Analysts may be divided on how to classify the newest supply chain applications. But no one denies that sales of event and performance management software are about to explode.
James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
With a hurricane bearing down on a busy Asian port, a ship operator is forced to scuttle its regular sailing schedule, delaying the departure of a U.S.-bound vessel loaded with electronic components. But the consignee doesn't have to wait long to find out about the delay. At the first sign of trouble, its event management software application sends out an alert to the company's logistics managers. It then sends out a recommendation that they reallocate stock in the U.S. warehouse in order to meet a delivery commitment to an important customer.
Afterward, during a routine review of shipping performance, the importer's performance management application notes that the hurricane-delayed shipment was only the latest in a long series of shipping problems. In fact, it notes that the overseas factory has routinely made expedited air shipments to the United States, rather than using standard ocean service. An analysis of the factory's inventory and production schedules reveals that the root cause of the repeated use of expedited service was a shortage of a critical part. The software recommends that the factory increase its safety stocks of that key part to keep the production line running and hold down shipping costs.
That might sound like a futuristic scenario, but it's already taking place in shipping operations across the country. Just as they installed warehouse and transportation management software a few years back to streamline their order fulfillment and freight operations, companies are now installing event management and performance management software that will allow them to respond instantly when things go awry. "Companies have come to the realization that to thrive today, it's not just about having a good plan," says Randy Littleson, vice president of marketing at Kinaxis, a software maker based in Ottawa, Ontario. "It's about responding when the plan does not go as predicted."
Early detection
That's exactly what these two software applications are designed to do—detect, diagnose, and resolve performance exceptions. The first type, event management software, collects data in real time from multiple sources so that it can monitor a shipment's progress against predetermined milestones, such as the ship date, and notify supply chain managers if an event fails to take place on schedule. The more sophisticated versions of the software enable companies to respond to exceptions as well.
After a shipment has been completed, the second application, supply chain performance management software, takes over. This type of software measures events after the fact and compares them against pre-set benchmarks to assess adherence to standards. These benchmarks can cover any function or activity in the supply chain. For example, if standard performance for a warehouse is to pick and ship 1,000 items an hour, the software will notify managers if performance slips to 800.
"It's used to manage performance of both internal and external supply chains," says Dushyant Mehra, a senior analyst with the research firm Frost & Sullivan. "It helps companies detect and diagnose exceptions before they become a problem."
Taking the lead
The dominant players in this segment of the software market are SAP and Infor, according to a market research report released by Frost & Sullivan in March. SAP, one of the bestknown makers of business software, has been selling event management software as part of its solution set since 2001. Today, about 200 SAP customers around the world employ the application to keep tabs on supply chain movements. If an event—say, a shipment—does not take place as scheduled, the program will alert a manager by such means as an e-mail or a fax.
"You can track and monitor processes with the software," says Tobias Goetz, a business developer for SCM solution management who's located at SAP's headquarters in Walldorf, Germany. "We are also extracting data from event management software and doing aggregate reporting. So you can determine, for example, the average time [for a shipment] to go from A to B."
Infor Global Solutions, a major software maker based in Alpharetta, Ga., also markets an event management software application. Developed a couple of years ago, the event management system lets the user set up event triggers in a database with instructions to alert a designated person if an exception occurs, says Andrew Kinder, Infor's director of product marketing for supply chain management. The event management application is designed to work with software from a variety of vendors.
Along with its event management system, Infor also offers a performance management application that allows manufacturers, retailers, and distributors to assess execution in planning, budgeting, forecasting, and logistics. This Webbased application draws data from enterprise resource planning and other supply chain applications, whether they're Infor's own systems or those supplied by other vendors. The program compares the data against key performance indicators (KPIs) selected by the user. Christina McKeon, Infor's director of product marketing for performance management, reports that inventory turnover and warehouse labor forecast accuracy are popular KPIs.
