SCM software E-market intermediary


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This is a thought leadership paper on the need to create intermediary for SCM software to bring big and small buyers and sellers together so as to reduce search cost and information assymmetry.

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SCM software E-market intermediary

  1. 1. Group 11 SCM software Intermediary BMIBE Supply Chain Management Software E-market intermediary Prof B. Mahadevan By 2005044: Priyadevi J 2005128: Kaushik Rana 2005129: Kirthi S. 2005142: Uma Manoj Copyright © 2007 by Indian Institute of Management Bangalore & Kaushik Rana BMIBE 1 IIMB-PGSEM
  2. 2. Group 11 SCM software Intermediary Executive Summary With globalization and intense competition, companies are no more competing against one another, but rather supply chains are competing against supply chains. The rapid penetration of new digital economy and internet has required companies to automate their supply chain management process enabling flow of information, product and funds to reach the customer as and when they demand at click-speed. The opening up of the Indian economy dictates Indian companies leverage information technology (use SCM software) to improve efficiency and reduce cost so as to compete with global conglomerates. So, while the big companies in India have taken the lead, the small and medium enterprises (which total about 3.57 million and providing industry value addition of 39% in India as per have been slow to adopt the new technology. Various reasons are attributed to that like lack of awareness, high cost, lack of computer literacy and inability to choose the right SCM software vendor for their operations. On the other hand, large number of suppliers of SCM/ERP software and fragmented buyers has resulted in information asymmetry. This necessitates the need for an intermediary and match maker who can bring the suppliers and buyers together and meet their needs. Further, an electronic market is required to bridge the geographical gap. This paper discusses the need for a neutral electronic market place that would be consortia of buyers and sellers of SCM software in India which in turn would reduce search and information cost, improve efficiency and provide more options. However, there are significant challenges because of the poor IT infrastructure in India, highly specialized SCM functionalities in industry verticals and complex product classification. The Indian buyers are price sensitive and often face a dilemma between customized software which may be costly and take longer to implement versus packaged solutions which may require change in business process for the buyer. Hence, this necessitates human intervention and the venture proposes to have specialized consultants who would assess the needs of buyers and recommend the necessary software. The venture proposes to target the SMEs in the automotive, consumer industries and retail sector which are all high growth sectors in India. The e-market place can add significant value add through virtual communities, reducing transaction cost and exploiting information asymmetry leading to savings for its clients. Revenue would be generated by getting a percentage of the saving from its clients. Other revenue streams can be through membership of online seller community and advertisement. In the long run the business can be sustained through providing support services and information about SMEs and generating more traffic on the e-market place. BMIBE 2 IIMB-PGSEM
  3. 3. Group 11 SCM software Intermediary Contents BMIBE.................................................................................................................................1 Executive Summary.........................................................................................................2 Contents...........................................................................................................................3 Introduction......................................................................................................................4 The Sellers of SCM Software..........................................................................................4 Buyers of SCM software..................................................................................................7 Challenges to SCM software Intermediary....................................................................10 Why electronic market required?...................................................................................12 Business Model..............................................................................................................13 How do we sustain the venture?....................................................................................16 Economic analysis.........................................................................................................17 Conclusion.....................................................................................................................18 Appendix 1.....................................................................................................................19 Appendix 2.....................................................................................................................20 Appendix 3.....................................................................................................................22 Appendix 4.....................................................................................................................23 Functional Components.................................................................................................24 Workflow Management and performance measurement platform................................26 Appendix 5:....................................................................................................................27 Appendix 6:....................................................................................................................27 Appendix 7:....................................................................................................................28 ........................................................................................................................................28 References:.....................................................................................................................29 BMIBE 3 IIMB-PGSEM
