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Supply Chain Software Once Again Hot Sector – Part 1

Supply Chain Software Once Again Hot Sector reports Investors Business Daily (IBD) in last Friday’s edition of their business rag. They report:

The supply chain gang is back in business.

Makers of supply chain management software fought a rough spending climate as tech budgets froze in the early 2000s.

But over the past year, many of these companies have come back with solid growth and higher stock prices.

Some firms such as Manhattan Associates, JDA Software Group, Logility and Red Prairie,

have recorded double-digit revenue growth in the past year. That compares with a 7% growth rate for all software.

The funny thing is that I had been looking for a job late last year and early this year, not really looking but I was knowledgeable about the state of the Supply Chain software hiring phenomenon. And I did note that these companies and others were expanding their employment base, first a trickle and then much more than a trickle. Its good to know that there was a "real" story behind that uptick.

However, some of this makes little sense:

Several factors sparked the rebound. Manufacturers and retailers face stiff global competition, so their supply chains are more important.

Sure manufacturers and retailers face stiff global competition but it is not the principal reasons behind why their supply chain are more important. Its because their supply chains are now global largely because of their off shoring/outsourcing models.

Another illogical statement reads,

"As companies grow larger and their supply chains extend, they need to scale up their software technology as well," he said. "Some tight purse strings have loosened."

Supply chains extend because they have been extended and not because companies grow larger. One could argue that ERP systems are needed because companies become unwieldy without such systems (though one could argue also that the systems themselves are unwieldy in the first place).

I would argue that the principal reason why supply chains software has become necessary is because inventories have exploded in the supply chain largely driven by longer lead times and not because companies have become larger or because of global competition. And that observation is borne out in the article itself but not valued as the principal cause as such:

Supply chain software typically consists of two main parts, planning and execution.

Companies rely on supply chain planning software to forecast inventories and plan for future capacities.

They use execution software to manage partner networks, transportation systems, warehouses and other logistics.

This is really what has happened to the supply chain in the last few years – inventories have increased because of outsourcing/off shoring and better transportation and warehouse management has become critical because not only do you need to manage the inventories but also transport and store them.

In the next post, I will delve a little deeper into the state of the players in the SCM market and my thoughts on the outlook going forward. Stay tuned!

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Category: Supply Chain Management, Supply Chain News

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