Supply Chain Planning and Execution 2007 Technology and Vendor Landscape Series Service Parts Planning and Optimization Landscape: Saving Millions Through Inventory Reductions and Increased Service Levels by William McNeill, John Fontanella, and Ken Ruggles Service parts planning and optimization vendors are delivering software that helps customers decrease spare parts inventory while increasing first-time fill rates and service levels. This landscape Report analyzes the leading vendors in this space, highlighting how their software combined with improved processes can lead to a serious return on investment. Market Services Report Acronyms and Initialisms 3PL A&D BOM BPM CRM EAM ERP MRO OEM Third-party logistics Aerospace and defense Bill of materials Business process management Customer relationship management Enterprise asset management Enterprise resource planning Maintenance, repair, and overhaul Original equipment manufacturer PBL ROI SaaS SCM SKU SLA SLM SPP Performance-based logistics Return on investment Software as a service Supply chain management Stock-keeping unit Service-level agreement Service lifecycle management Service parts planning and optimization © Copyright 2007 by AMR Research, Inc. AMR Research is a registered trademark of AMR Research, Inc. No portion of this report may be reproduced in whole or in part without the prior written permission of AMR Research. Any written materials are protected by United States copyright laws and international treaty provisions. AMR Research offers no specific guarantee regarding the accuracy or completeness of the information presented, but the professional staff of AMR Research makes every reasonable effort to present the most reliable information available to it and to meet or exceed any applicable industry standards. AMR Research is not a registered investment advisor, and it is not the intent of this document to recommend specific companies for investment, acquisition, or other financial considerations. This is printed on 100% post-consumer recycled fiber. It is manufactured entirely with wind-generated electricity and in accordance with a Forest Stewardship Council (FSC) pilot program that certifies products made with high percentages of post-consumer reclaimed materials. ® Service Parts Planning and Optimization Landscape: Saving Millions Through Inventory Reductions and Increased Service Levels by William McNeill, John Fontanella, and Ken Ruggles Best cases in service parts planning and optimization (SPP) show that SPP software helps companies decrease spare parts inventory by up to 66%, increase first-time fill rates by up to 26%, and drive service levels up to 98%. The Bottom Line Vendors featured in this Report: Baxter Planning Systems Click Commerce GAINSystems IFS Infor JDA Software Lawson Logility MCA Solutions Oracle SAP Servigistics ToolsGroup Since the last time AMR Research published a landscape of the service parts planning and optimization (SPP) space, we’ve continued to see good results from companies replacing manual, usually Excelbased, processes with SPP software. These results include more accurate demand forecasting for service parts, lower inventory costs, increased service levels, and the ability to manage a greater number of service parts. Executive Summary During the course of this research, we found SPP programs tended to be very tactical in nature, solving specific inventory, fill-rate, or service-level goals in businesses, and companies using them were saving millions of dollars. While the best examples are featured above, the benefits extend to all companies using SPP: • Typical spare parts inventory decrease 30% on average • Typical first-time fill rates increase 7% to 10% on average • Typical service levels increase 90% to 96% on average However, many companies are still leaving additional savings on the table and may be sacrificing longer term competitive positioning. This landscape Report analyzes the leading vendors in this space, highlighting how their software combined with improved processes can achieve the aforementioned ROI. Recommendations for enterprises • Replace manual forecasting and inventory processes with SPP software. • If you already own SPP software, evaluate your current vendor first. The company may have additional functionality or service applications that can be applied to your business to enhance SPP. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 1 • Perform a check-up on the health of your SPP application annually to make sure you’re using all the features to their fullest. • Look for additional areas to roll out SPP, including additional product lines or business units. • Consider using managed planning services to augment your own staff. • Consider offering managed services to your network partners. Recommendations for vendors • Tailor value messages to the intended audience. Some people are only looking for SPP while others want to hear a larger service story. • Look for opportunities to create additional value beyond just inventory reductions. Use SPP to increase visibility and cooperation among supply chain partners. • Factor in service providers and third-party logistics providers (3PLs) to understand how you can complement their supply chain efforts. • Figure out your differentiation strategy. We interviewed 13 software providers and more than 20 companies using SPP applications. This Report defines the SPP market and describes, but does not rank, vendor functionality. Note: This Report does not include vendors that are strictly maintenance, repair, and overhaul (MRO), enterprise asset management (EAM), or supply chain execution without planning and optimization, which are all complementary technologies to SPP. 2 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series The service parts planning and optimization market SPP applications provide software with detailed mathematical computations to assess and optimize service parts in the network. The objective behind them is to provide maximum service levels at the least cost in a multiechelon environment (i.e., a multitiered supply chain) and/or a multi-indentured environment (i.e., ability to plan from a bill of materials with multiple levels). These applications allow users to forecast demand, set inventory levels, and plan replenishment for service parts. SPP is a part of a broader set of applications that make up service lifecycle management (SLM). The segments of SLM break down into four categories: service discovery, service fulfillment, service knowledge, and business management. Service parts planning and optimization constitutes a part of the service fulfillment wedge of the SLM model. Figure 1: Service parts planning and optimization in SLM Service parts planning and optimization Service Discovery Service Ful llment Service Knowledge Bu en t sin ess Manag em Source: AMR Research, 2007 Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 3 Companies in a variety of industries are servicing a greater number of products, with a greater number of part SKUs, for a fraction of their original inventory costs, all the while increasing service levels to their customers. Companies with large service businesses will often link specific areas of the model together—purchase the required software for the call center with field service or field service with reverse logistics, for example—and conceptually, there is value in this approach. That said, implementing SPP alone is also a viable option especially for companies that view excess inventory and high inventory costs as a more tactical problem. For more detail on the SLM model, see “Service Lifecycle Management Landscape of Suite Vendors.” Needs are still about inventory reduction and increased service levels During the course of this research, we found SPP applications tended to be very tactical in nature, solving specific inventory, fill rate, or service-level goals. Oftentimes service is still being viewed as a cost center, and SPP applications are not necessarily viewed as the keys to a greater world of service nirvana. One explanation is that the buyers of SPP software tend to be planning managers or director-level planners who have no jurisdiction over service and repair or other areas of the SLM model. Other reasons include outsourcing, where OEMs have outsourced the service process but retain the planning aspects, or the fact that the company was never in charge of service in the first place—think of an auto OEM and the dealers that actually provide the service. Just because this is the current reality for most doesn’t mean it has to remain so. We found examples of companies bridging planning and service in creative ways to provide value for all parties involved. One exception to this general trend of the tactical mindset was with the few A&D user references we spoke with that are trying to implement performance-based logistics (PBL), which is a type of contract where the supplier is responsible for guaranteeing uptime of an asset (i.e., performance). There are several challenges in this type of environment that make the SPP story much more complicated: • PBL contracts are relatively new, and there is no such thing as a standard PBL contract. No two are alike, so the software functionality demands are still developing. • Practices within an organization implementing PBL are often counter to the goal of providing performance, especially in the early phases of a program, either because program managers aren’t in place for the life of the program or different stages of the program are handled by different contractors. • Turning a product-centric organization into a performance-centric one is difficult 4 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series because performance can mean different things to different people. For all these reasons, implementing SPP in a performance-based environment is just one piece of a very intricate puzzle. For more, see “Old Practices Hinder Performance in A&D” and “Performance-Based Logistics: A DDSN Transformational Event.” The most common goal of companies interviewed overall, even accounting for PBL environments, was to drive out inventory costs from the spare parts business without adversely affecting service levels. Five tactics are most common: • More accurately forecast demand for service parts • Reduce excess spare parts inventory • Reduce obsolete spare parts inventory • Institute or enhance scrapping programs • Increase service levels by either increasing fill rates or increasing product availability and uptime These initiatives work, as the following examples illustrate: • A high-tech manufacturer saved $105M over five years in inventory reductions because of greater visibility into demand and improved inventory optimization calculations as a result of deploying SPP software. The company achieved these results