  4. 4. Group 11 SCM software Intermediary Introduction Electronic commerce and the Internet are fundamentally changing the nature of supply chains, and redefining how consumers learn about, select, purchase, and use products and services. The result has been the emergence of new business-to-business supply chains that are consumer-focused rather than product-focused. So, Indian companies are quickly adopting SCM technologies to reduce transaction charges, improve market efficiencies and improve flexibility and responsiveness through collaboration and integration. However, there is huge fragmentation in the Indian market resulting in buyers not able to properly decide the right software that needs their budget and needs. Hence a neutral e- market consortium is proposed which will act as match-maker between buyers and sellers. The paper first details the characteristics of sellers and buyers of SCM software. Then the business model of the new venture is proposed with details of value addition, revenue stream, challenges, sustainability and economic justification. However, this does not detail the operational aspects, financial projections and risks involved. The Sellers of SCM Software The following table gives the major SCM software vendors in the world today: As we may note from above table, the top SCM software vendor is SAP, which accounts for 12 percent of the SCM software market. Oracle comes next with 10% of the market share. Manhattan Associates is ranked fourth in AMR's 2005 list, accounting for 4 BMIBE 4 IIMB-PGSEM
  5. 5. Group 11 SCM software Intermediary percent of the market and growing sales by 15 percent. The top five SCM vendors only account for 34 percent of the market, or about $1.9 billion in sales ( 2007). There are hundreds of SCM software vendors catering to different needs of the market and accounting for rest of the market share. This clearly shows the level of fragmentation that exists in this industry. This also indicates the complexity involved in standardizing the SCM software due to the varying requirements across companies even of the same industry. (2007) says that “companies are running leaner supply networks, employing more mass customization in their products, and coping with more variability in the demand for their products, which is compelling companies to either deploy SCM software for the first time, or deploy more rich configurations of it if they already have been using it.” Sellers of SCM suite help to enhance the enterprise's ability to plan, respond and deliver using real time, collaborative business processes. The market for supply chain management (SCM) solutions within the manufacturing industry is growing strongly in numerous countries around the world. The worldwide market for SCM software is expected to grow at a compound annual growth rate (CAGR) of 8%, from $1.5 billion in 2003 to $2.6 billion by 2010 as manufacturers continue to invest in the technology ( 2007). A FICCI survey revealed that India's manufacturing sector has clocked a growth of 13 per cent during Apr-Dec period of 2006-07 ( 2007) and this represents a considerable opportunity for selling SCM software in India alone. Appendix 2 gives a list of major SCM software sellers in India and their respective clients. According to Capterra, an enterprise software center on the internet, there are over 115 suppliers of various components of the supply chain across the world. In addition there are multiple suppliers in the local languages. For eg:- there are 21 software sellers in German language alone. Given the amount of fragmentation in this industry, and given the fact that software is an experience good, it is necessary to have an intermediary to do the necessary homework on the various software pieces. Supply Chains are becoming increasingly complex, global and interdependent – leaner supply networks, increased customer expectations, more mass customization, and increased demand variability are all affecting the current SCM software market. As there are number of different SCM functions/modules which again vary across industries and countries, there is no one software or vendors that can cater to it. Hence, we observe a series of acquisitions by the major players in the SCM software market. The software makers can be differentiated on various counts. The parameters that we can use to classify can be as follows: 1. Supply Chain functionalities like inventory management, logistics management, Materials management, procuring management 2. Support solutions BMIBE 5 IIMB-PGSEM
  6. 6. Group 11 SCM software Intermediary 3. Industry wise specialization. For eg: there are 52 software sellers for the manufacturing industry alone 4. Technology used for development 5. Optimizing business processes 6. Cost of the software depending on the size of the company Challenges faced by SCM software sellers Inspite of the extensive amount of customizations and configurations done by the industries, about 84% of companies state they have inadequacies with their current supply chain planning technology ( 2007). About 88% of companies have indicated that their current technology solutions are unable to fulfill their requirements for profit-based supply/demand balancing ( 2007). Over 68% of the companies surveyed indicated that supply demand balancing based on sales and operations was simply not possible with the current technologies in place ( 2007) Now software that is used by the various companies has to comply with this. SCM software also have to capture legal and regulatory concerns. Hence it needs to be customized and configured for the company’s nationality. The sellers might not be completely familiar with all the legal clauses. The use of an intermediary who will understand the same during configuration can be very helpful as a partner. Addressing demand management issues that is specific to the business. Some applications support fixed pricing strategies only. Some lack insight into price sensitivity and supply chain capacity. These factors need to be kept in mind by the sellers. Here again the intermediary can help the sellers with a thorough study of the buyer’s business and come up with the best recommendations. The demand management system should be tightly integrated with management systems for benefit programs for channel partners. This would help to ensure that just-in-time manufacturing is performed for the right products, in the right quantity, at the right time. The intermediary can analyze the software buyer’s channel partners and help in deciding the right combination of modules and also perform the installation, configuration and customization of the software. This is an activity that the sellers might not be in a position to deal with. In order to be successful and have the competitive edge, companies of today’s web-speed global economy need to tightly integrate all the participating organizations across the supply chain. Hence they need to decide on whether they want to have an internet based technology or a standalone server hosted internal application. Intermediaries can make the best recommendation. There are new business models that are evolving. SCM software sellers might not understand the business model of the buyer. He might prefer mass customization, click and mortar model etc. The intermediary can analyze them and recommend appropriately. BMIBE 6 IIMB-PGSEM
