Supply Chain Spending Is On a Roll

Spending priorities can change quickly in this ever-evolving space, but right now the most sizzling segments include demand planning, inventory management, e-procurement and PIM.

IT spending might be humdrum on the whole, but supply chain technology is one area where users are making some big investments, according to a chorus of analysts.

Hot areas cited by individual analysts run the gamut from demand planning and inventory management to collaboration-oriented IT systems such as e-procurement (electronic procurement) and PIM (product information management).

The analysts findings resound across a range of vertical markets. In Meta Group Inc.s recently released Worldwide IT Benchmark Report, researchers determined that "more than 50 percent of the population" in the federal government, metal/natural resources, and retail spaces planned to spend more money on SCM (supply chain management) in 2004 than 2003.

In a recent survey by the NRF (National Retail Foundation) and BearingPoint Inc., most of the retailers questioned pointed to supply chain optimization as a "priority initiative for getting close to the customer" in 2005.

/zimages/5/28571.gifSupply chain tech was lacking in 2004. Click here to read more.

Meanwhile, a survey conducted by the Yankee Group and sponsored by GXS (Global Exchange Services Inc.) showed that 75 percent of suppliers believe PIM systems are "a valuable investment." In other results, PIM is providing suppliers with an average of 25-percent savings in supply chain efficiencies.

Internally, suppliers are using PIM data to streamline shipping processes and inventory management, said Bobby Patrick, senior vice president and chief marketing officer at GXS, in an interview with

But in a collaborative sense, companies are now starting to synchronize PIM information with retailers so as to "change prices on the fly" and reduce product overstocks, according to Patrick.

E-procurement systems, on the other hand, get collaborative use from trading partners wanting to simplify the buying and sourcing of goods and services—ranging from temporary labor and office supplies to raw materials for manufacturing processes.

"Were seeing a trend toward collaboration—and its not always just holding hands, either. Companies are telling trading partners [who dont participate in collaborative systems], Youre tough to do business with," said Dwight Killpech, a supply chain analyst at the Meta Group, in another interview.

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"[But] the hottest topic is demand planning. Theres been a dramatic uptick in this over the past four or five months," according to Killpech.

Over the next couple of years, more retailers will also open their wallets for both demand planning and inventory management systems, said Kevin Boyanowski, managing director of BearingPoint.

Increasingly, demand planning is being performed collaboratively, too. "Collaborative planning [is viewed by retailers] as a key way to improve forecasts," according to the NRF/BearingPoint results.

The still controversial technology of radio frequency identification does play a role in spending expectations. So, too, does CPFR (collaborative planning, forecasting and replenishment). Over the next 12 months, 35 percent of retailers will deploy RFID, and one out of two will use CPFR to generate a portion of vendor orders, according to the same study.

In the Yankee Groups PIM report, 28 percent of the suppliers said that IT spending on internal PIM "continues to be a priority because it is a foundation for RFID, EPC and CPFR."

Another 36 percent replied simply that internal PIM spending "is a top priority and we will continue to invest in PIM software and services to optimize how we manage data internally."

Next Page: Spending patterns can change.