AMR Research Predicts Supply Chain Management Market to Grow 50 Percent in 1999
Rapid Acceleration Expected for Supply Chain Market in Second Half of 1999
BOSTON, Mass., March 8, 1999 – AMR Research, Inc., the leading industry and market analysis firm specializing in enterprise applications and enabling technologies, reports the rapidly growing Supply Chain Management (SCM) market continues to experience a temporary deceleration. The firm's recent "1999 Supply Chain Strategies Outlook" report projects the SCM market to regain its course in the latter half of 1999, as Enterprise Resource Planning (ERP) vendors expand their supply chain offerings. In addition, the report predicts the overall SCM market to grow 50 percent, or $4.5 billion, in 1999, with the Supply Chain Planning (SCP) portion increasing by 58 percent and Supply Chain Execution (SCE) growing 42 percent.
The 46 percent revenue growth for 1998 sustained SCM's temporary rapid growth, but fell behind 1997's 56 percent growth rate. The deceleration can be attributed to a slow down in IT spending for business applications as companies finished implementations in preparation for Y2K.
"The SCM market will heat up as leading ERP vendors enter the game, and mergers and acquisitions shape the playing field," said John Bermudez, group vice president, Enterprise Strategies, AMR Research. "As Y2K projects wind down, SCM takes center stage as the next big opportunity and money maker for the thousands of companies operating ERP systems."
The SCM market is defined as a consolidation of two market segments, SCP and SCE, distinguished according to the time frame users have to make decisions. The main focus of SCP is supporting the various planning processes in manufacturing and distribution. SCP includes supply chain network design, demand planning and forecasting, supply planning, manufacturing planning and scheduling, and distribution planning. A sampling of the top five SCP vendors, based on 1997 total company revenue, include i2 Technologies, Manugistics, Inc., Numetrix, Inc., ILOG, and Logility. SCE focuses on the daily operations of the distribution process. SCE includes Warehouse Management Systems (WMS), Transportation Management Systems (TMS), International Trade Logistics (ITL), inventory management and order management. The top five SCE vendors, based on 1997 total company revenue, include IMI, McHugh Software, EXE Technologies, Richter Systems, Inc., and BDM International, Inc. (bought by TRW Inc. at the end of 1997).
The Future for Supply Chain Management
According to AMR Research, many of the major trends of 1998 will continue throughout 1999, including the integration of product suites as backbones to support real-time supply chain decision-making, the alignment of vendors applications to ERP systems to allow easier integration, and product and marketing strategies focused on market segments and niches.
In addition, in 1999, the emergence of new trends and market penetration opportunities will shape the SCM market:
Y2K Issues: most leading corporations have goals to resolve Y2K by the first half of 1999, enabling companies to focus heavily on strategic technology plans to gain competitive advantage, in the later half of the year.
Impact on ERP Vendors: ERP vendors will compete heavily and will focus on selling SCM to the existing installed base in order to capture more seats and offset a slowdown in the traditional ERP business. The entry into the market for ERP vendors will also add visibility to the market and generate greater user interest in purchasing SCM applications.
Market Consolidation: further consolidation in the supply chain market will take place as SCM vendors increase the functionality and depth of their products, resulting in more, large SCM providers.
Retail Market: both larger SCP and SCE vendors will expand their market scope offering better support for the Wholesale Distribution and Retail markets, currently served by smaller niche application providers.
Conclusion
The year ahead will feature significant changes to the landscape of the SCP and SCE markets, as mergers and acquisitions, partnerships, and the invasion of ERP vendors shape the landscape of this dynamic space. The SCM market growth will be flat during the first half of 1999, but is expected to gain considerable momentum in the second half of the year. Because of the low market penetration, the opportunity is immense. The retail market will be an important focus of SCM and ERP vendors as they expand their footprint. Most ERP customers are potential SCM customers, as SCM applications promise to increase the return on investment from ERP. Finally, software providers will focus their resources on developing sales organizations around their supply chain offerings.
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About AMR Research
Founded in 1986, Boston-based AMR Research is the preeminent industry and market analysis firm specializing in enterprise applications and related trends and technologies. Tracking more than 400 leading software and service providers, AMR Research helps Global 1,000 companies evaluate, select, and manage new systems for every part of the enterprise, including logistics and supply-chain management, Enterprise Resource Planning (ERP), Manufacturing Execution Systems (MES), and electronic/internet commerce. For additional information, please visit AMR Research on the World Wide Web at www.amrresearch.com.
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