by linking recommended stocking levels directly to service-level agreements (SLAs) and cleaning up its installed base and contract information, which in turn improved the accuracy of demand forecasts. • An automotive company reported that one year after implementation, service levels (measured by fill rate) had increased from 91% to 98%. The SPP software receives demand history and stocking information from the ERP system and then sends back demand forecasts, recommended stocking levels, and recommended replenishment orders back to the ERP system. • An automotive company reported decreasing spare parts inventory by 66% over two years, from $15M to $5M after implementation, while increasing first-time fill rates from 70% to 80%. In the last six years, those fill rates have steadily increased and now hover around 96%, raising total improvement by 26%. Inventory is slightly higher again, but that’s because sales have increased by double digits for several years in a row, and the company is supporting a greater number of products. Every user company interviewed for this Report cited decreased inventory levels or Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 5 increased service levels as one of the primary benefits of implementing SPP software. Most mentioned that they were replacing manual processes, often Excel based. Other benefits from implementing the software came up: • Reduction in forecast errors —One high-tech manufacturer reported 35% improvement in the demand forecast accuracy. Results can be measured by comparing the forecast provided by the SPP software to the actual results, and then comparing this deviation to before implementation. • Easier remediation of forecasting errors and anomalies —One automotive supplier mentioned that by implementing SPP software, it could more easily spot unusual buying patterns from its customers and make adjustments accordingly. • Ability to support a greater number of products and SKUs —One automotive OEM cited that, after implementing SPP software, it supported 50,000 SKUs instead of 32,000 because it had reduced the amount of excess inventory, thus freeing up physical space and dollars. Where’s the market going? The total market size for service parts planning and optimization, including licenses, services, and maintenance, was approximately $120M in 2006. This represents a 7% growth in the market over 2005. We expect similar growth rates for the next two years. Additionally, we feel that industry consolidation is likely to take place because of the following factors: • The small size of the best-of-breed vendors • The tactical nature of the products • The appearance of this functionality as part of both supply chain and ERP suites Supply chain and ERP vendors looking to deepen their service functionality may be interested in acquiring a best-of-breed vendor, which likely has deep domain expertise and more advanced functionality. Deal flow in the SPP market has tended to be lumpy, indicating less frequent but larger deals. Market growth is coming from the combination of modest growth in deal numbers, the expansion of current projects with existing customers, and an increase in average deal size, which for some vendors in this space is averaging more than $1M. Typical buyers of SPP applications are companies with annual revenue of $1B or more, and with a few exceptions, this appears to be trending upwards. Additionally, a large percentage of revenue for SPP vendors still comes from just four 6 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Table 1: SPP software sales by customer revenue Vendor Baxter Planning Systems Click Commerce GAINSystems IFS Infor JDA Software* Lawson Logility MCA Solutions Oracle* SAP* Servigistics ToolsGroup * = AMR Research estimate 5% 10% 10% 20% 20% 15% 5% 75% 60% 20% 20% 36% Less than $30M $30M to $250M $250M to $1B 15% 6% 30% 44% 25% More than $1B 85% 94% 50% 20% 75% 100% 5% 25% 75% 100% 100% 85% 70% Source: AMR Research, 2007 Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 7 industries: A&D, automotive, high-tech, and industrial (see Table 2). These were all early adopters of SPP technologies. Table 2: SPP software sales by customer vertical Vendor Baxter Planning Systems A&D 5% Auto High-Tech 75% Industrial Medical Device 5% Other 15% (life sciences, tools) Click Commerce 22% 9% 53% 3% 3% 10% (utilities, manufacturing, publishing, service providers) 10% (electronics) GAINSystems 40% 10% 40% IFS 25% 5% 15% 32% 3% 20% (utilities, telecom) Infor 30% 30% 30% 10% (transportation) JDA Software* 100% Lawson 10% 50% 40% Logility 29% 10% 22% 7% 32% (utilities) MCA Solutions 50% 15% 30% 5% Oracle* 50% 22% 23% 5% SAP* 50% 50% Servigistics 23% 16% 45% 2% 14% (food and beverage, appliance, shipping, banking) 5% ToolsGroup 20% 50% 5% 20% * = AMR Research estimate Source: AMR Research, 2007 8 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series The service parts planning and optimization providers Vendor dynamics Today, the service parts planning and optimization software market is currently being served by best of breeds, supply chain suite vendors, and ERP vendors, with service providers preparing to jump into the mix. Service parts planning vendors These vendors offer functionality in all core areas of SPP and are driving functional innovation—a reflection of demand from their customer base. These companies— namely, Baxter Planning Systems, Click Commerce, GAINSystems, MCA Solutions, and Servigistics—either were founded as SPP software companies or currently derive a significant portion of their revenue (greater than 25%) from service parts planning and optimization software sales. Vendor approaches to tackle this market even within this group are varied. Two of the best of breeds, Baxter and MCA Solutions, deliver deep, rich SPP functionality without designs on a broader service suite. Other best of breeds are doing the exact opposite. Servigistics and Click Commerce want to build on their SPP knowledge to offer additional functionality and services. Servigistics presents its vision under the banner Strategic Service Management, which currently includes SPP, workforce management, and price management for service parts. Click Commerce offers a broad suite of execution software, which includes complex order management, partner relationship management, warehouse management, returns and repair, and more. The company’s vision is to create an end-to-end e-commerce suite. Companies in need of a quick SPP fix should consider a vendor from this group. Supply chain suite vendors Commitment to service parts planning and optimization within this group varies vendor by vendor. Those that have been successful, in particular Infor, Logility, and ToolsGroup, have successfully adapted their supply chain expertise into service-specific applications. SPP usually is just a small part of a larger SCM story, which often includes transportation management, warehouse management, MRO, EAM, field service, depot repair, warranty management, order management, and contract management. In almost all cases, SPP is not available as a stand-alone application, but instead must be purchased along with core SCM technology. i2 no longer actively promotes SPP products, and JDA Software concentrates on a small number of government contractors, but other Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 9 than these, we expect supply chain suite vendors to continue to develop their SPP functionality or acquire it. ERP vendors Like supply chain vendors, ERP vendors—in this case IFS, Lawson, Oracle, and SAP—have adapted their supply chain and ERP functionality for finished goods to service parts. All present SPP within a greater framework of service management and/or service parts planning and execution. Complementary modules often include the supply chain modules mentioned above plus CRM, performance management, and finance. Customers that wanted SPP functionality from their ERP vendor have often made modifications to existing functionality with some success, although functionality developed specifically with service parts in mind (which they are all doing to some degree) will always offer an edge. We have seen best-of-breed applications co-exist with ERP. MCA Solutions, for example, often provides the optimization functionality in deals with SAP Service and Asset Management. Like supply chain suite vendors, we expect ERP vendors to continue to develop their SPP functionality or acquire it. Service providers Companies such as Accenture, Genpact, IBM Global Services, and T-Systems either have the capability to deliver service parts planning projects or are considering investing in these capabilities. Service providers are interested in aftermarket services in general because it’s a new source of revenue rather than just being a cost-cutting measure. Tired of hacking away at the costs of the back office, service providers are champing at the bit to move toward other parts of the organization. Service providers will be attracted to service parts planning and optimization projects as a gateway to broader supply chain transformation work. While we don’t currently see them in smaller tactical deals, we fully expect to see them more in higher level strategic supply chain work. 10 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Table 3: SPP vendor overview Total Number of SPP Customers 22 50 28 200 30* 7 LicensestoServices Ratio 3:2 2:3 2:1 1:2 1:1 n/a Vendor Baxter Planning Systems Click Commerce GAINSystems IFS Infor JDA Software Founded 1993 1972 1971 1983 2001 1978 Number of Employees 38 475 50 2,600 9,200 1,700 Service Parts Application(s) Prophet Click Parts GAINS IFS Applications Infor SCM Demand Planning JDA Maintenance, Repair & Overhaul (MRO), JDA Demand, powered by Manugistics, JDA Inventory Policy Optimization, powered by Manugistics (IPO) Lawson M3 Enterprise Management Logility Voyager Solutions Service Planning and Optimization (SPO) Oracle E-Business Suite SAP Service and Asset Management Servigistics Parts Management Service Optimizer 99 Lawson Logility MCA Solutions Oracle SAP Servigistics ToolsGroup * = AMR Research estimate 1975 1996 1999 1977 1972 1999 1993 3,800 141 60 77,652 32,000 200 65 342 80 18 20* 10* 73 32 n/a 4:3 3:2 n/a n/a 1:1 n/a Source: AMR Research, 2007 Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 11 Vendors continue to differentiate by business model Over time, software vendors have formed to serve two distinct service parts planning business models: • Distribution-centric businesses —These companies distribute finished service parts or aftermarket parts in relatively large volumes to a high number of stocking locations, including retail locations. Example verticals include automotive, high-tech, and retail home services. The vendors from this Report that target this type of company include Baxter, Click Commerce, GAINSystems, Infor, Logility, MCA Solutions, Oracle, SAP, Servigistics, and ToolsGroup. • Customer-centric businesses —Bound by specific SLAs to particular customers that are often concerned most with asset availability and uptime, these businesses distribute component or subcomponent parts to stocking locations that service installed bases of customers directly. Example verticals include A&D, industrial, and medical devices. The vendors from this Report that target this type of company include Baxter, Click Commerce, GAINSystems, IFS, JDA Software, Lawson, MCA Solutions, Oracle, and Servigistics. 