supply chain research - oracle

www.hieurope.com© HI Europe, 2002. All rights reserved.

Supply Chain Research

5th December 2002

Stephen Timms, Associate DirectorHI Europe

HI Europe

Project background and objectives

Oracle approached HI Europe in June 2002 looking to gain a better understanding of the supply chain management (SCM) market and its customers’ needs

– 90 decision makers (DMs) were interviewed across large UK corporations

– mixture of users of in-house developed systems and externally sourced systems

Areas we will cover today :

– current and future usage of the different SCM software solution types

– satisfaction levels and problem areas

– key drivers relating to SCM (eg. top priorities, attitudes)

– awareness levels of SCM software solutions vendors amongst DMsas well as which suppliers are most likely to be selected

– communications media of most value to decision makers


1. Methodology and background

HI Europe

Sample breakdown: Primary industry sector of business unit / company

Base: All DMs

2%

4%

14%

34%

3%

1%

3%

3%

9%

12%

6%

9%

Pharmaceuticals

Primary Process / Chemicals

Telecommunications

Aerospace / Defence

High Tech

Manufacturing / Engineering

Other services

Utilities

Hospitality

Financial services

Retail / Wholesale

Transport & Distribution

Primary Process 15%

Hi-Tec / Aero20%

Mfg / Eng - 34%

Services31%

HI Europe

Relevance of four SCM areas to sample organisations

94%

91%

56%

86%

SUPPLYManagement

DELIVERYManagement

PRODUCTIONManagement

PLANNINGManagement

Q. Which of the following supply chain areas are relevant to your business…?

Base: All DMs


2. SCM solutions installed in major UK organisations


2.1 Current and future use of SCM software solutions

HI Europe

Current use of SCM solutions: by SCM area

77%

79%

78%

76%

74%

12%

13%

7%

16%

12%

11%

8%

15%

8%

14%

Supply

Delivery

Production

Planning

Base: All for whom specified business area is relevant to their company

Q. For each business area that is relevant to your company, can you please tell me whether you have an SCM solution already installed, or if you are currently in the process of installing a new solution?

AVERAGE

ALREADY HAVEa solution installed

NO SOLUTION IN PLACE

CURRENTLY INSTALLINGa solution

Average age of current solution: by SCM area

Base: All who currently have specified solution

HI Europe

2 or less yrs 3 – 5 yrs >5 yrs

40%

47%

36%

38%

39%

34%

28%

32%

38%

37%

26%

25%

32%

24%

24%

Supply

Delivery

Production

Planning

4.1

4.6

4.0

3.9

Average age (years):

3.7

AVERAGE

IN-HOUSE = 6.2 years old ; EXTERNAL = 3.9 years old

HI Europe

Future use of SCM solutions: overall (average across 4 SCM areas)

* ie. Current non-solution users planning to install a new solutionBase: All for whom specified business area is relevant to their company

Existing users :Plan to

upgrade / replace43%

NO PLANS 47%

New users*

10%

HI Europe

Increase>20%12%

Decision makers’ forecast for future increases/decreases in SCM s/w investment

Q. By approximately what % do you envisage your company’s annual investment for SCM software increasing or decreasing in the next financial year?

Base: All DMs

Increase11 - 20%

20%

Increase1 - 10%

21%

Increase 53%

Decrease 1-10% : 3%

Decrease 11-20% : 2%

Decrease >20% : 11%

At SAME level31%

Decrease 16%

31%39%

75%71%

Supp Del Prod Plan

79% 76% 75% 77%

Supp Del Prod Plan

Future use of SCM solutions: by age of solution

46%

18%23% 24%

Supp Del Prod Plan

Base: Those that have a solution already in place in each respective SCM area

Average % of current solution users planning to upgrade / replace their solution within the next two years :

2 years or less 3 to 5 years >5 years

HI Europe

Age of

solution

Age and associated functionality are the key drivers for buying plans


2.2 Integration of SCM solutions

HI Europe

Integration levels / plans - by SCM area

Base: All for whom specified business area is relevant to their company

Q. Which of your software solutions are integrated to some extent with one another, and which you are planning to integrate in the next 2 years?

74%

78%

75%

66%

18%

18%

19%

26%

8%

4%

8%

6%

Planning

Production

Delivery

Supply

CURRENTLY INTEGRATEDto some extent

PLAN TO INTEGRATE

Not integrated and NO PLANS


3. Satisfaction levels and problem areas

14%

19%

20%

44%

2%

4 or less

5

6

7 or 8

9 or 10

Satisfaction with overall performance of SCM system

Base: All DMs Note : Figures add to 99% due to rounding

Q. How satisfied are you with the overall performance of your SCM system? (on a scale of 1 to 10, where 10 = “extremely satisfied” and 1 = “extremely dissatisfied”)

Satisfaction score out of 10

HI Europe

Satisfied 46%

Dis-satisfied 54%

Very dissatisfied

Areas in which DMs are most dissatisfied with regard to their SCM system

Q. What is the one key thing that you are most dissatisfied with regarding your SCM system?

Note : No discernible differences with regards to areas of dissatisfaction were noticeable by make of system usedBase: Those DMs that are dissatisfied with the overall performance of their SCM system

7%

2%

4%

4%

11%

13%

17%

43%

Other

Reliability of system

Time required to implement

Lacking visibility

Flexability of the system

Complexity of the system / Difficult to use

Lack of integration

Lack of functionality

HI Europe

29%

51%

Not integrated

INTEGRATED tosome extent

Satisfaction with overall performance of SCM system amongst those integrated / not integrated

Base: All DMs

DMs that are satisfied with the overall performance of their SCM system(ie. gave a score of at least 7 out of 10) :

SCM systems integrated?

