In ARC‘s recent Supply Chain Visibility & Collaboration Study, we found that the supply chain visibility & collaboration market is the fastest growing supply chain market. Over a year ago, ARC started to come across large corporations investing in supply chain control towers as a way of taking their supply chain program to the next level. We decided we needed to look into this, and kicked off a market research project on this market.
When it came to supply chain collaboration, we defined this as having a collaborative, multi-supplier, multi-tier, supply chain planning solution. For visibility, the definition was a solution providing visibility to the order process (order placed, order adjusted, order accepted), inventory at rest or inventory in motion events, or supply chain risks, or providing a stand-alone supply chain analytics/event management solution not embedded in other solutions.
Based on our definitions, solutions built with different tech stacks – BI, optimization, and B2B networks – were involved in providing different types of visibility and collaboration solutions. But in particular, it was B2B network solutions – both for visibility and collaboration – that was driving this market’s very rapid growth.
What are the reasons for this? Well there can be a very good ROI associated with visibility projects. The primary way Supply Chain Planning (SCP) applications drive ROI is through improving service levels with less inventory. The more companies can reduce their lead times, and the less variability there is surrounding those lead times, the better the ROI that can be achieved with SCP tools. Supply Chain Visibility, provides the data and metrics surrounding lead-times, and then allows Lean practitioners to work with supply chain partners to improve and control those lead-times.
Much of the traffic flowing through B2B networks is either initiated by supply chain masters or mandated. Many of these very large multinational corporations work to tightly orchestrate their end-to-end supply chain from suppliers all the way out to customers. Without good visibility, tight orchestration is impossible. Further, the more outsourcing – use of contract manufacturers and 3PLs – the more valuable collaborative planning applications are.
Supply Chain Synchronization
But beyond visibility is supply chain orchestration. Orchestration takes the service improvements and inventory reductions to the next level. In this scenario, balancing supply and demand is not merely improved through faster lead times, but rather the supply demand matching process is actively and collaboratively managed on an ongoing basis. Improved supply-demand balancing also leads to increased revenues by reacting to surges in demand more quickly than a company would be able to do based on a traditional sales & operations planning process. It also helps companies react more nimbly to supply disruptions, helping to deliver on orders that have already been booked but which are now in jeopardy.
And ARC thinks this market will continue to grow quickly because the concept of a “network of networks” is being pursued by both SAP and Oracle. In short, just as companies with very strong supply chain capabilities are looking closely at this space, so are some of the largest supply chain software suppliers.
The supply chain product set and visibility roadmaps of SAP and Oracle are strikingly similar. SAP and Oracle are not only leading suppliers of supply chain solutions, through partnerships they exert additional influence on all supply chain software markets. Their product sets and vision matter.
Both SAP and Oracle recognize that supply chain synchronization capabilities are key for success in this market. Both suppliers offer a variety of planning and execution solutions, many of them with best of breed style functionality. Both have developed collaborative planning solutions (SAP is earlier in their journey) that are well adapted to companies with a large degree of outsourcing in their supply chains. Both have developed robust supply chain cockpits built on BI technologies that allow for the real-time analysis of supply chain data with drill down capabilities. Both have very fast in-process memory technologies that allow for simulation and predictive analytics. Both have cockpits that allow the sales & operations planning process to be effectively managed. And both are seeking to go beyond inward looking S&OP to more collaborative planning environments built upon better visibility.
To accomplish this, both have partnered or procured providers of B2B networks. Yet, both suppliers recognize that no one B2B network provides all the visibility necessary. Descartes, for example, is very good for Air visibility, while Transporean has robust visibility into European road transportation. So to take supply chain orchestration to the next level, SAP and Oracle will need to collaborate with a variety of B2B network providers. Both recognize that effective integration to those networks will depend upon semantic integration; in other words, a transport order as defined in Oracle will need to be mapped to the same concept in the electronic messages sent through the Descartes network to insure that apples are not being confounded with oranges. Both SAP and Oracle recognize that semantic integration is difficult and admit they are early in this journey. And in both cases the vision is that they will offer a Network of Networks visibility solution, they will provide the visibility layer that rides on top of all other BWB networks. Both Oracle and SAP are well positioned to achieve this.