12 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Table 4: Distribution-centric and customer-centric functionality by vendor Distribution Centric Service demand algorithms Multiechelon replinishment Installedbase tracking Customer Centric Vendor Baxter Planning Systems Click Commerce GAINSystems IFS Infor JDA Software Lawson Logility MCA Solutions Oracle SAP Servigistics ToolsGroup Phase in / phase out Predictive failure SLAs Multiindentured * * * = Functionality provided through SAP Endorsed Business Solution from MCA Solutions Advanced capabilities: Advanced functionality demonstrated through product demos, validated through user references, and/ or used by majority of customers. Demonstrated capabilities: Functionality demonstrated and validated through user references but may not be widely deployed. Limited or no expertise Source: AMR Research, 2007 Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 13 Table 5: Functionality that spans both distribution- and customer-centric applications Advanced Multiechelon inventory optimization Decision support (what-if analysis and simulation) Vendor Baxter Planning Systems Click Commerce GAINSystems IFS Infor JDA Software Lawson Logility MCA Solutions Oracle SAP Servigistics ToolsGroup Exception-based workflow Repair Advanced capabilities: Advanced functionality demonstrated through product demos, validated through user references, and/or used by majority of customers. Demonstrated capabilities: Functionality demonstrated and validated through user references but may not be widely deployed. Limited or no expertise Source: AMR Research, 2007 14 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Table 6: SPP functionality definitions Functionality Exception-based workflow Definition Ability to define, prioritize, and resolve an exception condition or alert Inventory optimization Use of available inventory in the most effective and efficient manner possible to achieve target fill rates, service levels, and/or costs Ability to run what-if analysis and simulation to help users make a business decision Visibility to entire repair cycle Decision support Repair Service demand algorithms Formulas to forecast demand for slow-moving or intermittent service parts Phase in / phase out Ability to plan parts for new product introduction and discontinuation of a product Ability to plan replenishments across multiple tiers of stocking locations in the service-parts network based on alternative sourcing policies and replenishment policies, such as order-up-to-level and economic order quantity Ability to track location and usage of assets, and use this information to calculate current and future requirements planning Ability to calculate the frequency of part replacement, and use this information to calculate current and future requirements planning Ability to track contractual agreements with a customer that guarantees a target level of service, and use this information to calculate required inventory investment Ability to plan across a multilevel bill of materials Multiechelon replenishment Installed-base tracking Predicitive failure SLAs Multi-indentured Source: AMR Research, 2007 Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 15 Vendor profiles Baxter Planning Systems Baxter provides on-demand applications for service parts planning, including both hosted software and managed planning services. Baxter is a private, self-funded company that has claimed profitability for the last 14 years. All of the company’s revenue is from service parts planning and optimization products (Prophet by Baxter) and managed planning services. Baxter partners with UPS Supply Chain Solutions (SCS), which generates approximately 50% of the company’s leads. UPS SCS sells the Baxter software directly or sells planning services and uses the Baxter software to deliver those services. The company has 22 customers, including 3Com, Agilent, Alcatel-Lucent, Kodak, Network Appliance, and Verizon. Customers often select Baxter because of the vendor’s domain expertise. One customer mentioned choosing Baxter solely because of the recommendation from UPS SCS. Click Commerce Click Commerce provides end-to-end e-commerce applications from complex order management and channel management through fulfillment and aftermarket services. Click was acquired by Illinois Tool Works (ITW), a $14B diversified manufacturer, in September 2006. While Click Commerce now represents less than 1% of ITW’s overall revenue, we expect the company to be able to operate as a separate company. Click Parts, the application that delivers the core SPP functionality, is a key component in the company’s broader service supply chain suite of products. It generates approximately 25% of the company’s revenue. To enhance its SPP offering, the company positions Click Parts alongside Click Commerce Returns and Repair to deliver forecasting, inventory optimization, replenishment, transshipment, reverse logistics, and repair center management, as well as Network Logistics and WMX (warehouse management) for a more complete supply chain application. Click Commerce has approximately 50 customers for Click Parts, including American Airlines, Aviall, Dell, Jabil Global Services, and the U.S. Air Force. Customers mentioned good functionality and the company’s domain expertise as reasons for buying the software. 16 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series GAINSystems The company has applied its supply chain technology to service parts, including demand planning and forecasting, inventory optimization, replenishment optimization, and supplier collaboration and portals. In the early 1980s, GAINSystems transitioned from providing consulting services enabled by an optimization toolkit to selling a packaged application with supporting services. The company is known as an inventory optimization vendor appropriate for customers whose key SLA is item availability. GAINSystems is a private company that has claimed profitability for 34 of its 35 years. GAINSystems has approximately 25 SPP customers out of a total customer base of about 100. SPP customers include Bell Helicopter Textron, Motorola, METSO Paper, Hawker Beechcraft, and the Australian Defense Forces. IFS IFS, a midmarket ERP company, provides asset management and aftermarket applications that include service parts planning. IFS targets companies managing global service organizations or project-based service environments. This public company is headquartered in Linköping, Sweden. Service parts planning is not marketed as a point application. Instead, the company includes SPP as part of its greater suite of products needed to provide service management. The product categories include customer management, asset management, resource management, supply chain management, and contract management. Some specific examples of modules customers may use in conjunction with service parts management include field service, depot repair, MRO, warranty management, order management, and contracts. IFS has approximately 220 customers using service management applications, and more than 1,000 customers planning for service parts within its EAM and ERP applications, including BAE Systems, Derco Aerospace, Finnair Technical Services, Lockheed Martin, and Williams International. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 17 Infor Infor approaches the service management business from both a planning and execution perspective. A number of its ERP applications, including ERP System 21, ERP LN, and ERP Syteline, have service management functionality, including dispatching, parts management, MRO, and billing. Infor positions service parts planning through functionality developed within its SCM product suite. The company is taking a dual route to market for SPP and supply chain: marketing to its large customer base, but also competing as a best-in-class product for any distribution-centric company, regardless of ERP backbone. Infor’s SCM service parts planning application, built around its Demand Planning application, comprises five pieces: Demand Forecaster, Inventory Planner, Replenishment Planner, Collaborate, and Sales & Operations Reporting. Other modules customers may use in conjunction with SCM Demand Planning to enhance SPP include EAM, inventory visibility and control, event management, performance management, warehouse management, and transportation management. Infor has approximately 30 SPP customers, approximately 1,600 SCM customers, and more than 4,000 service management customers. SPP customers include Baxi Interpart, General Motors, Honeywell, and TRW. JDA Software JDA provides demand and supply chain applications enabling supply management, demand management and pricing, and transportation and logistics applications. The company’s SPP functionality is provided via the acquisition of Manugistics. The modules required for SPP, which are grouped under Supply & Demand Optimization, include JDA Maintenance, Repair & Overhaul (MRO), JDA Demand, powered by Manugistics, and JDA Inventory Policy Optimization, powered by Manugistics (IPO). The company has approximately 1,200 supply chain customers, of which seven are currently using its supply chain functionality for SPP. All of the SPP customers have more than $1B in annual revenue and are in A&D, working on government contracts in complex service environments with highly indentured bills of materials (BOMs). 