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    Home IT Management
    • IT Management

    RFID to Spark Supply Chain Sector Growth

    Written by

    Jacqueline Emigh
    Published September 8, 2004
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      The prospering survivors of the supply chain technology shakeout are likely to gain a significant growth boost from RFID, according to industry analysts.

      One vendor thats kicking up sparks, Yantra Corp., boasts both Best Buy Inc. and Circuit City Stores Inc. as customers. Yantra just added IBM Corp. to a list of publicly announced partners that already included Siebel Systems Inc. and retail systems integration specialist InfoSys Corp.

      Supply chain management and logistics (SCM/L) players have felt uneven impacts from the cool economic climate of the past few years, according to Steve Banker, an analyst with ARC Advisory Group, a supply chain manufacturing industry market research firm based in Dedham, Mass. “A number of SCM/L start-ups have either gotten bought or gone bankrupt,” Banker said.

      But in a report issued this week, Banker contended that some companies in a sub-sector ARC dubbed “logistics visibility and control (LV&C)” — including Yantra, Optum Corp., and Savi Technology Inc. — have been doing very nicely in terms of sales.

      “This used to be known as supply chain event management” (SCEM), Banker said. At one time, more than 20 vendors — backed by at least $100 million in VC funds — specialized in SCEM alone.

      When Banker recently revisited this supply chain niche, he was amazed to find a cumulative annual growth rate of 29 percent during an otherwise lackluster IT market 2000 to 2003.

      Although a number of SCEM companies had gone bust, others had “quietly been doing a lot of business and generating substantial revenues,” he said.

      Next Page: Rising from the industry rubble

      Prospering amid the rubble

      Banker estimates that between them, Yantra and Optum now produce about $40 to $60 million in annual revenues.

      Optums products are used a lot in hosted distribution, warehousing, and transportation applications. Lucent Technologies is a key Optum partner, Banker said. Savi specializes in international SCM/L applications.

      Yantra software is currently being used by Circuit City, Best Buy, and other major retailers for new multichannel sales applications that use the same back-end ordering system for both Web-based and brick-and-mortar stores, said Mike Grandinetti, Yantras senior VP and chief marketing officer.

      /zimages/4/28571.gifClick here to read why Circuit City wont be moving to RFID any time soon.

      Grandinetti recalled the days when at least 400 software vendors populated the overall SCM/L market. “There was an absolute feeding frenzy by VCs. The vast majority of companies went under, and some of those that now remain are floundering,” he said

      “The supply chain market got a black eye,” Banker concurred. “People thought that it was over-hyped, and that real ROI wasnt there.”

      Banker has divided the new LV&C category into four main categories: supply, demand, international visibility and reverse and service logistics.

      So what sets this LV&C software apart from the earlier SCEM products? “The alerts generated are now much more geared to specific, complex business processes,” Banker said.

      Successful products have also met customer requirements that they readily integrate with supply partners existing IT systems and provide visibility into trading partners supply chains, he said.

      Next Page:What will RFID Contribute?

      RFID Contribution

      “RFID can give you a lot of data on whats happening. The data isnt very useful unless you put it into a (supply chain) system, Banker said. However, Banker still believes that RFID is going to help supply chain technology sales in this market, according to Banker.

      /zimages/4/28571.gifBest Buy is taking baby steps into RFID. Click here to read more.

      For his part, Grandinetti attributed the decade-old Yantras revenues in the SCM/L market to two main factors — an unswerving focus on customer needs and an early move to Web services.

      “Everybody in retail is up against Wal-Mart, a company that competes mostly on the basis of price. BestBuy, Circuit City, and other retailers are trying to use customer-centricity to outservice Wal-Mart,” he said.

      “We were able to peek ahead and see that the market was headed toward Web services for integration,” he added.

      Grandinetti agrees that industry is now headed toward RFID. But he thinks adoption of the wireless tracking technology will be very gradual.

      “We are supporting RFID in our software products. Any vendor worth his salt will do the same. But vendors shouldnt over invest in RFID, either. The retail industry is still in a mode where companies are experimenting with RFID, at best,” Grandinetti said.

      /zimages/4/28571.gifCheck out eWEEK.coms Supply Chain Management & Logistics Center for the latest news and analysis of enterprise supply chains.

      Jacqueline Emigh
      Jacqueline Emigh

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