Manufacturers to Adopt Supply Chain Apps, but Not RFID

In 2005, manufacturers will craft new applications as they look to the supply chain for productivity gains. But also this year, "RFID hype will implode," according to research from IDC's new Manufacturing Insights analyst firm.

Whats going to happen in manufacturing technology during 2005? Users will adopt new supply chain solutions in areas such as supplier relationship management. On the other hand, manufacturers will "fail to find the business case" for the highly touted RFID, according to research from Manufacturing Insights, a newly created IDC company.

"Productivity is the supply chain priority," said Bob Parker, vice president of the new analyst firm, who delivered 10 predictions for manufacturing IT during a recent telebriefing.

"RFID hype will implode," according to another of Parkers predictions for the new year. Unable to find the business case for RFID, manufacturers will drag their feet about compliance. Wal-Mart will "keep a stiff upper lip," but enthusiasm for RFID will privately wane among most retailer customers served by manufacturers.

To set the stage for his predictions, Parker pointed to three trends he foresees in the industry environment for 2005. First of all, much revenue growth will come from new geographic, specialty and value-added markets, the analyst said. The chemical industry, for instance, is now experiencing 7 percent to 8 percent growth in China, in contrast to only 1 percent to 2 percent growth in North America and Europe.

Second, CIOs will feel "pressure to improve the return on R&D investments," according to the analyst.

Third, "new productivity gains will come from the supply chain," Parker told the audience. Waste in the supply chain can constitute as much as 10 percent of revenue, he said.

/zimages/4/28571.gifClick here to read Jacqueline Emighs supply chain predictions for 2005.

Manufacturers have found that when they focus on internal productivity alone, productivity gains can actually backfire by outpacing market expansion, thereby creating excess capacity and driving down pricing. So they will turn instead to reducing waste in the supply chain, Parker said.

Consequently, during 2005, users will look across traditional application categories to craft new supply chain solutions in areas such as SRM (supplier relationship management); supply chain event management/visibility; and global manufacturing execution.

"Demand information will emerge as a high priority," according to a third prediction from Parker. Further, in a related trend, supply chains will become calibrated to demand information, as manufacturers shift from "plan and push" to a "sense and respond" orientation that relies on accurate demand-side data.

Meanwhile, though, RFID technology will start to be constrained to more narrow applications, such as sensor networks, asset tracking and counterfeit prevention, said the Manufacturing Insights analyst.

Moreover, epcGlobal Generation technology "will not come close to resolving issues that have surfaced in pilots," Parker said.

Parker also outlined his seven other predictions for the manufacturing space. "The CIO must become a change agent," he said. "Lean Sigma expands [in] influence. Companies will have to do more with less in their new product development processes."

Manufacturers will continue to build capabilities in China, despite growing supply challenges there, Parker said.

The regulatory compliance burden will continue to increase. Manufacturers will shift from projects that reduce IT costs to initiatives that add new business function support.

Finally, he predicted, vendors will need to redefine their offerings, as manufacturing buyers move from selecting applications to trying to achieve "value realization." p>/zimages/4/28571.gifCheck out eWEEK.coms for the latest news and analysis of enterprise supply chains.