18 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Lawson Lawson targets companies in manufacturing, distribution, and maintenance, with large services and/or equipment rental businesses that are interested in managing planning, scheduling, procurement, and fulfillment. SPP functionality is provided in Lawson’s M3 Enterprise Management product line. M3 (Make, Move, Maintain) contains Supply Chain Management modules that customers use for SPP. The modules include Demand Planner, Yield Optimizer, Forecasting, Supply Chain Planner, and Multi-Site Planner. For broader service businesses, customers also use procurement, order processing, inventory statistics, transportation management, warehouse management, performance management, EAM, CRM, and business process management (BPM). Lawson provides strong installed-base and asset-tracking functionality and maintenance scheduling. Lawson has approximately 340 customers using its applications for service parts planning and more than 4,000 customers overall. SPP customers include Aggreko, Biacore, Bunzl, Olympus, and Toyota Material Handling (Europe). Logility Logility targets midmarket distribution-centric companies with its Logility Voyager Solutions, which include Demand Planning, Inventory Planning, Supply Planning, Manufacturing Planning, Transportation Planning & Management, WarehousePRO, S&OP, Collaboration and Global Sourcing Management. The first three of these modules are used for SPP. Logility also brings its execution and global sourcing capabilities to bear on service parts management and replenishment, which differentiates the product suite. The company also positions collaboration and S&OP as enhancing SPP more strongly than other vendors. Logility’s wholly owned subsidiary, Demand Management, offers SPP software to the midmarket. Demand Management earns most of its SPP revenue from sales to companies with less than $250M in annual revenue. Logility has more than 80 SPP customers and 1,400 SCM customers. These customers often mention the company’s quick implementations. SPP customers include Remy International, Standard Motor Products, Sony, and Verizon Wireless. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 19 MCA Solutions The company targets customer-centric businesses with complex service parts planning needs. MCA Solutions is a privately held company that is venture backed, having raised its most recent round of financing in 2004. The company has claimed profitability for the last four years. All of the company’s revenue is from service parts planning and optimization products and services, with Service Planning & Optimization (SPO) being the primary product line with modules for strategic planning, tactical planning, and service business design. MCA Solutions has an SAP Endorsed Business Solution— the highest level in SAP’s partner program—with its Service Inventory Optimization (SIO) product. The company is brought into deals by SAP when advanced forecasting and optimization functionality is required to complement SAP Service and Asset Management. The first joint customer is expected to go live in summer 2008, although MCA has multiple customers that have integrated with SAP using their certified R/3 integration. In addition, MCA has a software-as-a-service (SaaS) product that it markets to midmarket companies. The company has 18 customers, including Boeing, U.S. Navy, Lockheed Martin, Rockwell Collins, KLA-Tencor, and Cisco. Customers often selected MCA Solutions because of its advanced optimization functionality and its ability to support PBL. Customers also reported noticeable improvements in the usability of the application. Oracle Oracle provides SPP functionality as part of its supply chain planning suite, Oracle Advanced Planning (Oracle APS). Oracle positions SPP along with supply chain execution and network planning. Customers use the following products for SPP and service management: Depot Repair Spares Management, cMRO, Field Service, and Advanced Planning (all E-Business Suite, Release 12), Service Contracts, isupport, EAM, Advanced Planning (Demantra 7.2), Inventory Optimization, Strategic Network Optimization, Global Order Promising, and Advanced Supply Chain Planning— Release 12.0. Release 12.1 of the E-Business Suite will include a new product, Oracle Service Parts Planning, which will bring together much of the aforementioned functionality specifically for service parts and will be the go-to-market product for SPP. AMR Research estimates that Oracle has approximately 20 customers for service parts planning and optimization. 20 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series SAP SAP’s service parts planning and management capabilities are now embedded in a new suite, SAP Service and Asset Management, which originated from a development partnership with Caterpillar Logistics Services and Ford. The company positions SPP along with supply chain execution functionality for service management, in the areas of warehousing, fulfillment, procurement, and transportation. Previously, much of the functionality required for SPP was provided through SAP’s APO planning applications. For asset-centric companies with advanced service parts inventory optimization needs, the company brings in its partner, MCA Solutions, with its Endorsed Business Solution Service Inventory Optimization (SIO). The first joint customer is expected to go live in summer 2008. Additionally, for the pricing of service parts, SAP offers SAP Price and Margin Management (PMM). AMR Research estimates that SAP has approximately 10 SPP customers, including Caterpillar Logistics Services, Unipart Logistics, and Ford. Implementations began in 2006, and the first customers are expected to go live in 4Q07. Servigistics Servigistics presents SPP as part of a broader SLM story under the banner of Strategic Service Management, which includes SPP, workforce management, and price management for service parts. Currently SPP generates a majority of company revenue. Servigistics is the only best-of-breed SPP vendor to offer a specific module for pricing for service parts. Conceptually the pairing of parts and people makes a lot of sense for companies that are responsible for both parts planning and workforce scheduling. The company recently won a deal with a large consumer products company to manage 2,000 field techs and spare parts. The company will also implement its command center application, which is a dashboard-like application that allows managers to view all current open service incidents on a map. The command center is currently used at other customers, such as Dell. Servigistics has more than 70 SPP customers out of 121 customers overall. In addition to Dell, SPP customers include Juniper, Sun, Subaru NA, General Motors, and RollsRoyce. Customers reported quick implementation times and cited the usability of the application as a factor in their purchasing decision. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 21 ToolsGroup ToolsGroup targets distribution-centric businesses, especially automotive aftermarket parts businesses, that use independent demand to calculate inventory mixes. ToolsGroup is positioned as a best-of-breed bolt-on to ERP, not as a stand-alone system of record. The company has integrated with about 20 different ERP and supply chain applications, including more than 30 integrations with SAP. Service Optimizer 99+ provides the functionality to address SPP, which includes Forecast MicroAllocation (for demand planning and forecasting) and Inventory Optimization. The application is often implemented along with replenishment-focused supply chain or ERP software. The company has 32 SPP customers out of a total customer base of about 130 companies. SPP customers include Delphi, Aston Martin, Ferrari, and Piaggio. 22 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Recommendations For enterprises • Replace manual forecasting and inventory processes with SPP software —Manual planning processes are as time intensive as they are error prone. Nearly all of the users interviewed reported that implementing SPP software decreased forecast error, freed up the time of planners through exception-based workflow, decreased inventory, and increased service levels. It’s hard to argue with ROI like that. • If you already own SPP software, evaluate your current vendor first—Several user references mentioned that they were either not using all of their current product’s functionality or didn’t understand all the functionality available to them. Take advantage of the vendor’s user groups, customer advisory boards, and training or consulting services. A few extra thousand dollars invested can potentially yield millions in savings. A few users admitted that they also didn’t necessarily understand what industry best practices were or their staff did not possess the proper background to run the applications effectively. What are your next steps for your service business? Can your SPP vendor provide additional service modules, such as field service, pricing, MRO, warehouse management, or transportation management? Is that important to your business? You need answers to these inquiries. • Perform a check-up on the health of your SPP application annually to make sure you’re using all the features to their fullest—Make sure your team members are up to speed on any new functionality that has been released. If you’ve had turnover, take the time to train planners on the application. Consider retraining any existing team members. Consider contracting with your vendor for a strategic system assessment for one or two years after the initial implementation to check the configuration and performance of the system. One company we interviewed has monthly meetings of system power users to share best practices and put together a wish list of functionality requests. • Look for additional areas to roll out SPP, including additional product lines or business units—We spoke with one company that was planning and optimizing for all parts in the field that were more than four years old. Now they are going to apply the software to parts less than four years old. One high-tech company was using SPP for their server business, but not its laptop business. Look for other opportunities like this to expand the application. • Consider using managed planning services to augment your own staff—Tap into the experience and knowledge of the vendor. Benefit from their views into other customers and verticals and apply lessons to your own business. Apply best practices, and augment your own staffing knowledge, especially if the people tasked with spare parts planning do not have a background in this area. