Companies will concentrate IT budgets on supply chain software next year as they continue to invest in technologies that will provide quick return on investments, according to experts.
Speaking to delegates in London yesterday, Nigel Montgomery of analyst group AMR Research said that despite some horror stories, businesses had identified the supply chain as the area most likely to provide instant value in a time of tightened budgets.
"It's clear that companies are still spending money on IT, but only where it's seen to reduce cost and increase efficiency," he said.
In a study of more than 100 European chief information officers from varying sized companies with annual turnovers exceeding £500m, AMR found that two thirds were planning or implementing supply chain event management (SCEM) technologies. Around 70 per cent were incorporating supply chain collaboration systems.
Supply chain management (SCM) involves co-ordinating and integrating flows between supplier, manufacturer, wholesaler, retailer and consumer, both within and among companies.
The 'event' element of SCEM is, Montgomery said, the value add which "unlocks the true potential of SCM", such as reporting on stock and pre-empting management with automated responses.
Recently, supermarket giant Sainsbury announced that it had saved £2.5m so far by implementing a collaborative SCEM project by sharing analytical data with suppliers. Using the system from Eqos, on-shelf availability increased and out-of-stock line was reduced by 20 per cent, providing savings through reduced waste and administrative costs.
"Reducing inventory costs and proving quick savings is the reason for implementing SCEM," said Montgomery.
AMR found that most projects (80 per cent) were small and focused on internal departments, but that as confidence grew companies were starting to branch out to the collaborative model.
But vendors often do not have the expertise to implement the project on behalf of their customers. "Most companies feel that vendors do not understand their market, so they have to use in-house skills to bring the SCEM project up to scratch," said Montgomery.
"This makes the project more expensive to roll out but also speeds it up."
AMR concluded that companies thinking about SCEM should act now while bargains are available and IT budgets go that much further. "Ineffective responses to supply chain bottlenecks reduce competitiveness and, once behind, it is hard to recover in any economic climate," Montgomery said.
"Companies must identify and install key performance indicators, implement SCEM projects in steps and control security within the SCEM project. You have to evaluate each vendor's implementation methodology carefully, covering yourself with a tightly constructed service level agreement (SLA) and look out for service costs."
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