Beyond the horizon: What’s next for SCM software?

From the September-October 2024 edition of Supply Chain Management Review.

September-October 2024

Back in late 2023, in response to global panic about the state of the supply chain, President Joe Biden announced the formation of the White House Council on Supply Chain Resilience. “We’re doubling down on our…

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As the linchpin that binds together fulfillment, warehousing and DC operations, supply chain management (SCM) software helps companies operate more efficiently, control their physical inventory, and manage transportation with precision.

Enterprise resource planning (ERP) systems automate functions like finance and human resources; warehouse management systems (WMS) optimize fulfillment operations; while transportation management systems (TMS) oversee the planning, execution, and optimization of carrier selection and route planning. 

Beyond these “big three” SCM applications lies a host of other solutions that manage everything from demand planning and inventory control to procurement and supply chain planning, just to name a few. Some are integrated directly into larger software suites, while others operate as standalone systems, but they all focus on one core mission: orchestrating a seamless flow of goods across the supply chain.

Thanks to all of the attention being paid to supply chains these days, the advent of artificial intelligence (AI) and a steady push to digitalize their operations, companies are investing in and implementing more SCM software right now. The cloud has made the transition easier—both for new users of SCM and for those that want to replace their aging legacy systems with new, modernized options.

Responding to this demand, software vendors are infusing more AI and machine learning into their applications; adding new functionalities and capabilities to their solutions; and finding innovative ways to improve the user experience (UX).

The latter has become a key focus in an era where warehouse and DC labor is notoriously hard to find and even more difficult to retain. By prioritizing UX, businesses can create more positive work environments, enhance overall business performance, and reduce employee turnover.

Heading in new directions

From a functional perspective, Amarendra Phadke, CTO, North American consumer products and retail engineering practice at Capgemini, says that SCM continues to evolve right along with the supply chains that the software supports.

“Over the last few years there has been a proliferation of AI in the SCM space, along with the integration of the Internet of Things (IoT) and real-time track-and-trace capabilities,” says Phadke. “The ultimate goal is to be able to provide end-to-end visibility via a control tower setup, and that’s the direction we’ve seen SCM heading in.”

Phadke expects that momentum to continue over the next few years as SCM developers tweak and hone their solutions to meet their shippers’ needs. For example, we will begin to see more native integration of machine learning—when computers learn from data without being explicitly programmed to do so—into most SCM applications.

Phadke adds that more AI and generative AI are also in the cards, as vendors find ways to integrate both into their applications—versus “bolting on” those advanced technologies to existing software.

“Over the last few years there has been a proliferation of AI in the SCM space, along with the integration of the Internet of Things (IoT) and real-time track-and-trace capabilities. The ultimate goal is to be able to provide end-to-end visibility via a control tower setup, and that’s the direction we’ve seen SCM heading in.”

Blockchain is another area that could make a comeback in the supply chain within the next few years. And while “Blockchain 1.0” may not necessarily have lived up to the hype around it, the core technology still holds promise for the supply chain as a whole and the applications that support it.

By creating a shared, immutable record for supply chain activities, blockchain streamlines real-time tracking, saves companies money and improves collaboration across partners. “There have been past attempts to integrate blockchain,” says Phadke, “but as the technology becomes more mainstream, we may see more companies using it to certify that their end-to-end supply chains are protected.”

Orchestrating the supply chain

In this period of rapid technological investment, companies can’t afford to stagnate on the digitalization front. Specific to SCM, Balaji Abbabatulla, VP and analyst at Gartner, says that many companies have committed to spending on the SCM software they need to modernize their operations. Others are taking the “incremental modernization” approach, which centers on making smaller, more targeted investments over time—all in the name of modernizing their supply chain operations.

Abbabatulla expects to see more of the same for the 2023-2028 forecast period, during which time companies will use committed spend to support the clear roadmaps that they’ve laid out, and that are focused on spending on certain capabilities.

