After years of caution and under-investment, manufacturing companies are finally increasing investments in supply chain management (SCM) systems and particularly radio frequency identification (RFID) technology, according to analysts.

AMR Research predicts that the SCM software market will grow five per cent in 2004 to $5.5bn, from $5.24bn in 2003. The bulk of this investment is expected to be in supply chain execution initiatives and demand-driven supply networks.

The study suggested that RFID continues to be a big driver, and that warehouse management system applications will grow six per cent.

AMR said companies are investing in technology that allows them to reduce costs while improving responsiveness.

Kevin O'Marah, AMR research vice president, said in a statement: "Using technology to leapfrog the competition, reinvigorate growth channels and provide shareholder value is the new earmark for supply chain savvy enterprises."

"The good news is that SCM investment is growing; the great news is that companies are grasping what enterprise applications can do for their businesses," said Tony Friscia, chief executive of AMR Research.

"Using IT to bring great ideas to market will undoubtedly keep technology spending up. Innovations in RFID and changes in the retail industry are spurring renewed growth."