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Supply Chain Research
5th December 2002
Stephen Timms, Associate DirectorHI Europe
Page 2 HI Europe
Project background and objectives
Oracle approached HI Europe in June 2002 looking to gain a better understanding of the supply chain management (SCM) market and its customers’ needs
– 90 decision makers (DMs) were interviewed across large UK corporations
– mixture of users of in-house developed systems and externally sourced systems
Areas we will cover today :
– current and future usage of the different SCM software solution types
– satisfaction levels and problem areas
– key drivers relating to SCM (eg. top priorities, attitudes)
– awareness levels of SCM software solutions vendors amongst DMsas well as which suppliers are most likely to be selected
– communications media of most value to decision makers
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1. Methodology and background
Page 4 HI Europe
Sample breakdown: Primary industry sector of business unit / company
Base: All DMs
2%
4%
14%
34%
3%
1%
3%
3%
9%
12%
6%
9%
Pharmaceuticals
Primary Process / Chemicals
Telecommunications
Aerospace / Defence
High Tech
Manufacturing / Engineering
Other services
Utilities
Hospitality
Financial services
Retail / Wholesale
Transport & Distribution
Primary Process 15%
Hi-Tec / Aero20%
Mfg / Eng - 34%
Services31%
Page 5 HI Europe
Relevance of four SCM areas to sample organisations
94%
91%
56%
86%
SUPPLYManagement
DELIVERYManagement
PRODUCTIONManagement
PLANNINGManagement
Q. Which of the following supply chain areas are relevant to your business…?
Base: All DMs
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2. SCM solutions installed in major UK organisations
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2.1 Current and future use of SCM software solutions
Page 8 HI Europe
Current use of SCM solutions: by SCM area
77%
79%
78%
76%
74%
12%
13%
7%
16%
12%
11%
8%
15%
8%
14%
Supply
Delivery
Production
Planning
Base: All for whom specified business area is relevant to their company
Q. For each business area that is relevant to your company, can you please tell me whether you have an SCM solution already installed, or if you are currently in the process of installing a new solution?
AVERAGE
ALREADY HAVEa solution installed
NO SOLUTION IN PLACE
CURRENTLY INSTALLINGa solution
Average age of current solution: by SCM area
Base: All who currently have specified solution
Page 9 HI Europe
2 or less yrs 3 – 5 yrs >5 yrs
40%
47%
36%
38%
39%
34%
28%
32%
38%
37%
26%
25%
32%
24%
24%
Supply
Delivery
Production
Planning
4.1
4.6
4.0
3.9
Average age (years):
3.7
AVERAGE
IN-HOUSE = 6.2 years old ; EXTERNAL = 3.9 years old
Page 10 HI Europe
Future use of SCM solutions: overall (average across 4 SCM areas)
* ie. Current non-solution users planning to install a new solutionBase: All for whom specified business area is relevant to their company
Existing users :Plan to
upgrade / replace43%
NO PLANS 47%
New users*
10%
Page 11 HI Europe
Increase>20%12%
Decision makers’ forecast for future increases/decreases in SCM s/w investment
Q. By approximately what % do you envisage your company’s annual investment for SCM software increasing or decreasing in the next financial year?
Base: All DMs
Increase11 - 20%
20%
Increase1 - 10%
21%
Increase 53%
Decrease 1-10% : 3%
Decrease 11-20% : 2%
Decrease >20% : 11%
At SAME level31%
Decrease 16%
31%39%
75%71%
Supp Del Prod Plan
79% 76% 75% 77%
Supp Del Prod Plan
Future use of SCM solutions: by age of solution
46%
18%23% 24%
Supp Del Prod Plan
Base: Those that have a solution already in place in each respective SCM area
Average % of current solution users planning to upgrade / replace their solution within the next two years :
2 years or less 3 to 5 years >5 years
Page 12 HI Europe
Age of
solution
Age and associated functionality are the key drivers for buying plans
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2.2 Integration of SCM solutions
Page 14 HI Europe
Integration levels / plans - by SCM area
Base: All for whom specified business area is relevant to their company
Q. Which of your software solutions are integrated to some extent with one another, and which you are planning to integrate in the next 2 years?
74%
78%
75%
66%
18%
18%
19%
26%
8%
4%
8%
6%
Planning
Production
Delivery
Supply
CURRENTLY INTEGRATEDto some extent
PLAN TO INTEGRATE
Not integrated and NO PLANS
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3. Satisfaction levels and problem areas
14%
19%
20%
44%
2%
4 or less
5
6
7 or 8
9 or 10
Satisfaction with overall performance of SCM system
Base: All DMs Note : Figures add to 99% due to rounding
Q. How satisfied are you with the overall performance of your SCM system? (on a scale of 1 to 10, where 10 = “extremely satisfied” and 1 = “extremely dissatisfied”)
Satisfaction score out of 10
Page 16 HI Europe
Satisfied 46%
Dis-satisfied 54%
Very dissatisfied
Areas in which DMs are most dissatisfied with regard to their SCM system
Q. What is the one key thing that you are most dissatisfied with regarding your SCM system?
Note : No discernible differences with regards to areas of dissatisfaction were noticeable by make of system usedBase: Those DMs that are dissatisfied with the overall performance of their SCM system
7%
2%
4%
4%
11%
13%
17%
43%
Other
Reliability of system
Time required to implement
Lacking visibility
Flexability of the system
Complexity of the system / Difficult to use
Lack of integration
Lack of functionality
Page 17 HI Europe
29%
51%
Not integrated
INTEGRATED tosome extent
Satisfaction with overall performance of SCM system amongst those integrated / not integrated
Base: All DMs
DMs that are satisfied with the overall performance of their SCM system(ie. gave a score of at least 7 out of 10) :
SCM systems integrated?