  7. 7. Group 11 SCM software Intermediary Buyers of SCM software To identify the target customers for our proposal, we need to identify the existing markets of the SCM software vendors. A part or the complete set of existing market will form our target market. The SCM/ERP market could be classified into 2 segments based on the company size. 1. Big corporate that can afford sophisticated software packages (Revenues more than 5 Crores) 2. Small & Medium enterprises (Revenues less than 5 Crores) Big Enterprises Market The big organizations have high awareness about the benefits of SCM software and have adapted to the SCM automation very early in the game. The awareness level at the big enterprise level is 88% and the established players of SCM software vendors are already saying that the enterprise level i.e. the top 500 companies, already have ERP ( 2007). The ERP market at the big enterprise level has saturated and growth has slowed down. However, the current challenges to big enterprises market are as follows ( 2007) • Lack of standardization of supply chain practices across multiple sites. • Complexity of the existing site-specific, highly customized legacy software environment The current trend for Indian companies is to grow by acquisition but lack of standardization information systems makes it difficult for organizations to evaluate business performance. Again, site-specific customization has led to high level of maintenance cost of its existing legacy system. But replacing such systems with a single fleet solution is a challenge. It is again difficult to coordinate decision making with multiple sites having different systems which a uniform integrated ERP/SCM package across the organization will help share resources and help in corporate level planning and control. Hence, a need for radical change in their existing software, growth can fuel growth in the sale of SCM software in the big enterprises market. BMIBE 7 IIMB-PGSEM
  8. 8. Group 11 SCM software Intermediary But, a virtual SCM/ERP software exchange can help drive the much needed requirement among software suppliers and buyers to bring about uniformity and standardization across big and small enterprises and across business units and functions. Small & Medium Enterprises Market In India having more than 20,000 small and mid-size manufacturing companies, the number of ERP/SCM packages sold in the last 5 years has been just 1000 ( 2007). While this represents considerable opportunity for SCM vendors there are several issues that need to be understood to be able to tap the market. Problems/Challenges of SMEs( 2007): 1. Awareness of good SCM practices among SMEs is still low: A recent survey conducted by IDC states that the awareness of the ERP concept among SMEs is only 31 percent compared to 88 percent in large organizations ( 2007). This represents an opportunity to have virtual community to build awareness of good SCM practices such as maintaining ecological balance with the external environment, green productivity matters and product lifecycle management to bring dramatic changes in the work or business process with positive results in efficiency, cost reduction, and better quality services. 2. SMEs are slow to implement SCM: In this age of one marketplace concept, intense competition, dynamic business environment, proliferation of innovation and new disruptive technologies, organizations must implement SCM. SMEs have been slow to do so as they lack the requisite ingredients in finance, facilities, and skilled faculty to effectively harness SCM for greater productivity and customer satisfaction. A virtual community can help understand their problems and overcome inhibitions. Failure to act quickly and link productively to the SCM ring will impede the productivity levels of the SMEs as globalization and competition will continue to haunt organizations and business systems nationally and regionally. 3. Management of supply chain among SMEs is limited and localized: SMEs being small and highly fragmented are at a natural disadvantage when dealing with the overall management of the supply chain(s) that concerns them. Unlike the MNCs, which have greater geographical reach and richness of resources, SMEs generally do not a good view of the whole supply chain outside of their immediate operations and contact. As such, these SMEs can only manage the supply chain within their close proximity. So, here again a virtual market place with no geographical restriction can help SMEs broaden the horizon and implement technology to leverage on the new opportunities in India. BMIBE 8 IIMB-PGSEM
  9. 9. Group 11 SCM software Intermediary 4. Information sharing is lacking among and between SME vendors and customers: Best SCM software and practice dictates the necessity to share and coordinate information regionally, nationally, functionally and industry-wise across India. Unfortunately, SMEs plagued by survival and competitive fears put themselves in a quagmire when it comes to unrestricted sharing of data and information. Hence, there is information asymmetry among SME buyers on the kind of SCM/ERP software and vendors available. Further, SMEs being fragmented among themselves within the same industry, simply cannot lend themselves to a good information infrastructure. Hence, an online community can help them share information and reduce information asymmetry. 5. SMEs still employ a low level of IT usage for SCM: The run of the mill technologies currently employed by MNCs to extract value from the supply chain are considered to be either too expensive or too sophisticated for the SMEs' present level of business operations. So, good software from MNCs like SAP/Oracle may be unaffordable and thus unable to invest in maintenance and upgrading cost of the system. In India which is highly labour intensive and having lower educated employees, SMEs are weak in technology acceptance and adoption. So, an electronic market place can bring together Indian SCM sellers and buyers along with MNCs to serve sophisticated and unsophisticated as well as large and small enterprises. So, the above analysis clearly identifies the problems facing the SME sector and a clear gap which can be addressed by a SCM software intermediary. Akhtar Pasha of IDC says “If you are an ERP vendor, the small and medium enterprises (SME) market is the place to be. Most ERP vendors, MNC and Indian, are wooing the small and medium enterprise segment with a variety of options. Most vendors agree that growth in the enterprise market has slowed down because of saturation at the enterprise level” ( 2007). A SCM intermediary can be an enabler for faster growth of SCM software adoption among SMEs making them competitive in the global market. Since it is clear that the growth is going to be in the SME segment, we will analyze if there could be any hurdles to the growth by answering the following two questions: 1. Can the SMEs afford? The investment required to implement ERP will largely depend upon the size of the SME. Mr Agarwal of ESS, “If SMEs are defined as organizations with a turnover of less that Rs 50 crore, then budgets would range between Rs 5 to Rs 8 lakh for the software, and Rs 3 to 4 lakh for hardware, software and training. SMEs start becoming concerned the moment the phase 1 budget crosses Rs 10-12 lakh for the application and its rollout.” ( 2007). On the other hand, MNC packages start from a higher price in the range of Rs 20 lakh and above. BMIBE 9 IIMB-PGSEM