As long as the budgets are approved and the right vendors identified, he says, the supply chain modernization momentum will continue over the next four years. Companies are also allocating discretionary spend to the cause and investing in “net new” capabilities for their supply chain software stacks.

For example, Abbabatulla says companies will invest in SCM applications that help them “shift from the traditional view of supply chain convergence and over to orchestration”—a pivot that requires software capabilities that the company may not currently have. “Convergence is about providing a consistent way of doing things across end-to-end supply chain,” he explains. “But even if a company has a consistent way of doing things across the supply chain, it still needs to improve efficiency.”

Expect to see more supply chain orchestration platforms rising up to meet these requirements over the next few years. According to Capgemini, these platforms help reorganize supply chain roles, processes and technologies. They also break down silos between disciplines, remove friction and establish an operational and financial flow from planning through to delivery.

“Convergence is about providing a consistent way of doing things across end-to-end supply chain. But even if a company has a consistent way of doing things across the supply chain, it still needs to improve efficiency.”

Abbabatulla says supply chain orchestration takes automation to the next level by making processes even more efficient, effective and streamlined. For example, a current yard management system (YMS) may not be designed to fulfill certain decisions. Because of this, those decisions can’t integrate into existing execution workflows.

When orchestration is layered into existing automation pathways, however, it gives companies access to real-time insights into inventory levels, supports data-driven decision-making, reduces inventory holding costs and prevents stockouts.

Minimizing the pendulum swings

As nearly all companies learned during the global pandemic, the pendulum can swing pretty quickly in the supply chain. In some cases, companies were left scrambling to fulfill orders for products whose demand spiked for the first time ever (think face masks and hand sanitizer, for example).

Kira Bilecky, senior supply chain consultant at St. Onge Company, says as SCM software incorporates more AI, machine learning and other advanced technologies, it may help keep the pendulum swinging at a more predictable rhythm.

Bilecky tells companies to keep a close eye on the “scope creep” that can surface on SCM projects that incorporate advanced technologies like AI and machine learning. The sector of the market is still in its early stages, which means that an off-the-shelf WMS, TMS or other system that incorporates AI and GenAI may add some unanticipated costs to the project.

“A lot of software vendors are offering AI and using it as a buzzword to attract customers,” Bilecky cautions. “The key is to find a solution that works for your company without the need for too much over-customization. Right now, we’re seeing some scope creep and added costs that buyers don’t always anticipate or expect upfront.” She adds that this isn’t a new problem for software buyers, but is something that companies should keep an eye on as they modernize their tech stacks with new SCM applications.

“Companies should think beyond ‘we’re getting these three modules to handle these three things for X dollars,’” says Bilecky, “and look at it more from the perspective of building out adaptive, responsive tools that provide real-time information and high levels of supply chain visibility. If you don’t do this, from an investment perspective you may wind up blowing your budget pretty quickly.”

Taking a holistic approach

As a former global logistics manager herself, Bilecky also tells shippers to take a thoughtful, holistic approach to SCM and the emerging technologies that are being threaded into these systems.

In this role, she would sometimes assess new solutions from the standpoint of how her team members would use the tools for specific functions. Those visions didn’t always translate to the warehouse or factory, where the tools would be used for functions that Bilecky didn’t consider upfront.

“I had one vision that was very different than what the solution actually would and could do,” Bilecky says. “Managers can avoid this issue by being open-minded when they talk to solution providers. Just know that when you ask for X, you may wind up getting X+Y+Z.”

Looking ahead, the analysts and experts we interviewed for this article all expect to see more innovation on the part of SCM software vendors and more requests for additional functionalities from the shippers that rely on these applications to run their global supply chains.

To shippers that are investing in SCM in the next 12 months to 24 months, Phadke says the best starting point is to conduct thorough internal assessment of current processes, challenge areas, and future needs. “When evaluating software options, be sure to factor in the vendors’ AI and machine learning integration roadmaps,” he adds, “knowing that these types of technologies may radically change how you operate your business going forward.”

Bridget McCrea is a contributing editor for Supply Chain Management Review

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