Web/E-business /

Despite economy, online supply chains thrive

By Ellen Messmer
Network World, 04/09/01

Manufacturers and retailers are continuing to roll out online supply chains, despite an economic downturn that may or may not have hit bottom.

To be sure, it all sounded bad last week. The leading supply-chain software vendor, i2 Technologies, said it would lay off about 600 workers, or about 10% of its workforce, as it missed its earnings mark. Ariba called off its acquisition of Agile and said it plans to lay off one-third of its workforce because of weak revenue.

Though Siebel Systems - one of the most important supply-chain vendors - saw revenue rise 121% last year, company CEO Thomas Siebel last week grimly predicted a global recession is under way that will wipe out business-to-business exchanges and software vendors.

"When we emerge from this thing in 24 or 36 months, the world will be a saner place," Siebel said at a Forrester Research conference in Phoenix last week.

Saner or not, some analysts don't see a doomsday scenario for supply-chain software vendors, but only slower growth for a market that more than doubled in the last two years according to two research firms IDC and AMR Research.

"For i2 Technologies, it's a matter of having hired people in anticipation of growth that wasn't as strong as expected. But this is not a company in big trouble," said Bob Kraus, vice president of quantitative research at consultancy AMR Research.

Many companies, however, are still bullish on Web-based supply-chain management for purchasing, planning and fulfillment.

Manufacturing giant Ingersoll-Rand last week cut a deal with SupplyWorks, the Bedford, Mass., provider of Web-based supply-chain software, to host the SupplyWorks Max application online as part of Ingersoll-Rand's push to be a provider of outsourced supply-chain services to other companies. SupplyWorks competes directly with i2.

Under a new business unit called The 21st Supplier, Ingersoll-Rand will manage inventory and transportation logistics on behalf of companies and their suppliers, which would be expected to upload data from their back-end manufacturing planning systems to the SupplyWorks-hosted application.

"Large companies tend to focus on their top suppliers when it comes to collaboration, and they often don't have time for the second and third tier," said the Ingersoll-Rand's business unit leader, Bill Lindquist, adding that is where Ingersoll-Rand is prepared to fill the gap with the SupplyWorks-hosted application.

Helps to stay on top of many details

Large corporations that have gained experience in using supply-chain management software say it helps managers stay on top of the multitude of detail that surrounds shipping a variety of products to resellers or end users. Many companies deploy more than one vendor's products, depending on the application.

For instance, Motorola has deployed i2 Technologies software for planning and scheduling but uses ClearCross for tracking international trade logistics and Siebel for sales-force automation.

Three years ago Motorola chose Oracle as the preferred enterprise resource planning (ERP) vendor. Motorola uses the Oracle 10.7 financial and human resources applications, but is still undecided on the Oracle 11i supply-chain suite.

"It's new, so we're taking our time to evaluate it," says John Liang, Motorola's general manager of supply-chain services.

Motorola has deployed Yantra's Web-based supply-chain software PureEcommerce DCS for use in its Atlanta distribution center, and in China and Brazil, for tracking inventory, packing and shipping, and barcode compliance.

The Yantra application can receive business data from the Oracle ERP system and the i2 Technologies demand-planning system that Motorola uses. Motorola hasn't provided Web access to its customers for online tracking but may do so.

"Motorola is a very decentralized company, but we decided to standardize on ERP and supply-chain applications to present a single face to our supplier," Liang says.