Increased competition globally coupled with shorter product lifecycles and growth in Asia are expected to push the worldwide market for supply chain execution systems by more than 9% annually over the next five years, according to research by Dedham, Mass.-based ARC Advisory Group.
The market was $4.2 billion in 2005 and is predicted to be almost $6.6 billion in 2010, according to the ARC Advisory Group study.
SCE solutions are composed of Warehouse Management Systems, Transportation Management Systems, Collaborative Production Management applications and other real-time supply chain applications. SAP wraps execution apps within its supply chain management (SCM) suite.
"Across all of these applications there is a need for better visibility and control of financial performance," said Steve Banker, ARC service director for SCM.
Meanwhile, best-of-breed vendors that focus on specific industries, such as Rockville, Md.-based Manugistics or Waukesha, Wis.-based RedPrairie Corp., are feeling pressure from giant ERP vendors like SAP, Banker said.
"In the long run I don't think RFID [radio frequency identification] is going to boost revenues of best-of-breed suppliers, I think the opportunity is greater for ERP vendors," he said.
Larger enterprises are choosing SCM applications from big ERP vendors, including SAP and Oracle Corp. The decision is based on the cost of installation and maintenance, putting pressure on the best of breeds to lower their prices, Banker said.
While companies are expected to invest in RFID technology and a host of other sensor-based products to increase supply chain visibility, RFID will not play a major role. Instead, Manugisitics and other best-of-breed vendors need to wrap the technologies into their product offerings for a complete suite in order to compete with large ERP vendors, Banker said.
Over the past several years, SAP, Oracle, IBM and a slew of best-of-breed vendors have been rolling out tools and software packages designed to deploy RFID and harvest the data generated through the use of the technology. RFID is expected to augment and eventually replace bar coding technology to track products in the supply chain.
SAP has been touting its Auto-ID infrastructure, which is sold with its event management and supply chain management software, and SAP Enterprise Portal. SAP's product is built on the NetWeaver platform.
Larger software vendors like SAP, Oracle and IBM could be the real winners, as business applications handle data management, administration and analysis.
In a recent interview with SearchSAP.com, SAP America CEO Bill McDermott said the era of best-of-breed vendors is almost over. SAP partners with some best-of-breed vendors with its Auto-ID infrastructure, including implementation and maintenance services, but the product is expected to work out of the box.
"The customer has no interest in maintaining multiple point solution relationships," McDermott said. "[With best of breed] the very promise of the technology isn't fulfilled because the various functions are not integrated into the business process, and therefore you ended up with too much IT cost and not enough return for the investment."
While pricing will put pressure on best-of-breed vendors to lower prices, the vendors with the most vertical industry expertise will survive, Banker said. Many manufacturers require deep, industry-specific functionality that can be provided by best-of-breed vendors, he said.
One area that is emerging as a winner for best-of-breed vendors is the collaborative production management market, where vendors supply factory automation software, devices and sensors to link factory control systems and production management systems, according to Banker.