Jumping in the game
SAP and Infor may be the dominant players in this market, but they've got plenty of competition. For example, Dallas-based newcomer Blue Sky Logistics Inc. also offers event and performance management applications. Those applications sit on top of other software, such as enterprise resource planning (ERP) systems, warehouse management systems (WMS), and transportation management systems (TMS). Along with sending out alerts when an exception occurs, the software can analyze the reasons for recurring problems. "Not only does it tell me that the order was only 97.6 percent perfect, it tells me why," says Steve Hensley, president of Blue Sky Logistics. "The cause could be the labor force is not effective in getting picks done. Or you don't have enough equipment. It gives the root cause as to why you're falling short."
Other vendors have included event and performance management features in existing software. For example, global trade management software vendor QuestaWeb of Westfield, N.J., offers both event monitoring and a diagnostic capability to suggest a corrective action, such as contacting customs or a customs broker, when an event does not happen as planned.
A few companies have even begun to close the loop between these types of systems. For example, the Canadian software supplier Kinaxis has developed an application, RapidResponse, that connects the event management system to a performance management engine. The application sends out an alert and then diagnoses the problem, generally offering a number of possible fixes. "It sees the problem, then tries to solve it," says Dwight Klappich, an analyst in the Atlanta office of Gartner Research. "It has taken event management from just identifying problems to solving them."
The RapidResponse application uses "live" scorecards set up by the user to measure activities in real time, says Littleson. For example, the application might send out an alert that a scheduled order drop for a part can't be met. The program would then suggest alternatives. The company could expedite shipping of the same part from another warehouse or could locate the part being built by a contract manufacturer to have it fill the current order with product originally intended for another customer.
A number of contract manufacturers have already deployed the Kinaxis application to help control their worldwide supply chains, says Littleson. The application can be accessed through the Web on a software-as-a-service basis or installed on a company's own server.
Class differences
Analysts say the future looks bright for event and performance management software. Mehra, for example, projects that sales will swell from $600 million at the end of 2006 to $1.8 billion by 2013. "Overall, [this] segment is expected to grow at a faster rate than the supply chain planning (SCP) and supply chain execution (SCE) segments," he says.
In fact, Mehra believes these applications have reached the point where they should no longer be considered a subset of other supply chain applications. In the March Frost & Sullivan market report, World Supply Chain Management Software and Services Markets, he argued that, based on their rate of growth, event management and performance management supply chain applications deserve their own class—a category he calls "Supply Chain Coordination."
Not everyone agrees. Analyst John Fontanella of Boston-based AMR Research, for example, doesn't see a big future for these "coordination" programs as stand-alone applications. He says it's far more likely that both event and performance management will be absorbed into other supply chain applications as features. The market is already moving in that direction, he says. "A lot of supply chain applications have some level of analytics built in that can be used to determine the performance of the function that application is involved in."
Klappich of Gartner Research also thinks event management capabilities will likely be incorporated into other supply chain applications, like transportation management systems. "Companies today expect visibility to be part of any transportation solution," he says. "We'll see less event management as a stand-alone category because it will just become a software function."
But it could be a different story with performance management software, he says. Although Klappich expects to see performance management features incorporated into more warehouse management systems, he also sees a future for stand-alone performance management software packages if they focus on cross-functional performance across the supply chain. In fact, he predicts that major vendors outside the supply chain space—companies like Cognos, which makes financial performance software—will enter the supply chain market with performance applications.
Mehra concedes that performance and event management applications may someday be absorbed into other supply chain solutions, but he says that it won't happen right away. "It will take some time for this trend to develop," he contends.
But no matter how they're sold—as stand-alone applications or as features in other business software solutions—it seems clear that event and performance management will continue to gain traction. When used in conjunction with planning and execution software, these "coordination" applications hold great promise for helping optimize the supply chain.
"There is an increasing preference for supply chain solutions that integrate collaboration between planning, execution, and coordination of the entire supply chain network," Mehra wrote in the Frost & Sullivan report. "By using technology to decide on the appropriate courses of action and then acting rapidly on these decisions, businesses can satisfy their customers' requirements better and deliver the product at the appropriate place and time."
it's on the list
The applications may be relatively new to the market, but DC VELOCITY readers have already put event and performance management software on their shopping lists. More than two-thirds (69 percent) of the respondents to a recent survey said their companies were planning to buy supply chain performance management software in the next 12 months. Four out of 10 respondents (43 percent) said they planned to buy supply chain event management software in the same period.