HI Europe

If solutions are notintegrated to some

degree, then VERY UNLIKELY to be SATISFIED

7.06.2 5.9

0 to 2 3 to 5 > 5

7.47.0 6.9

0 to 2 3 to 5 > 5

6.26.6

5.1

0 to 2 3 to 5 > 5

Supply PlanningDelivery

Note : The base size for production management by solution age was too small to analyse.Base: Those respondents for whom each areas is relevant

Age of solution (years)

Satisfaction with effectiveness of current SCM s/w solutions -by SCM area : by solution age

HI Europe

Q. “Bearing in mind the supply chain systems of your key competitors, how effective are your current SCM s/w solutions in helping your business perform in the areas of supply / delivery / production / planning management… “

Mean satisfaction scores out of 10

Age of solution (years) Age of solution (years)


4. Key supply chain drivers

62%

31%

28%

15%

13%

10%

10%

8%

4%

3%

3%

2%

3%

Cost reduction

Vendor performance

Customer service levels

Inventory reduction

Improved order delivery times

Improved cycle times

Business development

Transparancy/better SCM management

Lead time management

Forecasts

Financial management

Time to market

Others

Most important business drivers facing organisations in the area of SCM

Base: All DMs

Q. What are the two most important business drivers currently facing your organisation in the area of SCM?

HI Europe

Attitudes to key supply chain related users

Base: All DMs

Strongly AGREE Slightly AGREESTATEMENT

95%

HI Europe

82%

79%

71%

67%

61%

54%

58%

51%

44%

47%24%

15%

30%

31%

29%

34%

47%

51%

82%

23%

29%

33%

29%

24%

30%

38%

37%

32%

31%

13%

18%

29%

Our LEGACY SYSTEMS PREVENT US FROM MAKING CHANGES to certain SCareas

SC solutions currently on market are LACKING IN FUNCTIONALITY

Would PAY A PREMIUM TO ENSURE THE FUTURE-PROOFING of any new SCs/w solutions

There is a LACK OF UNDERSTANDING OF SC S/W SOLUTIONS within ourorganisation

INVESTING IN MORE SOPHISTICATED PLANNING FUNCTIONALITY is keyaspect of future strategy

Managing all aspects of SC through SINGLE S/W SOLUTION is a key priorityfor future investment

The COMPETITIVE ADVANTAGES gained by implementing SC s/w solutionsJUSTIFY THE INVESTMENT

DO NOT UTILISE existing SC solutions to MAXIMUM ABILITY

IMPLEMENTATION TIME is one of top considerations when deciding to investin a new system

Solutions need to be LESS COMPLEX & MORE ‘OUT-OF-THE-BOX

Implementing SC s/w solutions must deliver an ROI CASE

Is integration or planning most important to DMs’ businesses?

Base: All DMs

Q. Which of the following would you say is most important to your business…?

50% 48%67%

33% 37%

20%

17% 15% 13%

All External solutionusers

In-house users

Further integration

More sophisticated

planning

Neither

HI Europe


5. Supplier awareness and selection

HI Europe

Brand awareness - ‘top of mind’ / unprompted

Q. When you think of Supply Chain software solutions, which one software vendor first springs to mind?….and which other software vendors are you aware of?

Note 1: Top 5 vendors only shownNote 2 : Vendors are ranked by ‘cumulative mentions’ (ie. first mention plus other mentions) Base: All DMs

24%

9%

17%

21%

34%

4%

34%

7%

1% 14%

0% 10% 20% 30% 40% 50% 60%

BAAN

Manugistics

JD Edwards

Oracle

SAP

55%

58%

16%

15%

21%Vendor that ‘first springs’ to DMs mind

‘Other’ vendors that DM was aware of

21%

47%

54%

9%

9%JD Edwards

i2

Manugistics

Oracle

SAP

Suppliers most likely to be chosen for new SCM s/w solutions

Q. Hypothetically, if you had to use an external supplier to source and implement a range of new SCM software solutions, which TWO suppliers would you most likely consider using?

Note: Top 5 vendors only shownBase: All DMs HI Europe


6. Communications media

HI Europe

Communications media which DMs regard as being valuable in keeping them informed

White papers (54%)

Regular newsletters (62%)

Leve

l of

val

ue

Events (80%)

Internet seminars (48%)

Regular telephone contact

(30%)

Visits by a customer rep.

(44%)

Note : % figures show % of DMs that would find communications media to be of value.Base: All DMs

Q. There are a number of communications media which SCM software vendors use to keep existing and potential clients informed. Which of the following would you find to be of particular value in keeping you up-to-date?

Events

Regular newsletters

Regular telephone contact

White papers

Visits by customer rep

Internet seminars


7. Summary of key research findings

Summary points (1)

Current installation levels : Around ¾ have a solution in place in each of four SCM areas

– But most are ‘old’ (4 years on average)

Future investment plans : on average, a half of all organisations are looking to invest in a solution in each area

– mainly upgraders / replacements, rather than first time buyers

– functionality is key driver to buying plans

upgraders / replacers typically have older solutions

Integration is important

– approx ¾ are integrated to some extent

– most of those not integrated are planning to do so

– consider further integration to be more important than improving planning capabilities

HI Europe

Satisfaction levels : High degree of dissatisfaction (54%) with systems currently in place

– Integration is very important to satisfaction

– New SCM solutions do improve effectiveness

Functionality is the key area of dissatisfaction

Summary points (2)

Key SCM solution suppliers : Oracle and SAP are key SCM solution suppliers by a large margin

HI Europe

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