  10. 10. Group 11 SCM software Intermediary An SCM software intermediary can significantly reduce the search costs of the prospective SMEs willing to automate their SCM process. Again, it can reduce transaction cost of the SCM software vendors. 2. Do they want customize software or complete package? It would be difficult to generalize the modular needs of SMEs, since it is a broad segment with diverse verticals. Primarily, the need of module would depend on the organizational focus of the SME. An SME with manufacturing focus would prefer the production module to the HR module. However, in general it can be stated that finance, HR, production, procurement and order management are some of the modules that any SME would go for ( 2007). The SME segment prefers packaged solutions that can be tuned to fit their business, as business requirements change more frequently in this segment as compared to large enterprises. Nagpal of Navision says, “SME customers are demanding that ERP solutions should match with their own business, which means that they want customised ERP solutions. But what they don’t understand is packaged ERP solutions are designed from best practices and therefore if they go for customisation, the whole idea of implementing an ERP solution gets defeated.” ( 2007) Another interesting point is that though SMEs are small in size, in terms of turnover they almost have the same business functionalities as that of large companies ( 2007). When companies have multiple offices, factories in various locations they need to connect and integrate all the internal departments within the company to avoid islands of information being formed. Thus while a complete package may be the need, the cost could offset them. Another aspect is the time to implement the software package. A package software may take about a month for an SME while a customized one can take about 6 months. Hence, a software intermediary which understands the problems of the SMEs could help them make the right decision in choosing the right software within their budget and in time to meet their operational goals. There are however, some challenges that the intermediary needs to overcome to be effective themselves. Challenges to SCM software Intermediary 1). IT infrastructure: BMIBE 10 IIMB-PGSEM
  11. 11. Group 11 SCM software Intermediary Most of the SMEs in India are located in India’s 2nd and 3rd tier cities where the IT infrastructure, internet connectivity is still not fully developed. Many of them are yet to invest in computer hardware and are not well trained to take advantage of software and automation. MNC companies in Infrastructure management services like IBM, HP, Sun, Cisco have been trying to tap into the huge potential of $10.25 billion SME market (as on 2005) and growing at the rate of 20-25 per cent( 2007). An AMI study of SMEs shows that only three per cent of them in India have a local area network at their offices or factories, just 15 per cent have a internet connection, four per cent have broadband and a mere one per cent have their own website( 2007). And unlike the big players, they are extremely sensitive to price, demand quick implementation, want continuous support as they don't have IT departments and often are not located in metropolitan cities. The size of their transactions too is much smaller. So in order to implement or take advantage of the SCM software intermediary, they need to first invest in reliable IT infrastructure and network/internet capabilities. These secondary costs could impede growth of the new venture. 2). Industry vertical: If we consider the gamut of industries, each would require efficient supply chain management software for their various operations. There is some specialized ERP/SCM software for each industry and if required to customize, it will involve detailed understanding of the domain and business processes so as to provide the right package for the solution needed. This is a significant challenge. The following are some of the identified industries  Aerospace and defense  Automotive  Chemicals  Computers/office equipment  Consumer durables  Consumer Non-durables  Electrical and electronics equipments  Engineering & Construction  Food & Beverage  Retail  Petroleum & Energy utilities  Telecommunication Appendix 1 gives a list of major companies in India and the SCM software they use for their various functions. As we may note, there is specialization of functions required based on the industry. However, as a start, we have decided to target the SMEs in three high growth sectors in India now – Automotive, Consumer durables/non-durables/Retail. A brief overview of BMIBE 11 IIMB-PGSEM
  12. 12. Group 11 SCM software Intermediary these sectors as detailed in Appendix 3. However, primary research requires to be done to determine the feasibility, preparedness and profitability in these sectors. 3).Classification of SCM software: Available supply chain management software suites are very complex and cater to different functionalities/industries/countries. Hence, the complexity of product description requires specialized professional services who understand the SCM software and domain well to be able to match the buyers and sellers requirements. However, as a start we have classified the SCM suite based on product platforms aimed at supporting and integrating the most critical business processes for companies. The following set of software platforms are available to cater to different parts of any Suppy chain: • Demand management & Forecasting • Planning & Optimization • Plant & operations Management • Product Design and Innovation • Supplier Relationship Management All the above should be made configurable across different verticals based on the buyer’s requirement and this can be achieved by means of good workflow management and performance measurement system across the gamut of SCM software. Using the above main platforms, one can classify the software in the SCM space to help companies build a more agile and demand-driven network that brings the following advantages: • improved customer service level in terms of delivery reliability and time-to-market • Increased efficiency and lower costs while optimizing the use of corporate assets • Better collaboration with subcontractors and suppliers of the supply chain • Shorter decision making times and the guarantee of a complete visibility over processes. More details about the SCM software platforms are given in Appendix 4. Why electronic market required? Driven by e-commerce’s capabilities to empower clients, many companies are moving from the traditional "push" business model, where manufacturers, suppliers, distributors and marketers have most of the power, to a customer-driven "pull" model. This new business model is less product-centric and more directly focused on the individual consumer. As a result of this we have many players in the market to support different BMIBE 12 IIMB-PGSEM
