Recently, I found myself looking over market research in an effort to assess the impact of the global financial crisis and subsequent business downturn on Supply Chain Management (SCM) Applications. 

For the purpose of this blog, I’m talking about the 10 software application groups that you typically find within SCM which include – Inventory Optimization, Performance Management, RFID, Sales & Operations Planning, Network Design, Global Trade Compliance, Supply Chain Planning, Sourcing, Transportation Management Systems (TMS) and Warehouse Management Systems (WMS).

As expected, many of the current realities of the overall business climate are reflected in the actions of supply chain managers. Specifically the top priorities today and in the near term highlight a tactical focus on: 

This ongoing, narrow focus on tactical execution is one of the reasons that the SCM application market – despite the economic uncertainties – is still projecting more than 10% annual growth through 2012. 

The High: Based on the overall outlook from my research I thought, “Wow, this is really great news for TMS providers and for customers who are either in need of a TMS upgrade or building a TMS business case.” If you can find a way to secure the capital and IT support, there doesn’t appear to be a better time than now – especially when you consider the looming transportation-related cost increases associated with carrier capacity and steadily increasing transportation demands placed upon downsized carrier networks.

The Low: However when I looked deeper in the details, specifically the most recent SCM application market penetration survey by Gartner (Q4-2009), I could not believe my eyes. In fact, I actually had to pull out a ruler and make sure my eyes were lining up the numbers properly. 

According the survey respondents – a group that comprised of supply chain practitioners responsible for the planning and management of SCM applications –TMS applications have had the third lowest deployment ranking of the 10 SCM application categories over the last 10 years. 

The only SCM applications with fewer deployments than TMS are RFID and GTM. TMS applications actually ‘tie’ with network optimization applications as the third smallest of the 10 SCM applications studied in the market penetration survey. However, the market penetration view represents deployments performed to date. So you have to ask, “What about the forward view – surely there has to be a larger proportion considering TMS in future plans?”

Again, the survey responses seem inconsistent with the current business and economic realities. Looking forward, respondents ranked RFID, GTM and TMS most frequently as the applications that they have no current plans to deploy. It becomes even more curious when you consider that both RFID and GTM span a much smaller supply chain footprint than TMS. But how can this be? 

Transportation spend is a key source of supply chain cost, yet the majority of practitioners surveyed either don’t use TMS or have current plans to even consider deployment. I suspect that as the recession recovery drags along, we’re going to see a continued focus on productivity-efficiency improvements as well as cost containment initiatives. Hopefully, in addition to that, TMS applications will become a much more relevant topic for consideration in supply chain improvement initiatives.

Do you have any thoughts on this disconnect – why TMS has achieved so little overall market penetration over the last 10 years?

Next time around, we’ll take a look at the other side of the market penetration survey. Until then, do you have any projections on where and why the most substantial market share exists and where the greatest interest lies for future SCM deployments? 

-- Kevin

 

 

 

 

Photo Credit: rutlo