Plans to invest in performance management software appear to be driven by a desire to boost efficiency. When asked to indicate their primary reason for buying the software, 36 percent of the respondents said they hoped to streamline their supply chain operations. Another 26 percent cited the desire to manage costs better.
When it comes to event management software, it appears that the need for better visibility is sparking the demand. When asked to identify their primary reason for buying event management software, 45 percent of the respondents said it was to obtain a better view of products as they move through the supply chain. Another 24 percent said they hoped to reduce costs.
The survey also asked about respondents' current usage of these two applications. Only 16 percent of the survey respondents said their companies were using event management applications, while 14 percent were using performance management software. By way of comparison, some 66 percent of the respondents have a warehouse management system (WMS) in place, 45 percent a transportation management system (TMS), and 41 percent an enterprise resource planning (ERP) package. Thirty-six percent are using demand planning software and 32 percent inventory planning.
A third of the survey respondents (32 percent) worked in manufacturing. Service providers, such as third-party logistics service companies, motor carriers, and warehouse operators, made up the next largest group of survey respondents (28 percent).
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
The clean energy transition continuing to sweep the globe will give companies in every sector the choice to either be disrupted or to capitalize on new opportunities, a sustainability expert from Deloitte said in a session today at a conference in Orlando held by the enterprise resource planning (ERP) firm IFS.
While corporate chief sustainability officers (CSOs) are likely already tracking those impacts, the truth is that they will actually affect every aspect of operations regardless of people’s role in a business, said John O’Brien, managing director of Deloitte’s sustainability and climate practice.
For example, regulatory requirements on carbon emissions are expanding in every region, which means that even if a specific company doesn’t have to change its own practices, it will almost definitely need to flex to accommodate its partners and suppliers as they track scope 3 emissions or supply chain practices.
Likewise, companies are starting to challenge the classic concept of “force majeure” events than can cancel service providers’ contractual duties due to unforeseeable weather events. As the new argument goes, extreme weather patterns increasingly occur in accordance with climate scientists’ forecasts, so those hurricanes and wildfires are in fact foreseeable after all.
But one strategy for coping with the cost of those changes is to mine the power of the data that most companies will soon need to collect as part of their evolution. Instead of simply tracking its trucks to trim their routes and emissions, a transportation company could use the same data to manage their maintenance and fuel consumption.
“The climate management transition is going to be a massive disruption, but with that comes massive opportunity,” O’Brien said from the keynote stage at the “IFS Unleashed” show. “Don’t waste compliance efforts just on compliance, use it to create new value. You’re collecting all that new data, so use it!”
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
However, that trend is counterbalanced by economic uncertainty driven by geopolitics, which is prompting many companies to diversity their supply chains, Dun & Bradstreet said in its “Q4 2024 Global Business Optimism Insights” report, which was based on research conducted during the third quarter.
“While overall global business optimism has increased and inflation has abated, it’s important to recognize that geopolitics contribute to economic uncertainty,” Neeraj Sahai, president of Dun & Bradstreet International, said in a release. “Industry-specific regulatory risks and more stringent data requirements have emerged as the top concerns among a third of respondents. To mitigate these risks, businesses are considering diversifying their supply chains and markets to manage regulatory risk.”
According to the report, nearly four in five businesses are expressing increased optimism in domestic and export orders, capital expenditures, and financial risk due to a combination of easing financial pressures, shifts in monetary policies, robust regulatory frameworks, and higher participation in sustainability initiatives.
U.S. businesses recorded a nearly 9% rise in optimism, aided by falling inflation and expectations of further rate cuts. Similarly, business optimism in the U.K. and Spain showed notable recoveries as their respective central banks initiated monetary easing, rising by 13% and 9%, respectively. Emerging economies, such as Argentina and India, saw jumps in optimism levels due to declining inflation and increased domestic demand respectively.
"Businesses are increasingly confident as borrowing costs decline, boosting optimism for higher sales, stronger exports, and reduced financial risks," Arun Singh, Global Chief Economist at Dun & Bradstreet, said. "This confidence is driving capital investments, with easing supply chain pressures supporting growth in the year's final quarter."