Matching Indian SMEs with Right SCM Software Solutions

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

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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 Smallindustryindia.com) 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.

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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

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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

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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 (ITjungle.com 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.

AMRresearch.com (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
(CBRonline.com 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 (Hindustantimes.com
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

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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 (Knowledgestorm.com 2007). About 88% of
companies have indicated that their current technology solutions are unable to fulfill their
requirements for profit-based supply/demand balancing (Knowledgestorm.com 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
(Knowledgestorm.com 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.

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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
(Expresscomputeronline.com 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 (NCSU.edu
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.

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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
(Expresscomputeronline.com 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(APO-tokyo.org 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
(Expresscomputeronline.com 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.

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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”
(Expresscomputeronline.com 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.”
(Expresscomputeronline.com 2007).

On the other hand, MNC packages start from a higher price in the range of Rs 20 lakh
and above.

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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 (Expresscomputeronline.com 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.” (Expresscomputeronline.com 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
(Expresscomputeronline.com 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:

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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(Rediff.com 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(Rediff.com 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

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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

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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

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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.

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.

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.

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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

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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 (Expresscomputeronline.com 2007).

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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” (Expresscomputeronline.com 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


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.

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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)
http://www.icmr.icfai.org/casestudies/catalogue/Operations/SCM%20and%20ERP
%20Software-Nike-Operations%20Management%20Case%20Study.htm

Reliance Logistics - iBidPro by Baan

Reliance Infocomm
7hills business solutions

TI Cycles
I2

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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
http://www.panoramasoftware.com/news/news/archives/2004/july_21_2004.html

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: www.ibilttechnologies.com

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

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http://www.wrenchsolutions.com/media_plm.htm

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: www.indussoftware.com

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

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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.

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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

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• 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.


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.


BMIBE 24 IIMB-PGSEM


• 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.


• 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


• 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

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).


• 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.

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Appendix 5:
Source: Datamonitor, "Manufacturing - Streamling production (Review Report)"

Appendix 6:

BMIBE 27 IIMB-PGSEM


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

utdallas.edu/~metin
7

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References:

ITjungle.com: Information website www.itjungle.com/tug/tug100506-story09.html
(Accessed Feb, 2007)

AMRresearch.com: Research website http://www.amrresearch.com/Content/View.asp?
pmillid=19728

CBRonline.com Information website
http://www.cbronline.com/article_researchwire.asp?guid=CDCFFF6C-682D-48F0-
AFE4-2B5A379CDFCE

Hindustantimes.com Newspaper Website
www.hindustantimes.com/news/181_1931138,0002.htm (Accessed Feb, 2007)

Knowledgestorm.com
http://supplychain.knowledgestorm.com/shared/write/collateral/ANL/13320_03108_9125
0_!QVM6MA02JVQHTechnologyStrategiesBenchmark_July2006_Logo.pdf?
ksi=1430856&ksc=1271567639

http://www.7hillsbiz.com/pdf/7HBS_CB.pdf

Expresscomputeronline.com
www.expresscomputeronline.com/20020708/indtrend1.shtml

NCSU.edu www.scm.ncsu.edu/public/lessons/less060406.html

APO-tokyo.org www.apo-tokyo.org/projreps/projrep0005.htm

Rediff.com News website www.rediff.com/money/2004/dec/01spec2.htm

Smallindustryindia.com SME Website
www.smallindustryindia.com/smeshowcase/smeshow.htm

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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:
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Mahadevan B. (2003). Making Sense of Emerging Market Structures in B2B E-
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http://www.mckinseyquarterly.com/category_editor.aspx?L2=2

http://www.knowledgestorm.com/search/keyword/Indian%20Supply
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Models for Supply Chains in E-Business
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Kenan-Flagler Business School, University of North Carolina, Chapel Hill, North
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http://www.sap.com/solutions/business-suite/scm/index.epx

http://www.oracle.com/applications/supply-chain-management.html

http://www.wipro.com/manufacturing/focus_areas/demand_mgmt.htm

http://www.accenture.com/Global/Services/Accenture_Technology_Labs/R_and_I/Gamb
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http://www.ieor.berkeley.edu/~shen/handbook/Chapter1.pdf
http://scm.technologyevaluation.com/?
se=google_scm&gclid=CO6k45WfwYoCFRt0TAoduDO6fQ

http://www.i2.com/solution_library/c_collaboration.cfm

http://www.mckinseyquarterly.com/article_page.aspx?ar=1272&L2=13&L3=13

http://www.nextlevelpurchasing.com/articles/what-is-supply-chain-management.html?
gclid=CPPBl-zPwooCFRspTAod8mEGgQ

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