  13. 13. Group 11 SCM software Intermediary activities of supply chain and catering to different domains in the market. From the traditional model of just providing a website, it has been evolving to current trend of adding more value add in supply chain by providing huge suite of applications for • Planning • Operational for different stake holders in the entire supply chain. Appendix 7 gives an overview of the fragmentation in the SCM market space. Along with this, we have many players catering to same functionality in different domains say textile industry, airline industry etc. From the above analysis we can see that the market for SCM software is highly fragmented. There are a large number of buyers and sellers. The asset specificity can be considered low or medium. This justifies the need for a Neutral E-Market mechanism(Mahadevan 2003, 90). However, the complexity of product description is moderate to complex while value assessment is easy to medium. Hence, a Catalogue and Online community would effectively serve the needs of both buyers and sellers(Mahadevan 2003, 97). Business Model The framework provided by Mahadevan (2000, 55-69) is used to describe the business model of this venture. Value stream Our model proposes to perform the following roles to add value to both enterprises & SCM software vendors 1. Match Makers 2. Signaling Agents 3. Consultants Match makers We will spin off as match makers, bringing the various SCM software vendors and the enterprises together. SCM vendors will see value in the extended reach to the huge market of enterprises we would be bringing. Enterprises will also be able to see the list of all available SCM products that would suit their needs. Benefit to Enterprises Benefit to SCM Vendors Reduction in Search costs Market Reach to huge potential clients Time Reduction in selection process An efficient avenue to position oneself BMIBE 13 IIMB-PGSEM
  14. 14. Group 11 SCM software Intermediary Signaling Agents We would also provide signals about the various vendors to the enterprises. The signaling would not only involve the quality of the vendors, but it would also help the enterprises choose the right software that would suit their business. Our enabled process will help enterprises to better understand the various software & their features and help them evaluate if the software would suit their business needs or not. The SCM vendors will also benefit from our signaling process. With better signaling available in the market, the vendors with better propositioning will benefit. Benefit to Enterprises Benefit to SCM Vendors Signals reduce anxiety of choosing from Regulated market, reduced chaos in the thousands of software. competitive market Boosted confidence about the choice they Better rated vendors will enjoy better make advantage Consultants This will be next step to being signaling agents. Apart from rating the vendors, we will also provide consultancy services to help enterprises make better choices. We will study their business models and work with them to choose the best software and the vendor for their business. Benefit to Enterprises Benefit to SCM Vendors Unique consultancy services, from a Better positioning for certain vendors company which knows in and out of the SCM software packages & vendors Logistic Stream Infomediation Genuine references to information of latest SCM best practices, processes, software in a particular industry is hard to obtain. This would be necessary for Indian SMEs to survive in the globalize market place. The electronic market can suitably help both parties. Metamediation As detailed later in Economic analysis, there is huge search cost, high information cost, high SCM software comparison cost and hence the venture can provide additional value by using the SCOR framework to classify the buyer and supplier software offering as described below. BMIBE 14 IIMB-PGSEM
  15. 15. Group 11 SCM software Intermediary SCOR framework (Source: Bolstorff and Rosenbaum 2003) Company Supplier’s SourceMakeDeliver Customer’s Supplier Customer Supplier Return Customer An enterprise can be a supplier or a supplier’s supplier to another SME or big enterprise. Again the buyer may require SCM/ERP for improving its own internal functions. Or the enterprise could be distributors or retailers reaching the customer. So, the various functionality requirements are as described below: Supplier & Supplier’s Supplier: This includes functionalities like  Purchasing planning  Third party logistics  Collaborative planning and replenishment  Vendor managed inventory Company: Here the SCM functionalities include  Forecasting, demand management and capacity planning  Order, Inventory management – configure to order, available to promise, order tracking  Manufacturing planning & scheduling  Materials planning  Sales & Operations planning Customer & Customer’s Customer: This includes functionalities like  Advanced Planning and scheduling  Customer Relationship management  Warehouse management  Transportation and distribution management BMIBE 15 IIMB-PGSEM
  16. 16. Group 11 SCM software Intermediary Appendix 6 shows the buyer needs that need to be met to make a supply chain more effective. This framework would help the neutral market place to catalogue the software under various categories like functionality, cost, technology, industry. By being able to effectively map and match the buyer’s needs, the intermediary would reduce transaction cost and provide significant value to its clients. Revenue Stream Exploiting Information asymmetry: One of the prime drivers of revenue generation can be linked to the amount of savings accrued to the buyer as his knowledge of the SCM processes and software availability is limited. However, there is again money saved of sellers who can reduce their marketing functions because of the neutral market mechanism. Revenue from Online Seller Community: The venture would provide free membership to buyers to get access to host of information and air their needs. However, the sellers can be charged a membership fee and variable transaction fee linked to the amount of business performed through the neutral e-market. Advertising: The sellers can advertise their software product on the catalogue which could help generate huge revenue based on the number of clicks. Revenue from consulting: Typically, SMEs need the human touch to convince him on long term support, realistic budgets, revenue benefit. Again, owing to the complexity of the assignment, match making difficulties, specialized consultants will be employed to understand the buyer needs and provide recommendations. How do we sustain the venture? The key operational business drivers for manufacturing companies will be to increase operational efficiencies, increase labor and capital productivity, reduced fixed and variable costs, and integration with tier-1 suppliers, sub-contractors and distributors. Industry pundits believe that WTO will put pressure on SMEs to become more efficient, competitive and increase customer response, especially companies who are in the import and export business ( 2007). BMIBE 16 IIMB-PGSEM
