Supply-Chain Integration Spending Jumps
From Yahoo News - Thu Jul 17, 1:19 PM ET
Kimberly Hill, www.CRMDaily.com
Spending on supply-chain integration will increase by 12 percent this
year, according to a study recently completed by Yankee Group. Report
author Jon Derome told CRMDaily.com that "supply chain masters" that
buy enormous amounts of product from suppliers -- like Wal-Mart (NYSE:
WMT - news) and Home Depot (NYSE: HD - news) -- are exerting great
influence over the increased spending. Their suppliers must invest in
supply-chain technology to meet their mandates, and then competitors
often follow suit.
"When one company moves forward and enforces a new policy with its
suppliers, "it saves money and improves response time," said Derome.
"Then, a whole flock of companies adopt the same or similar technology
to match that competitive capability."
Customer Service Enters the Equation
The trend toward making supply-chain applications and information
available to customers and business partners continues to accelerate,
says Derome. Many of the firms Yankee surveyed reported that they were
adopting new supply-chain technologies primarily to better service
their B2B accounts.
At the same time, supply-chain activities are expanding into other
areas of enterprises, Aberdeen Group's Tim Minahan told CRMDaily. For
example, many enterprises are beginning to use supply-chain
applications to acquire professional services (news - web sites) and
other "soft" items, as opposed to simply using the technology to get
the best possible deals on parts and wholesale goods.
Companies with a complex distribution chain are, in fact, having a
harder time distinguishing between CRM and supply-chain functionality,
especially as they relate to partner relationship management, Deloitte
Consulting partner Mark Peacock told CRMDaily. At the end of the day,
CRM is about customer care and supply chains are about logistics, he
explained, but the intersection in Venn Diagrams mapping is
XML Grows Exponentially
The technology on which supply-chain systems are based remains split
between newer applications built around XML (extensible markup
language) and other Internet standards and older-generation EDI
(electronic data interchange) software, according to Derome. Use of
XML is growing at a rapid pace -- anywhere from 150 to 300 percent per
However, XML is starting from a very low base of use, said Derome. Of
all the information flowing between companies -- excluding e-mail --
only 5 percent is transmitted in XML.
EDI Stays the Course
Many companies continue to use older EDI standards to communicate with
suppliers and partners. In fact, the 95 percent of information that is
not sent in XML format is transmitted either in EDI or proprietary
Thus, although use of EDI-based applications is growing by only about
18 percent per year, its enormous existing user base continues to make
it a formidable force in the supply-chain arena.
Hybrid Models Proliferate
In addition to the choice between XML and EDI, companies must decide
whether they will send transactions directly to suppliers -- which
requires that parties on both sides have direct-connect software in
place -- or route them through a value-added network. What most
enterprises are doing, explained Derome, is adopting a variety of
standards and putting together hybrid systems to address their
supply-chain integration issues.
"It doesn't make sense for companies to migrate their entire supply
chain to the direct-connect model," he noted. Instead, most
enterprises choose to use a service provider to communicate with
medium- and low-volume transaction partners. But for those key
suppliers and customers with whom they do an enormous business, many
companies choose direct-connect software.