Page 18 HI Europe
If solutions are notintegrated to some
degree, then VERY UNLIKELY to be SATISFIED
7.06.2 5.9
0 to 2 3 to 5 > 5
7.47.0 6.9
0 to 2 3 to 5 > 5
6.26.6
5.1
0 to 2 3 to 5 > 5
Supply PlanningDelivery
Note : The base size for production management by solution age was too small to analyse.Base: Those respondents for whom each areas is relevant
Age of solution (years)
Satisfaction with effectiveness of current SCM s/w solutions -by SCM area : by solution age
Page 19 HI Europe
Q. “Bearing in mind the supply chain systems of your key competitors, how effective are your current SCM s/w solutions in helping your business perform in the areas of supply / delivery / production / planning management… “
Mean satisfaction scores out of 10
Age of solution (years) Age of solution (years)
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4. Key supply chain drivers
62%
31%
28%
15%
13%
10%
10%
8%
4%
3%
3%
2%
3%
Cost reduction
Vendor performance
Customer service levels
Inventory reduction
Improved order delivery times
Improved cycle times
Business development
Transparancy/better SCM management
Lead time management
Forecasts
Financial management
Time to market
Others
Most important business drivers facing organisations in the area of SCM
Base: All DMs
Q. What are the two most important business drivers currently facing your organisation in the area of SCM?
Page 21 HI Europe
Attitudes to key supply chain related users
Base: All DMs
Strongly AGREE Slightly AGREESTATEMENT
95%
Page 22 HI Europe
82%
79%
71%
67%
61%
54%
58%
51%
44%
47%24%
15%
30%
31%
29%
34%
47%
51%
82%
23%
29%
33%
29%
24%
30%
38%
37%
32%
31%
13%
18%
29%
Our LEGACY SYSTEMS PREVENT US FROM MAKING CHANGES to certain SCareas
SC solutions currently on market are LACKING IN FUNCTIONALITY
Would PAY A PREMIUM TO ENSURE THE FUTURE-PROOFING of any new SCs/w solutions
There is a LACK OF UNDERSTANDING OF SC S/W SOLUTIONS within ourorganisation
INVESTING IN MORE SOPHISTICATED PLANNING FUNCTIONALITY is keyaspect of future strategy
Managing all aspects of SC through SINGLE S/W SOLUTION is a key priorityfor future investment
The COMPETITIVE ADVANTAGES gained by implementing SC s/w solutionsJUSTIFY THE INVESTMENT
DO NOT UTILISE existing SC solutions to MAXIMUM ABILITY
IMPLEMENTATION TIME is one of top considerations when deciding to investin a new system
Solutions need to be LESS COMPLEX & MORE ‘OUT-OF-THE-BOX
Implementing SC s/w solutions must deliver an ROI CASE
Is integration or planning most important to DMs’ businesses?
Base: All DMs
Q. Which of the following would you say is most important to your business…?
50% 48%67%
33% 37%
20%
17% 15% 13%
All External solutionusers
In-house users
Further integration
More sophisticated
planning
Neither
Page 23 HI Europe
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5. Supplier awareness and selection
Page 25 HI Europe
Brand awareness - ‘top of mind’ / unprompted
Q. When you think of Supply Chain software solutions, which one software vendor first springs to mind?….and which other software vendors are you aware of?
Note 1: Top 5 vendors only shownNote 2 : Vendors are ranked by ‘cumulative mentions’ (ie. first mention plus other mentions) Base: All DMs
24%
9%
17%
21%
34%
4%
34%
7%
1% 14%
0% 10% 20% 30% 40% 50% 60%
BAAN
Manugistics
JD Edwards
Oracle
SAP
55%
58%
16%
15%
21%Vendor that ‘first springs’ to DMs mind
‘Other’ vendors that DM was aware of
21%
47%
54%
9%
9%JD Edwards
i2
Manugistics
Oracle
SAP
Suppliers most likely to be chosen for new SCM s/w solutions
Q. Hypothetically, if you had to use an external supplier to source and implement a range of new SCM software solutions, which TWO suppliers would you most likely consider using?
Note: Top 5 vendors only shownBase: All DMsPage 26 HI Europe
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6. Communications media
Page 28 HI Europe
Communications media which DMs regard as being valuable in keeping them informed
White papers (54%)
Regular newsletters (62%)
Leve
l of
val
ue
Events (80%)
Internet seminars (48%)
Regular telephone contact
(30%)
Visits by a customer rep.
(44%)
Note : % figures show % of DMs that would find communications media to be of value.Base: All DMs
Q. There are a number of communications media which SCM software vendors use to keep existing and potential clients informed. Which of the following would you find to be of particular value in keeping you up-to-date?
Events
Regular newsletters
Regular telephone contact
White papers
Visits by customer rep
Internet seminars
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7. Summary of key research findings
Summary points (1)
Current installation levels : Around ¾ have a solution in place in each of four SCM areas
– But most are ‘old’ (4 years on average)
Future investment plans : on average, a half of all organisations are looking to invest in a solution in each area
– mainly upgraders / replacements, rather than first time buyers
– functionality is key driver to buying plans
upgraders / replacers typically have older solutions
Integration is important
– approx ¾ are integrated to some extent
– most of those not integrated are planning to do so
– consider further integration to be more important than improving planning capabilities
Page 30 HI Europe
Satisfaction levels : High degree of dissatisfaction (54%) with systems currently in place
– Integration is very important to satisfaction
– New SCM solutions do improve effectiveness
Functionality is the key area of dissatisfaction
Summary points (2)
Key SCM solution suppliers : Oracle and SAP are key SCM solution suppliers by a large margin
Page 31 HI Europe