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 23 • Consider offering managed services to your network partners —On the flip side of the above recommendation, consider buying the software and running it on your network partners’ behalf. We’ve seen this model work very well in the automotive industry, where the OEM will purchase the software and run the optimizations for the dealerships. The OEM gains insight into dealer inventories and sales histories, and the dealership benefits from lower inventories, improved service levels, increased sales, and, in some cases, guaranteed parts. For vendors • Tailor value messages to the intended audience —Our research indicates that when buyers of SPP software are in planning, their concerns are more tactical in nature. They want to make sure they have the right part in the right place at the right time. They want to lower their inventory and reduce back orders. They’re not necessarily in the market for a full-blown service management suite, nor are they ready to, or even have the clout to, champion a strategic services message. Take that message to a higher level executive in charge of services. • Look for opportunities to create value beyond just inventory reductions —While inventory reductions and increased fill rates are certainly goals for which to strive, continue to look for other opportunities to help create strategic differentiation for your customers. Consider offering managed planning services or help your customers provide managed services to their network partners. • Factor in the service providers and 3PLs to understand how you can complement their supply chain efforts—As mentioned earlier, service providers will be attracted to service parts planning and optimization projects as a gateway to broader supply chain transformation work. While we don’t currently see them in smaller tactical deals, we fully expect to see them more in higher level strategic supply chain work. SPP software vendors should consider how they might fit into these projects and begin to form partnerships with the service providers and 3PLs that are taking over service and other supply chain functions from the OEMs. • Figure out your differentiation strategy—Some of the world’s largest software vendors and service providers are actively ramping up development in SPP. If you’re a small best-of-breed vendor, now is the time to figure out how you are going to differentiate yourself. Maybe it will be through managed planning services. Perhaps it will be broadening SPP into a service suite. Maybe you want to position yourself to be acquired by another player in this space. Whatever the case may be, now is the time to figure out how SPP fits into your vision of SLM as this functionality becomes a piece of greater service, supply chain, and ERP offerings. 24 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Notes Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 25 Research and Advice That Matter Founded in 1986, AMR Research provides subscription advisory services and peer networking opportunities to operations and IT executives in the consumer products, life sciences, manufacturing, and retail sectors. We are the No. 1 research firm focused on the intersection of business processes with value chain and enterprise technologies. AMR Research has published more than 15,000 pieces of research. Grounded in industry and business process expertise, our analysts deliver independent, leading-edge research on established and emerging technologies. This analysis is supported by the best research data in the industry, expert-led Peer Forums, and daily interaction with our members, the most comprehensive community of practitioners in the industry. More information is available at www.amrresearch.com. Your comments are welcome. Reprints are available. Send any comments or questions to: AMR Research, Inc. 125 Summer Street Boston, MA 02110 Tel: +1 (617) 542-6600 Fax: +1 (617) 542-5670 This is printed on 100% post-consumer recycled fiber. It is manufactured entirely with wind-generated electricity and in accordance with a Forest Stewardship Council (FSC) pilot program that certifies products made with high percentages of post-consumer reclaimed materials. AMR-R-20939
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AMR Research REPORT 20939-Service Parts Planning and Optimization

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Supply Chain Planning and Execution 2007 Technology and Vendor Landscape Series Service Parts Planning and Optimization Landscape: Saving Millions Through Inventory Reductions and Increased Service Levels by William McNeill, John Fontanella, and Ken Ruggles Service parts planning and optimization vendors are delivering software that helps customers decrease spare parts inventory while increasing first-time fill rates and service levels. This landscape Report analyzes the leading vendors in this space, highlighting how their software combined with improved processes can lead to a serious return on investment. Market Services Report Acronyms and Initialisms 3PL A&D BOM BPM CRM EAM ERP MRO OEM Third-party logistics Aerospace and defense Bill of materials Business process management Customer relationship management Enterprise asset management Enterprise resource planning Maintenance, repair, and overhaul Original equipment manufacturer PBL ROI SaaS SCM SKU SLA SLM SPP Performance-based logistics Return on investment Software as a service Supply chain management Stock-keeping unit Service-level agreement Service lifecycle management Service parts planning and optimization © Copyright 2007 by AMR Research, Inc. AMR Research is a registered trademark of AMR Research, Inc. No portion of this report may be reproduced in whole or in part without the prior written permission of AMR Research. Any written materials are protected by United States copyright laws and international treaty provisions. AMR Research offers no specific guarantee regarding the accuracy or completeness of the information presented, but the professional staff of AMR Research makes every reasonable effort to present the most reliable information available to it and to meet or exceed any applicable industry standards. AMR Research is not a registered investment advisor, and it is not the intent of this document to recommend specific companies for investment, acquisition, or other financial considerations. This is printed on 100% post-consumer recycled fiber. It is manufactured entirely with wind-generated electricity and in accordance with a Forest Stewardship Council (FSC) pilot program that certifies products made with high percentages of post-consumer reclaimed materials. ® Service Parts Planning and Optimization Landscape: Saving Millions Through Inventory Reductions and Increased Service Levels by William McNeill, John Fontanella, and Ken Ruggles Best cases in service parts planning and optimization (SPP) show that SPP software helps companies decrease spare parts inventory by up to 66%, increase first-time fill rates by up to 26%, and drive service levels up to 98%. The Bottom Line Vendors featured in this Report: Baxter Planning Systems Click Commerce GAINSystems IFS Infor JDA Software Lawson Logility MCA Solutions Oracle SAP Servigistics ToolsGroup Since the last time AMR Research published a landscape of the service parts planning and optimization (SPP) space, we’ve continued to see good results from companies replacing manual, usually Excelbased, processes with SPP software. These results include more accurate demand forecasting for service parts, lower inventory costs, increased service levels, and the ability to manage a greater number of service parts. Executive Summary During the course of this research, we found SPP programs tended to be very tactical in nature, solving specific inventory, fill-rate, or service-level goals in businesses, and companies using them were saving millions of dollars. While the best examples are featured above, the benefits extend to all companies using SPP: • Typical spare parts inventory decrease 30% on average • Typical first-time fill rates increase 7% to 10% on average • Typical service levels increase 90% to 96% on average However, many companies are still leaving additional savings on the table and may be sacrificing longer term competitive positioning. This landscape Report analyzes the leading vendors in this space, highlighting how their software combined with improved processes can achieve the aforementioned ROI. Recommendations for enterprises • Replace manual forecasting and inventory processes with SPP software. • If you already own SPP software, evaluate your current vendor first. The company may have additional functionality or service applications that can be applied to your business to enhance SPP. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 1 • Perform a check-up on the health of your SPP application annually to make sure you’re using all the features to their fullest. • Look for additional areas to roll out SPP, including additional product lines or business units. • Consider using managed planning services to augment your own staff. • Consider offering managed services to your network partners. Recommendations for vendors • Tailor value messages to the intended audience. Some people are only looking for SPP while others want to hear a larger service story. • Look for opportunities to create additional value beyond just inventory reductions. Use SPP to increase visibility and cooperation among supply chain partners. • Factor in service providers and third-party logistics providers (3PLs) to understand how you can complement their supply chain efforts. • Figure out your differentiation strategy. We interviewed 13 software providers and more than 20 companies using SPP applications. This Report defines the SPP market and describes, but does not rank, vendor functionality. Note: This Report does not include vendors that are strictly maintenance, repair, and overhaul (MRO), enterprise asset management (EAM), or supply chain execution without planning and optimization, which are all complementary technologies to SPP. 2 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series The service parts planning and optimization market SPP applications provide software with detailed mathematical computations to assess and optimize service parts in the network. The objective behind them is to provide maximum service levels at the least cost in a multiechelon environment (i.e., a multitiered supply chain) and/or a multi-indentured environment (i.e., ability to plan from a bill of materials with multiple levels). These applications allow users to forecast demand, set inventory levels, and plan replenishment for service parts. SPP is a part of a broader set of applications that make up service lifecycle management (SLM). The segments of SLM break down into four categories: service discovery, service fulfillment, service knowledge, and business management. Service parts planning and optimization constitutes a part of the service fulfillment wedge of the SLM model. Figure 1: Service parts planning and optimization in SLM Service parts planning and optimization Service Discovery Service Ful llment Service Knowledge Bu en t sin ess Manag em Source: AMR Research, 2007 Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 3 Companies in a variety of industries are servicing a greater number of products, with a greater number of part SKUs, for a fraction of their original inventory costs, all the while increasing service levels to their customers. Companies with large service businesses will often link specific areas of the model together—purchase the required software for the call center with field service or field service with reverse logistics, for example—and conceptually, there is value in this approach. That said, implementing