CSCMP's Supply Chain Quarterly
December 14, 2018

A strategic shift

The primary reasons why companies are investing in supply chain technology are changing. Enhancing the customer experience, driving growth, and creating innovation now outrank cutting costs and improving efficiencies.

Spending on supply chain software and technology should remain strong over the next few years, but the reasons why companies are investing in these tools are changing. According to the fifth annual "Gartner Supply Chain User Wants and Needs Study," companies are shifting away from a myopic focus on using software and technology to cut supply chain costs. Instead they are focusing more on how technology can enhance the customer experience and produce innovation and growth.

The study found that more than 60 percent of the survey respondents plan to increase their investments in supply chain management (SCM) technologies, with 20 percent or more of that 60 percent saying they expect that increase to be significant. Furthermore, when the study looked just at companies with high-performing supply chains, that number grew, with 80 percent saying they would boost spending.

Article Figures
[Figure 1] Business priorities shift toward customer satisfaction and growth initiatives
[Figure 1] Business priorities shift toward customer satisfaction and growth initiatives Enlarge this image
[Figure 2] Most important investment plans through 2014
[Figure 2] Most important investment plans through 2014 Enlarge this image

While spending is increasing, business priorities are shifting. For the first time in the five years of conducting this survey, supply chain leaders ranked customer service improvements, supply chain contributions that drive business growth, and innovation higher in importance than improving efficiencies and reducing costs. Figure 1 shows respondents' priorities from 2008 through 2011.

Respondents said that their top challenges to achieving these supply chain goals and objectives were:

  1. Forecast accuracy and demand variability
  2. Inability to synchronize end-to-end supply chain processes
  3. Lack of supply chain visibility
  4. Supply chain network complexity
  5. The last three obstacles highlight the need for better internal collaboration and communication, which is difficult to achieve as networks become increasingly complex. In order to respond to these and other challenges, survey respondents plan to invest in a variety of technologies across the supply chain. Investments in supply chain visibility and event management, strategic sourcing, and supply base management are the highest priorities through 2014, they said (see Figure 2).

    Several of those planned investments highlight companies' growing need to better manage uncertainty in an increasingly complex and risky global market. As Figure 2 shows, supply chain visibility will be a major focal point for investment over the next three years. Additionally, sales and operations planning (S&OP) continues to garner attention because many companies facing uncertainty see the value of deploying the analytical approach afforded by S&OP.

    Sourcing and supply base management are an emerging focal point. These technologies are concerned with identifying, profiling, assessing, and developing suppliers in order to deliver and maintain high performance.

    Supply chain execution technologies (warehousing, transportation, and global trade) continue to represent the application foundation for many supply chain organizations. Although warehouse management system (WMS) technology is mature, users who are looking to replace an aging WMS are now focusing more on technical architecture to support improved agility and adaptability, as well as extended capabilities that improve productivity, such as labor management, task interleaving, value-added services, and slotting. Demand for transportation management systems (TMS) remains strong as supply chains continue to confront higher fuel costs, capacity constraints, and new driver regulations.

    Another development is a change in how supply chain technology is delivered to users. Respondents continue to indicate that they intend to move from strictly buying on-premise applications to purchasing "cloud" and software-as-a-service solutions. Organizations are increasingly adopting hosted, cloud, and business process outsourcing when they consider their supply chains to be strategic.

    Taken all together, these technology shifts point to one important overarching trend: Buyers increasingly view the supply chain as a source of competitive advantage.

    © 2012 Gartner, Inc. and/or its affiliates. All rights reserved.

    C. Dwight Klappich is a research vice president at the research and advisory firm Gartner Inc.

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