  17. 17. Group 11 SCM software Intermediary S P S Grover, GM, e-business, Oracle India says, “The pressure from large OEM players to streamline their supply chains will force SMEs to streamline their operations, and drive the demand for ERP in the SME sector” ( 2007).This would be a significant driver and with large number of fragmented SMEs all over India, the challenge would be to bring them to the online platform. The portal site can also build a database of people requesting assistance in various industry verticals. This database can then also be sold out in the market. The consultants need to constantly upgrade themselves to the new products and work in close tandem with the software makers. SMEs need lots of hand holding and also expect the vendors to provide onsite support. This proves to be a burden for the vendors, since they will have to provide dedicated personnel for each of their clients. So, in future the neutral market place can move into support for the SCM software from beginning of implementation to the ongoing up gradation and maintenance of the system. There is also sufficient lock in for the company since they would know the implementation setup of the software. This will enable SCM software sellers to focus on key functionality. This is an extremely niche area of consulting which needs to be nurtured carefully. The expertise and the background of the necessary employees behind this would need to be diverse and specialists. The consultants should also have the business acumen to recommend the right set of combinations. The success factor would be in generating sufficient traffic on the website. This could involve lot of online marketing programs including adwords, adsense and online advertisements. Given sufficient traffic and a fairly high conversion ratio, the company can reach a critical mass. Economic analysis However, as electronic consortia of buyers and sellers, the venture could also be considered a Network Intermediary (Andal, Cartwright and Yip 2003). Hence, there can be resistance among suppliers as it could be seen to increase costs and cut at their margins. However, the following economic benefits would ensure buy in from both sides (Spulber 1996, 135-152). Reduction in Search Cost: As mentioned above there is a significant fragmentation of buyers and sellers in this market and the system is getting more complex with emerging players. The SMEs in India located in small cities and distant places in India are hard to identify and reach for SCM software vendors who are primarily located in Tier 1 cities in India. Here, the web model as a network intermediary facilitates the process, making it simpler for buyers and BMIBE 17 IIMB-PGSEM
  18. 18. Group 11 SCM software Intermediary software suppliers to communicate their requirement, thereby decreasing the search cost and making the market place more collaborative and efficient. Improve efficiency: Improve Efficiency by understanding and addressing buyers requirements and providing consulting services for the right choice of SCM software according to their need, budget, a customized solution by partnering with the Software solution providers in the market. Also it can help educate the buyers of the seller market and raise awareness among SMEs about the value addition from SCM software. Reduction in Information cost: Reduce Information costs for buyers by telling them about the products and services of sellers and the basis for their cost, profit margins, and quality. For sellers, letting them know of the financial condition and need of the buyer. Superior match-making provided through experience consultants who understand the buyer and seller characteristics would further reduce information cost. Standardization Benefits: As we observed from our analysis of large enterprises, buyers have difficulty in integrating the various functions of their business units having different software systems. Hence, going forward this catalogue aggregator can in due time act as an exchange driving standardization of functionalities, business processes and technology across industry verticals so that it is easier to maintain, upgrade and integrate the software. High reach and more options to both buyers and sellers: As a network intermediary, we add value to the buyers as well as sellers by providing convenience for broad selection of multiple vendors and also provide huge reach for suppliers. Conclusion This analysis clearly provides an opportunity to be tapped into the SME sector. The neutral market place with a consortia of buyers and sellers and value added services provide by consultants should reduce information search costs and make the SME sector more efficient. Cataloguing the SCM software as per the functionalities described in SCOR framework would help in aligning software for good fit between buyers and sellers. Proper match of buyers and sellers would drive down costs and improve turnaround time. Hence the role of our web model will be crucial to help the Supply chain players in selecting the right software to enhance their business profitability. BMIBE 18 IIMB-PGSEM
  19. 19. Group 11 SCM software Intermediary Appendix 1 Some of the major companies in India and the SCM software they use Asian Paints: I2 Factory Planner, I2 Demand Planner, I2 Supply Chain Planner HLL Wings - To e-integrate its entire distribution network using Wings SCM - exclusive software designed for Distributors & Stockists BPCL SAP Balsara SAP Maruti I2 Software, 7hills business solutions Nike I2 Tradematrix Plan solution (I2 replaced manugistics) - both failed and now it ha implemented SAP Apparel & Footwear solution (AFS) %20Software-Nike-Operations%20Management%20Case%20Study.htm Reliance Logistics - iBidPro by Baan Reliance Infocomm 7hills business solutions TI Cycles I2 BMIBE 19 IIMB-PGSEM
  20. 20. Group 11 SCM software Intermediary Appendix 2 The following gives the client list of major SCM software sellers: Client list of Wings SCM 3M, Acer India, Aircell, Ajanta Clocks, Apollo Hospitals, Arun Ice Creams, Atlas Gears, Cricket Club of India, Daks, Effem India, Eureka Forbes, Gulf Oil, Hindustan Lever, Indian Oil Corporation, Indo Matsushita Carbon, ION Exchange, ITC, Jindal Strips, JTI International, Kevin Care, KMCH Hospitals, MRF, Provogue, SQL Star International, Titan Industries, Voltas, Zee Records Client list of Suprawin Technologies Ltd - partner of panorama software (toronto) Kennametal Widia, Yokogawa Bluestar, Canara Bank, Vijaya Bank, Syndicate Bank, Suprajit Engineering, Grasim Industries; Swan Silk Ltd., Meyer Health, Moog Controls, LG Soft India, Export Credit Guarantee Corporation, Department of Agriculture and Bangalore City Corporation, Member Audit Board Client list of Vishesh Infotech - Allergan pharma, Kalyani Brakes. Other customers are Honda Siel, Anand Corporates, Landmark Group, T-Series and Loctitie Client list of Eastern Software Systems - Bluestar, Maxima Watches, D-Link India, Wadpack India, Bajaj Capital and Westman Furnace Client list of SAP - Bharathia Industries, Bharati Enterprises, Sudarshan Chemicals, Tata Jewels and Balsara Client list of Navision India - Proagro, Deesa, LM Glass and Nonuhay Heims Client list of J D Edwards – Looking for prospective clients Client list of Oracle - Forbes Marshal, Sona Steering, Hatsun Fodds, Visaka Industries and Fine Organics Client list of IBILT Technologies Ltd - Amrit Banaspati Company Limited, Ballarpur Industries ,TAAL Specialization: iBilt specialises in development of software applications based on Microsoft and Sun Technologies. ERP, SCM, DW, BI, DM, KM, FMS are some key focus areas.Website: Client list of Wrench Solutions (PLM)- Vikram Sarabhai Space Centre (ISRO Thiruvanantha-puram), BHEL, L&T, Toyo Denki Power Systems and Sundaram Fastners, Tata Power, Sanmar Engineering and Bajaj Auto BMIBE 20 IIMB-PGSEM
