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9th Annual Software Users Survey: Mixed Results

While shippers say they’re taking a more calculated approach to vendor and product selection, our survey finds that there will be an increase in overall supply chain software spending over the next 18 months.
By Bridget McCrea, Contributing Editor
April 01, 2011

Taking to the cloud?
Twenty-four percent of shippers report that they’re currently using an on-demand supply chain package, and the same percentage of respondents say they’re looking to move into an on-demand option over the course of the next 12 month. Meanwhile, 76 percent say they weren’t using on-demand solutions and are currently not shopping for one.

In examining this low interest in on-demand supply chain solutions in the survey, Belinda Griffin-Cryan, global supply chain executive program manager at Capgemini Consulting, says that the numbers could be trending downward because while the initial buzz around such solutions has subsided, they also haven’t “quite hit critical mass yet.”

The low-hanging fruit has been picked, so to speak, and non-adopters have yet to jump at the chance to move their supply chain software into the “cloud.”

“Shippers are still interested in on-demand solutions,” says Griffin-Cryan, “but they are approaching it more cautiously than we would expect, and that cautiousness is reflected in the adoption rates of some of these solutions.”

When asked how much logistics professionals are expecting to spend overall on supply chain software in 2011, 48 percent of shippers plan on $100,000 or less. Twenty-five percent expect to pay out $100,000 to $499,999; 9 percent are planning on $500,000 to $999,999; and 10 percent fell into the $1 million to $2.49 million range. The average amount that shippers expect to pay is $703,448, up from $538,800 in 2010.

The criteria that shippers use when evaluating software packages has changed as a result of challenging economic conditions. Forty-six percent of respondents say they are scrutinizing their software investments more closely (compared to 33 percent in 2010) and moving more cautiously, while 21 percent have frozen all investments for this sector (compared to 18 percent in 2010).

Thirty-eight percent of respondents say their company’s use of supply chain software has increased over the last two years. When asked the same question in 2010, 47 percent responded affirmatively. This year, 56 percent of companies say their supply chain software investment has remained steady over the last 24 months, and 6 percent say it has decreased.

Important factors that shippers will use when choosing the right supply chain software include operations service/support; compatibility with existing software; and configurability. Twenty-four percent of shippers are currently using an on-demand supply chain package. Most respondents (43 percent) expect ROI on their purchases within 12 to 18 months, while 29 percent want to see those results within six to 12 months.

What do the analysts think?
Dwight Klappich, research vice president for Gartner, Inc., isn’t surprised by the overall results of the software survey, which indicates a cautiously optimistic approach to new purchases for 2011, an overall increase in total supply chain software spending, and a more calculated approach to vendor and product selection.

Klappich did have some comments on specific data points. For example, he says that a higher number of shippers are probably considering on-demand solutions than the survey indicated. “Our own analysis shows that about 50 percent of supply chain operations are looking at on-demand options,” says Klappich.

Griffin-Cryan says she was surprised at the fact that inventory visibility and demand planning “dropped off a bit” as drivers of supply chain software purchases. While 58 percent of respondents cited inventory visibility as a key concern in 2010, only 42 percent pointed to it as a driver in 2011. For demand planning, the percentages were 52 percent and 25 percent, respectively.

She credits an improving economy with taking some of the emphasis off of those two drivers. “During the recession, that’s where companies were spending money because there was so much focus on improving inventory position and doing better demand planning,” Griffin-Cryan says. “That’s probably why we’re seeing a drop-off now, because those were the two areas where companies were able to justify spending for the last couple of years.”

When it comes to overall spending on supply chain software, Griffin-Cryan states that the Logistics Management survey results are in line with Capgemini’s own findings. “It does look like firms are starting to spend money and invest again,” she notes. “We’re seeing that trend in our own discussions with clients, and it’s reflected in the survey data.”

Adrian Gonzalez, director at Newton, Mass.-based Logistics Viewpoints concurs, and says his firm’s numbers also show an uptick in IT spending in the supply chain space for 2011, compared to the previous two years. “The year 2009 was a bad one for the market, and a lot of companies pulled back,” says Gonzalez. “In 2010 we started to see some recovery, and the momentum is definitely continuing in 2011.” 

About the Author

Bridget McCrea
Contributing Editor

Bridget McCrea is a Contributing Editor for Logistics Management based in Clearwater, Fla. She has covered the transportation and supply chain space since 1996, and has covered all aspects of the industry for Logistics Management and Supply Chain Management Review. She can be reached at .(JavaScript must be enabled to view this email address).

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