in other places, it will only strengthen the need for their software applications in the future.”
Ditching paper and manual systems
Some companies want more analytics, AI and ML from their SCM software, but others are still working to ditch their manual, spreadsheet and paper-based approaches to supply chain management in favor of more automated, technology-based systems. “We’re seeing a lot of technology adopted with the goal of automating previously paper-based processes,” says Hiskey, who sees the current labor shortage as one driver of this trend.
“Companies may have previously had employees running from production line to production line to get sign-offs on certain parts or processes,” says Hiskey, who adds that—in addition to labor market constraints—the COVID outbreaks and need for good social distancing in the workplace have interfered with some of these age-old business management techniques.
As a result, companies once reluctant to adopt technology and automate processes—and that perhaps didn’t want to be seen as “taking away” jobs from individuals—are now changing course and moving in a more automated direction. This, in turn, is driving interest in SCM software ranging from very basic applications to extremely sophisticated, multi-faceted platforms.
“Where many companies are interested in advanced options like AI and ML, some are still replacing simple paper-based processes with automation, robots and applications that can handle workflows,” Hiskey adds, “and without necessarily needing to have people physically onsite.”
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