  21. 21. Group 11 SCM software Intermediary Indus Business Systems Ltd. Specialization: Business process consultancy / re-engineering; ERP-CRM, SCM software; turnkey IT solutions; IT outsourcing; collaborative management software; wireless solutions; and instrumentation interfacing software. Website: Client list of Indus Business Systems Ltd. Food Cert India Pvt Ltd. Quality Certification Company Amina Institute of Technology Education Mannan Institute of Science & Technology Education Regency Exports Pvt Ltd Manufacturing Everest Kanto Cylinder Ltd Manufacturing Tata Memorial Centre Healthcare Provider Girnar Food and Beverages Pvt Ltd Beverages Pregna International Ltd Manufacturing Smart Labtech Pvt Ltd Trading Shaktikumar M .Sancheti Ltd Construction Ahuja Continental Limited Manufacturing Nitin Fire Protection Industries Ltd Manufacturing Cadem Technologies Pvt Ltd CAD/CAM,DNC National Institue of Nutrition (ICMR) Medical Research Lupin Limited Manufacturing Nizam's Institute of Medical Sciences Healthcare Provider Bharat Dynamics Limited Defence Production Orbit Technologies Pvt.Ltd. Trading Inteq Software Ltd. Software Development BHEL- GE Gas Turbine Services Heavy Industry American Quality Assessors (India) Private Limited Quality Assessors Suresh Productions Film Production House ADD Gel Pens India Ltd Manufacturing Standardization Testing Quality Certification(Govt) Quality Assessors The Adarsh Bank Ltd Banking NM Medical Centre Healthcare Pokarna Limited (Apparel Division) Manufacturing Mettler Toledo Weighing Systems Tata Projects Ltd Project Consultants Mother Diary Food Processing Birla Copper Manufacturing Godrej Industries Manufacturing Kaira Union (Amul) Food Processing Birla Cellulosic Textile Manufacturing BMIBE 21 IIMB-PGSEM
  22. 22. Group 11 SCM software Intermediary Appendix 3 Automotive: Major automotive players are in various stages of transformation from a localized “buy/make/sell” model to a global “buy/move/make/move/sell anywhere” model. This transition is being undertaken in order to achieve greater scale and cost efficiencies while capitalizing on rapidly expanding markets such as China and India. Hence, OEMs and suppliers must maintain or enhance supply chain flexibility and customer responsiveness. So, while MNC source from India, inbound and outbound transportation needs to be handled effectively. This will require good logistics software for the SMEs.Also, supplier collaboration is the key here. So, software in collaborative planning and management of suppliers will be required. Consumer Industries: Consumer industries companies manufacture goods that affect nearly every part of our daily lives—everything from clothing and shoes to home appliances and cell phones. These products are routed through retail channels to reach the end consumer. Consumer industries consist of several distinct business segments, including consumer packaged goods; consumer electronics and durables; softgoods; and telecommunications service providers. There are similarities in the consumers that purchase these products, and these segments require a similar set of strategies to address them such as product innovation, fashion, and pricing strategies, as well as product and service bundling. The SMEs in various cities are the manufacturers and suppliers of these products. So, here again good SCM software is required to be able reduce total turnaround time and improve responsiveness to changing customer demands. Retail: With the impending opening up of the retail sector and move towards organized retail in India, the SME sector has a big role to play. Organised retail of INR 350 billion constitutes just about 3.4 percent of retail sales but is growing at over 30 percent. Top six cities account for 66 percent of total organized retailing. There is intense competition, demanding customer preferences which necessitate the winner to that enterprise that is able to reach the customer fastest. SME sector has a significant role to play where big conglomerates and multi-nationals will source from. Hence the supply chain software will be required. BMIBE 22 IIMB-PGSEM
  23. 23. Group 11 SCM software Intermediary Appendix 4 Integrated demand management and Forecasting platform This set of software should offer all the tools necessary to achieve a high-quality Demand Planning process, shared by all corporate functions. Functional components • Demand Planning: generates demand plans filtered on products, markets and sales channels and allows sharing them between different company functions. • Demand Forecasting • Sales Budgeting • Promotion Planning: supports promotion management as part of the forecasting process, and evaluates the impact of such initiatives on volumes, turnover and margin objectives. This helps planners optimize the use of resources for promotional initiatives. • Assortment Planning: allows planners to establish the right mix of products to be allocated to the distribution network. Assortments are defined by taking into account sales targets and constraints, such as shelf space and allocation rules. Some of the major players in the market supporting these kind of softwares are: • I2 Solutions – Demand Manager & Demand Fulfillment • My Sap Solutions • Oracle – Demantra Demand driven solutions • Wipro – Demand management solutions Integrated Supply Chain Planning Platform It offers a response to companies that need an integrated planning of production, procurement, distribution, replenishment and inventory. Functional Components • Production Planning • Procurement Planning • Distribution Planning • Replenishment Planning • Inventory Planning & Optimization: Some of the major players in the market supporting these kind of software are: • I2 Solutions – Production Scheduler, Factory planner • My Sap Solutions BMIBE 23 IIMB-PGSEM