SPP alone is also a viable option especially for companies that view excess inventory and high inventory costs as a more tactical problem. For more detail on the SLM model, see “Service Lifecycle Management Landscape of Suite Vendors.” Needs are still about inventory reduction and increased service levels During the course of this research, we found SPP applications tended to be very tactical in nature, solving specific inventory, fill rate, or service-level goals. Oftentimes service is still being viewed as a cost center, and SPP applications are not necessarily viewed as the keys to a greater world of service nirvana. One explanation is that the buyers of SPP software tend to be planning managers or director-level planners who have no jurisdiction over service and repair or other areas of the SLM model. Other reasons include outsourcing, where OEMs have outsourced the service process but retain the planning aspects, or the fact that the company was never in charge of service in the first place—think of an auto OEM and the dealers that actually provide the service. Just because this is the current reality for most doesn’t mean it has to remain so. We found examples of companies bridging planning and service in creative ways to provide value for all parties involved. One exception to this general trend of the tactical mindset was with the few A&D user references we spoke with that are trying to implement performance-based logistics (PBL), which is a type of contract where the supplier is responsible for guaranteeing uptime of an asset (i.e., performance). There are several challenges in this type of environment that make the SPP story much more complicated: • PBL contracts are relatively new, and there is no such thing as a standard PBL contract. No two are alike, so the software functionality demands are still developing. • Practices within an organization implementing PBL are often counter to the goal of providing performance, especially in the early phases of a program, either because program managers aren’t in place for the life of the program or different stages of the program are handled by different contractors. • Turning a product-centric organization into a performance-centric one is difficult 4 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series because performance can mean different things to different people. For all these reasons, implementing SPP in a performance-based environment is just one piece of a very intricate puzzle. For more, see “Old Practices Hinder Performance in A&D” and “Performance-Based Logistics: A DDSN Transformational Event.” The most common goal of companies interviewed overall, even accounting for PBL environments, was to drive out inventory costs from the spare parts business without adversely affecting service levels. Five tactics are most common: • More accurately forecast demand for service parts • Reduce excess spare parts inventory • Reduce obsolete spare parts inventory • Institute or enhance scrapping programs • Increase service levels by either increasing fill rates or increasing product availability and uptime These initiatives work, as the following examples illustrate: • A high-tech manufacturer saved $105M over five years in inventory reductions because of greater visibility into demand and improved inventory optimization calculations as a result of deploying SPP software. The company achieved these results by linking recommended stocking levels directly to service-level agreements (SLAs) and cleaning up its installed base and contract information, which in turn improved the accuracy of demand forecasts. • An automotive company reported that one year after implementation, service levels (measured by fill rate) had increased from 91% to 98%. The SPP software receives demand history and stocking information from the ERP system and then sends back demand forecasts, recommended stocking levels, and recommended replenishment orders back to the ERP system. • An automotive company reported decreasing spare parts inventory by 66% over two years, from $15M to $5M after implementation, while increasing first-time fill rates from 70% to 80%. In the last six years, those fill rates have steadily increased and now hover around 96%, raising total improvement by 26%. Inventory is slightly higher again, but that’s because sales have increased by double digits for several years in a row, and the company is supporting a greater number of products. Every user company interviewed for this Report cited decreased inventory levels or Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 5 increased service levels as one of the primary benefits of implementing SPP software. Most mentioned that they were replacing manual processes, often Excel based. Other benefits from implementing the software came up: • Reduction in forecast errors —One high-tech manufacturer reported 35% improvement in the demand forecast accuracy. Results can be measured by comparing the forecast provided by the SPP software to the actual results, and then comparing this deviation to before implementation. • Easier remediation of forecasting errors and anomalies —One automotive supplier mentioned that by implementing SPP software, it could more easily spot unusual buying patterns from its customers and make adjustments accordingly. • Ability to support a greater number of products and SKUs —One automotive OEM cited that, after implementing SPP software, it supported 50,000 SKUs instead of 32,000 because it had reduced the amount of excess inventory, thus freeing up physical space and dollars. Where’s the market going? The total market size for service parts planning and optimization, including licenses, services, and maintenance, was approximately $120M in 2006. This represents a 7% growth in the market over 2005. We expect similar growth rates for the next two years. Additionally, we feel that industry consolidation is likely to take place because of the following factors: • The small size of the best-of-breed vendors • The tactical nature of the products • The appearance of this functionality as part of both supply chain and ERP suites Supply chain and ERP vendors looking to deepen their service functionality may be interested in acquiring a best-of-breed vendor, which likely has deep domain expertise and more advanced functionality. Deal flow in the SPP market has tended to be lumpy, indicating less frequent but larger deals. Market growth is coming from the combination of modest growth in deal numbers, the expansion of current projects with existing customers, and an increase in average deal size, which for some vendors in this space is averaging more than $1M. Typical buyers of SPP applications are companies with annual revenue of $1B or more, and with a few exceptions, this appears to be trending upwards. Additionally, a large percentage of revenue for SPP vendors still comes from just four 6 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Table 1: SPP software sales by customer revenue Vendor Baxter Planning Systems Click Commerce GAINSystems IFS Infor JDA Software* Lawson Logility MCA Solutions Oracle* SAP* Servigistics ToolsGroup * = AMR Research estimate 5% 10% 10% 20% 20% 15% 5% 75% 60% 20% 20% 36% Less than $30M $30M to $250M $250M to $1B 15% 6% 30% 44% 25% More than $1B 85% 94% 50% 20% 75% 100% 5% 25% 75% 100% 100% 85% 70% Source: AMR Research, 2007 Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 7 industries: A&D, automotive, high-tech, and industrial (see Table 2). These were all early adopters of SPP technologies. Table 2: SPP software sales by customer vertical Vendor Baxter Planning Systems A&D 5% Auto High-Tech 75% Industrial Medical Device 5% Other 15% (life sciences, tools) Click Commerce 22% 9% 53% 3% 3% 10% (utilities, manufacturing, publishing, service providers) 10% (electronics) GAINSystems 40% 10% 40% IFS 25% 5% 15% 32% 3% 20% (utilities, telecom) Infor 30% 30% 30% 10% (transportation) JDA Software* 100% Lawson 10% 50% 40% Logility 29% 10% 22% 7% 32% (utilities) MCA Solutions 50% 15% 30% 5% Oracle* 50% 22% 23% 5% SAP* 50% 50% Servigistics 23% 16% 45% 2% 14% (food and beverage, appliance, shipping, banking) 5% ToolsGroup 20% 50% 5% 20% * = AMR Research estimate Source: AMR Research, 2007 8 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series The service parts planning and optimization providers Vendor dynamics Today, the service parts planning and optimization software market is currently being served by best of breeds, supply chain suite vendors, and ERP vendors, with service providers preparing to jump into the mix. Service parts planning vendors These vendors offer functionality in all core areas of SPP and are driving functional innovation—a reflection of demand from their customer base. These companies— namely, Baxter Planning Systems, Click Commerce, GAINSystems, MCA Solutions, and Servigistics—either were founded as SPP software companies or currently derive a significant portion of their revenue (greater than 25%) from service parts planning and optimization software sales. Vendor approaches to tackle this market even within this group are varied. Two of the best of breeds, Baxter and MCA Solutions, deliver deep, rich SPP functionality without designs on a broader service suite. Other best of breeds are doing the exact opposite. Servigistics and Click Commerce want to build on their SPP knowledge to offer additional functionality and services. Servigistics presents its vision under the banner Strategic Service Management, which currently includes SPP, workforce management, and price management for service parts. Click Commerce offers a broad suite of execution software, which includes complex order management, partner relationship management, warehouse management, returns and repair, and more. The company’s vision is to create an end-to-end e-commerce suite. Companies in need of a quick SPP fix should consider a vendor from this group. Supply chain suite vendors Commitment to service parts planning and optimization within this group varies vendor by vendor. Those that have been successful, in particular Infor, Logility, and ToolsGroup, have successfully adapted their supply chain expertise into service-specific applications. SPP usually is just a small part of a larger SCM story, which often includes transportation management, warehouse management, MRO, EAM, field service, depot repair, warranty management, order management, and contract management. In almost all cases, SPP is not available as a stand-alone application, but instead must be purchased along with core SCM technology. i2 no longer actively promotes SPP products, and JDA Software concentrates on a small number of government contractors, but other Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 9 than these, we expect supply chain suite vendors to continue to develop their SPP