  24. 24. Group 11 SCM software Intermediary • Oracle – Oracle's PeopleSoft Enterprise Supply Chain Management (SCM) provides a cohesive yet flexible solution for the synchronized supply chain, driving efficiencies in cost savings over the entire supply chain Plant & Operations Management Platform This set of software help manufacturing companies manage their production departments simply and effectively and supports order management, multi-plant scheduling (including subcontractors), shop-floor control. Functional Components Order Management: supports web product configuration and selection, online order- entry, as well as order dating with ATP logic (Available-to-promise). Operations Planning & Scheduling: supports factory planning and scheduling. Based on customer orders, forecasts and planning policies (such as safety stock levels), it generates purchase and production orders (MRP calculation). MES: Complex manufacturing operations can be tackled through the use of solutions tailored on the needs of each customer. The solutions are based on proprietary libraries or, alternatively, they integrate MES solutions from the market, such as Siemens' SIMATIC IT platform. Some of the major players in the market supporting these kinds of software are: • SAP: less flexible than others but does have linkage to their APO suite • Oracle: pretty flexible and will sit on top of their middleware package (Fusion). Linkage to their SCM products not so strong • Yantra order management system have efficient rules engines, entensibility, well integration capabilities • i2 Technologies: OMS system is built around complex build to order and configure to order environments and they link the "order building" and promising back to the supply chain apps. It sits on something called the Agile Platform Product innovation: Product Data management Software It supports product innovation processes in the fashion, apparel, footwear, leather goods, accessories and textile industries. Functional Components BMIBE 24 IIMB-PGSEM
  25. 25. Group 11 SCM software Intermediary • Model Form: generates and manages technical worksheets, stored in a single and shared database. • Templates: SRM collaborative platform It supports all the actors in the value chain (suppliers, subcontractors, logistics service providers and their customers) in the easy exchange of information and documents, negotiation of supply terms, monitoring performances and synchronization of activities. The solution supports collaborative relationships, either “one to many” or “many to many”, with the aim of realizing public or private marketplaces. Functional Components • Sourcing and Order Management: • Call For Offer: the solution supports buyers and suppliers in negotiating supply relationships (price, delivery dates, terms of delivery). • Order Management: this solution automates the management and approval of both production and purchase orders. It supports order generation, as well as order confirmation, updating and tracking. • Catalogue & Document Management: • Catalogue Data Management: allows suppliers to easily publish their catalogues in a shared electronic environment. The system acts as a translator between suppliers' and customers' master data. Customers can thus see product codes in the way that is most familiar to them. • Electronic Delivery Notes (EDN): this solutions allows to generate and transmit delivery notes and shipment orders through the system. Functions are available for order confirmation and tracking, as well as for the supervision of transportation. • Operations Control & Performance Measurement: • Production Progress Monitoring: enables the monitoring of subcontracted work. Reports about production progress can be easily shared and viewed with the desired level of detail. BMIBE 25 IIMB-PGSEM
  26. 26. Group 11 SCM software Intermediary • Event Management: helps users to intercept irregularities and critical situations before they may cause inefficiencies. The system automatically sends a notification when determined thresholds are crossed. • Key Performance Indicators Management (KPI): the solution allows to attribute performance indicators to the activity of suppliers, subcontractors and logistics service providers and therefore to determine their reliability over time. Some of the major players in the market supporting these kinds of software are: • I2 Solutions – Collaboration suite of software • My Sap Solutions Integrating Supply Chain partners Workflow Management and performance measurement platform It supports companies in analyzing, redesigning and managing business processes, while monitoring their efficiency towards objectives. The solution provides an environment in which processes may be easily designed, described (in terms of activity flows and organization, roles and timing), coordinated, controlled and evaluated through configurable KPIs (Key Performance Indicators). Functional Components • Workflow Manager: through a graphic tool, the solution enables modeling any business process by specifying flows, priorities and user responsibilities. Supervisors control in real time the progress status of the process, quickly reacting to critical situations. • Performance Monitor: associates performance indicators to business processes. The evolution of processes can be monitored and their efficiency measured, allowing for a continuous improvement. BMIBE 26 IIMB-PGSEM
  27. 27. Group 11 SCM software Intermediary Appendix 5: Source: Datamonitor, "Manufacturing - Streamling production (Review Report)" Appendix 6: BMIBE 27 IIMB-PGSEM
  28. 28. Group 11 SCM software Intermediary Appendix 7: Information Technology in a Supply Chain: Analytical Applications Strategic SCM Planning APS Transport & Inventory Dem Plan Planning Supplier Apps Transport execution & CRM/SFA MES WMS Operational Supplier Manufacturer Distributor Retailer Customer 7 BMIBE 28 IIMB-PGSEM
  29. 29. Group 11 SCM software Intermediary References: Information website (Accessed Feb, 2007) Research website pmillid=19728 (Accessed Feb, 2007) Information website AFE4-2B5A379CDFCE (Accessed Feb, 2007) Newspaper Website,0002.htm (Accessed Feb, 2007) 0_!QVM6MA02JVQHTechnologyStrategiesBenchmark_July2006_Logo.pdf? ksi=1430856&ksc=1271567639 (Accessed Feb, 2007) (Accessed Feb, 2007) (Accessed Feb, 2007) (Accessed Feb, 2007) News website (Accessed Feb, 2007) SME Website (Accessed Feb, 2007) BMIBE 29 IIMB-PGSEM
  30. 30. Group 11 SCM software Intermediary Spulber D.(1996). Market Microstructure and Intermediation: Journal of Economic Perspectives-Vol 10, Number 3 Andal A., Cartwright P., Yip G. (2003). The Digital Transformation: Massachusetts Institute of Technology Mahadevan B. (2000). Business Models for Internet-Based E-commerce: An Anatomy: California Management Review- Vol 2, Number 4 Mahadevan B. (2003). Making Sense of Emerging Market Structures in B2B E- commerce: California Management Review- Vol 46, Number 1 %20Chain/Directkw/Indian%20Supply%20Chain Models for Supply Chains in E-Business Jayashankar M. Swaminathan • Sridhar R. Tayur Kenan-Flagler Business School, University of North Carolina, Chapel Hill, North Carolina 27599 roManagement_old.htm se=google_scm&gclid=CO6k45WfwYoCFRt0TAoduDO6fQ gclid=CPPBl-zPwooCFRspTAod8mEGgQ BMIBE 30 IIMB-PGSEM