functionality or acquire it. ERP vendors Like supply chain vendors, ERP vendors—in this case IFS, Lawson, Oracle, and SAP—have adapted their supply chain and ERP functionality for finished goods to service parts. All present SPP within a greater framework of service management and/or service parts planning and execution. Complementary modules often include the supply chain modules mentioned above plus CRM, performance management, and finance. Customers that wanted SPP functionality from their ERP vendor have often made modifications to existing functionality with some success, although functionality developed specifically with service parts in mind (which they are all doing to some degree) will always offer an edge. We have seen best-of-breed applications co-exist with ERP. MCA Solutions, for example, often provides the optimization functionality in deals with SAP Service and Asset Management. Like supply chain suite vendors, we expect ERP vendors to continue to develop their SPP functionality or acquire it. Service providers Companies such as Accenture, Genpact, IBM Global Services, and T-Systems either have the capability to deliver service parts planning projects or are considering investing in these capabilities. Service providers are interested in aftermarket services in general because it’s a new source of revenue rather than just being a cost-cutting measure. Tired of hacking away at the costs of the back office, service providers are champing at the bit to move toward other parts of the organization. Service providers will be attracted to service parts planning and optimization projects as a gateway to broader supply chain transformation work. While we don’t currently see them in smaller tactical deals, we fully expect to see them more in higher level strategic supply chain work. 10 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Table 3: SPP vendor overview Total Number of SPP Customers 22 50 28 200 30* 7 LicensestoServices Ratio 3:2 2:3 2:1 1:2 1:1 n/a Vendor Baxter Planning Systems Click Commerce GAINSystems IFS Infor JDA Software Founded 1993 1972 1971 1983 2001 1978 Number of Employees 38 475 50 2,600 9,200 1,700 Service Parts Application(s) Prophet Click Parts GAINS IFS Applications Infor SCM Demand Planning JDA Maintenance, Repair & Overhaul (MRO), JDA Demand, powered by Manugistics, JDA Inventory Policy Optimization, powered by Manugistics (IPO) Lawson M3 Enterprise Management Logility Voyager Solutions Service Planning and Optimization (SPO) Oracle E-Business Suite SAP Service and Asset Management Servigistics Parts Management Service Optimizer 99 Lawson Logility MCA Solutions Oracle SAP Servigistics ToolsGroup * = AMR Research estimate 1975 1996 1999 1977 1972 1999 1993 3,800 141 60 77,652 32,000 200 65 342 80 18 20* 10* 73 32 n/a 4:3 3:2 n/a n/a 1:1 n/a Source: AMR Research, 2007 Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 11 Vendors continue to differentiate by business model Over time, software vendors have formed to serve two distinct service parts planning business models: • Distribution-centric businesses —These companies distribute finished service parts or aftermarket parts in relatively large volumes to a high number of stocking locations, including retail locations. Example verticals include automotive, high-tech, and retail home services. The vendors from this Report that target this type of company include Baxter, Click Commerce, GAINSystems, Infor, Logility, MCA Solutions, Oracle, SAP, Servigistics, and ToolsGroup. • Customer-centric businesses —Bound by specific SLAs to particular customers that are often concerned most with asset availability and uptime, these businesses distribute component or subcomponent parts to stocking locations that service installed bases of customers directly. Example verticals include A&D, industrial, and medical devices. The vendors from this Report that target this type of company include Baxter, Click Commerce, GAINSystems, IFS, JDA Software, Lawson, MCA Solutions, Oracle, and Servigistics. 12 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Table 4: Distribution-centric and customer-centric functionality by vendor Distribution Centric Service demand algorithms Multiechelon replinishment Installedbase tracking Customer Centric Vendor Baxter Planning Systems Click Commerce GAINSystems IFS Infor JDA Software Lawson Logility MCA Solutions Oracle SAP Servigistics ToolsGroup Phase in / phase out Predictive failure SLAs Multiindentured * * * = Functionality provided through SAP Endorsed Business Solution from MCA Solutions Advanced capabilities: Advanced functionality demonstrated through product demos, validated through user references, and/ or used by majority of customers. Demonstrated capabilities: Functionality demonstrated and validated through user references but may not be widely deployed. Limited or no expertise Source: AMR Research, 2007 Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 13 Table 5: Functionality that spans both distribution- and customer-centric applications Advanced Multiechelon inventory optimization Decision support (what-if analysis and simulation) Vendor Baxter Planning Systems Click Commerce GAINSystems IFS Infor JDA Software Lawson Logility MCA Solutions Oracle SAP Servigistics ToolsGroup Exception-based workflow Repair Advanced capabilities: Advanced functionality demonstrated through product demos, validated through user references, and/or used by majority of customers. Demonstrated capabilities: Functionality demonstrated and validated through user references but may not be widely deployed. Limited or no expertise Source: AMR Research, 2007 14 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Table 6: SPP functionality definitions Functionality Exception-based workflow Definition Ability to define, prioritize, and resolve an exception condition or alert Inventory optimization Use of available inventory in the most effective and efficient manner possible to achieve target fill rates, service levels, and/or costs Ability to run what-if analysis and simulation to help users make a business decision Visibility to entire repair cycle Decision support Repair Service demand algorithms Formulas to forecast demand for slow-moving or intermittent service parts Phase in / phase out Ability to plan parts for new product introduction and discontinuation of a product Ability to plan replenishments across multiple tiers of stocking locations in the service-parts network based on alternative sourcing policies and replenishment policies, such as order-up-to-level and economic order quantity Ability to track location and usage of assets, and use this information to calculate current and future requirements planning Ability to calculate the frequency of part replacement, and use this information to calculate current and future requirements planning Ability to track contractual agreements with a customer that guarantees a target level of service, and use this information to calculate required inventory investment Ability to plan across a multilevel bill of materials Multiechelon replenishment Installed-base tracking Predicitive failure SLAs Multi-indentured Source: AMR Research, 2007 Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 15 Vendor profiles Baxter Planning Systems Baxter provides on-demand applications for service parts planning, including both hosted software and managed planning services. Baxter is a private, self-funded company that has claimed profitability for the last 14 years. All of the company’s revenue is from service parts planning and optimization products (Prophet by Baxter) and managed planning services. Baxter partners with UPS Supply Chain Solutions (SCS), which generates approximately 50% of the company’s leads. UPS SCS sells the Baxter software directly or sells planning services and uses the Baxter software to deliver those services. The company has 22 customers, including 3Com, Agilent, Alcatel-Lucent, Kodak, Network Appliance, and Verizon. Customers often select Baxter because of the vendor’s domain expertise. One customer mentioned choosing Baxter solely because of the recommendation from UPS SCS. Click Commerce Click Commerce provides end-to-end e-commerce applications from complex order management and channel management through fulfillment and aftermarket services. Click was acquired by Illinois Tool Works (ITW), a $14B diversified manufacturer, in September 2006. While Click Commerce now represents less than 1% of ITW’s overall revenue, we expect the company to be able to operate as a separate company. Click Parts, the application that delivers the core SPP functionality, is a key component in the company’s broader service supply chain suite of products. It generates approximately 25% of the company’s revenue. To enhance its SPP offering, the company positions Click Parts alongside Click Commerce Returns and Repair to deliver forecasting, inventory optimization, replenishment, transshipment, reverse logistics, and repair center management, as well as Network Logistics and WMX (warehouse management) for a more complete supply chain application. Click Commerce has approximately 50 customers for Click Parts, including American Airlines, Aviall, Dell, Jabil Global Services, and the U.S. Air Force. Customers mentioned good functionality and the company’s domain expertise as reasons for buying the software. 16 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series GAINSystems The company has applied its supply chain technology to service parts, including demand planning and forecasting, inventory optimization, replenishment optimization, and supplier collaboration and portals. In the early 1980s, GAINSystems transitioned from providing consulting services enabled by an optimization toolkit to selling a packaged application with supporting services. The company is known as an inventory optimization vendor appropriate for customers whose key SLA is item availability. GAINSystems is a private company that has claimed profitability for 34 of its 35 years. GAINSystems has approximately 25 SPP customers out of a total customer base of about 100. SPP customers include Bell Helicopter Textron, Motorola, METSO Paper, Hawker Beechcraft, and the Australian Defense Forces. IFS IFS, a midmarket ERP company, provides asset management and aftermarket applications that include service parts planning. IFS targets companies managing global service organizations or project-based service environments. This public company is headquartered in Linköping, Sweden. Service parts planning is not marketed as a point application. Instead, the company includes SPP as part of its greater suite of products needed to provide service management. The product categories include customer management, asset management, resource management, supply chain management, and contract management. Some specific examples of modules customers may use in conjunction with service parts management include field service, depot repair, MRO, warranty management, order management, and contracts. IFS has approximately 220 customers using service management applications, and more than 1,000 customers planning for service parts within its EAM and ERP applications, including BAE Systems, Derco Aerospace, Finnair Technical Services, Lockheed Martin, and Williams International. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 17 Infor Infor approaches the service management business from both a planning and execution perspective. A number of its ERP applications, including ERP System 21, ERP LN, and ERP Syteline, have service management functionality, including dispatching, parts management, MRO, and billing. Infor positions service parts planning through functionality developed within its SCM product suite. The company is taking a dual route to market for SPP and supply chain: marketing to its large customer base, but also competing as a best-in-class product for any distribution-centric company, regardless of ERP backbone. Infor’s SCM service parts planning application, built around its Demand Planning application, comprises five pieces: Demand Forecaster, Inventory Planner, Replenishment Planner, Collaborate, and Sales & Operations Reporting. Other modules customers may use in conjunction with SCM Demand Planning to enhance SPP include EAM, inventory visibility and control, event management, performance management, warehouse management, and transportation management. Infor has approximately 30 SPP customers, approximately 1,600 SCM customers, and more than 4,000 service management customers. SPP customers include Baxi Interpart, General Motors, Honeywell, and TRW. JDA Software JDA provides demand and supply chain applications enabling supply management, demand management and pricing, and transportation and logistics applications. The company’s SPP functionality is provided via the acquisition of Manugistics. The modules required for SPP, which are grouped under Supply & Demand Optimization, include JDA Maintenance, Repair & Overhaul (MRO), JDA Demand, powered by Manugistics, and JDA Inventory Policy Optimization, powered by Manugistics (IPO). The company has approximately 1,200 supply chain customers, of which seven are currently using its supply chain functionality for SPP. All of the SPP customers have more than $1B in annual revenue and are in A&D, working on government contracts in complex service environments with highly indentured bills of materials (BOMs). 18 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Lawson Lawson targets companies in manufacturing, distribution, and maintenance, with large services and/or equipment rental businesses that are interested in managing planning, scheduling, procurement, and fulfillment. SPP functionality is provided in Lawson’s M3 Enterprise Management product line. M3 (Make, Move, Maintain) contains Supply Chain Management modules that customers use for SPP. The modules include Demand Planner, Yield Optimizer, Forecasting, Supply Chain Planner, and Multi-Site Planner. For broader service businesses, customers also use procurement, order processing, inventory statistics, transportation management, warehouse management, performance management, EAM, CRM, and business process management (BPM). Lawson provides strong installed-base and asset-tracking functionality and maintenance scheduling. Lawson has approximately 340 customers using its applications for service parts planning and more than 4,000 customers overall. SPP customers include Aggreko, Biacore, Bunzl, Olympus, and Toyota Material Handling (Europe). Logility Logility targets midmarket distribution-centric companies with its Logility Voyager Solutions, which include Demand Planning, Inventory Planning, Supply Planning, Manufacturing Planning, Transportation Planning & Management, WarehousePRO, S&OP, Collaboration and Global Sourcing Management. The first three of these modules are used for SPP. Logility also brings its execution and global sourcing capabilities to bear on service parts management and replenishment, which differentiates the product suite. The company also positions collaboration and S&OP as enhancing SPP more strongly than other vendors. Logility’s wholly owned subsidiary, Demand Management, offers SPP software to the midmarket. Demand Management earns most of its SPP revenue from sales to companies with less than $250M in annual revenue. Logility has more than 80 SPP customers and 1,400 SCM customers. These customers often mention the company’s quick implementations. SPP customers include Remy International, Standard Motor Products, Sony, and Verizon Wireless. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 19 MCA Solutions The company targets customer-centric businesses with complex service parts planning needs. MCA Solutions is a privately held company that is venture backed, having raised its most recent round of financing in 2004. The company has claimed profitability for the last four years. All of the company’s revenue is from service parts planning and optimization products and services, with Service Planning & Optimization (SPO) being the primary product line with modules for strategic planning, tactical planning, and service business design. MCA Solutions has an SAP Endorsed Business Solution— the highest level in SAP’s partner program—with its Service Inventory Optimization (SIO) product. The company is brought into deals by SAP when advanced forecasting and optimization functionality is required to complement SAP Service and Asset Management. The first joint customer is expected to go live in summer 2008, although MCA has multiple customers that have integrated with SAP using their certified R/3 integration. In addition, MCA has a software-as-a-service (SaaS) product that it markets to midmarket companies. The company has 18 customers, including Boeing, U.S. Navy, Lockheed Martin, Rockwell Collins, KLA-Tencor, and Cisco. Customers often selected MCA Solutions because of its advanced optimization functionality and its ability to support PBL. Customers also reported noticeable improvements in the usability of the application. Oracle Oracle provides SPP functionality as part of its supply chain planning suite, Oracle Advanced Planning (Oracle APS). Oracle positions SPP along with supply chain execution and network planning. Customers use the following products for SPP and service management: Depot Repair Spares Management, cMRO, Field Service, and Advanced Planning (all E-Business Suite, Release 12), Service Contracts, isupport, EAM, Advanced Planning (Demantra 7.2), Inventory Optimization, Strategic Network Optimization, Global Order Promising, and Advanced Supply Chain Planning— Release 12.0. Release 12.1 of the E-Business Suite will include a new product, Oracle Service Parts Planning, which will bring together much of the aforementioned functionality specifically for service parts and will be the go-to-market product for SPP. AMR Research estimates that Oracle has approximately 20 customers for service parts planning and optimization. 20 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series SAP SAP’s service parts planning and management capabilities are now embedded in a new suite, SAP Service and Asset Management, which originated from a development partnership with Caterpillar Logistics Services and Ford. The company positions SPP along with supply chain execution functionality for service management, in the areas of warehousing, fulfillment, procurement, and transportation. Previously, much of the functionality required for SPP was provided through SAP’s APO planning applications. For asset-centric companies with advanced service parts inventory optimization needs, the company brings in its partner, MCA Solutions, with its Endorsed Business Solution Service Inventory Optimization (SIO). The first joint customer is expected to go live in summer 2008. Additionally, for the pricing of service parts, SAP offers SAP Price and Margin Management (PMM). AMR Research estimates that SAP has approximately 10 SPP customers, including Caterpillar Logistics Services, Unipart Logistics, and Ford. Implementations began in 2006, and the first customers are expected to go live in 4Q07. Servigistics Servigistics presents SPP as part of a broader SLM story under the banner of Strategic Service Management, which includes SPP, workforce management, and price management for service parts. Currently SPP generates a majority of company revenue. Servigistics is the only best-of-breed SPP vendor to offer a specific module for pricing for service parts. Conceptually the pairing of parts and people makes a lot of sense for companies that are responsible for both parts planning and workforce scheduling. The company recently won a deal with a large consumer products company to manage 2,000 field techs and spare parts. The company will also implement its command center application, which is a dashboard-like application that allows managers to view all current open service incidents on a map. The command center is currently used at other customers, such as Dell. Servigistics has more than 70 SPP customers out of 121 customers overall. In addition to Dell, SPP customers include Juniper, Sun, Subaru NA, General Motors, and RollsRoyce. Customers reported quick implementation times and cited the usability of the application as a factor in their purchasing decision. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 21 ToolsGroup ToolsGroup targets distribution-centric businesses, especially automotive aftermarket parts businesses, that use independent demand to calculate inventory mixes. ToolsGroup is positioned as a best-of-breed bolt-on to ERP, not as a stand-alone system of record. The company has integrated with about 20 different ERP and supply chain applications, including more than 30 integrations with SAP. Service Optimizer 99+ provides the functionality to address SPP, which includes Forecast MicroAllocation (for demand planning and forecasting) and Inventory Optimization. The application is often implemented along with replenishment-focused supply chain or ERP software. The company has 32 SPP customers out of a total customer base of about 130 companies. SPP customers include Delphi, Aston Martin, Ferrari, and Piaggio. 22 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Recommendations For enterprises • Replace manual forecasting and inventory processes with SPP software —Manual planning processes are as time intensive as they are error prone. Nearly all of the users interviewed reported that implementing SPP software decreased forecast error, freed up the time of planners through exception-based workflow, decreased inventory, and increased service levels. It’s hard to argue with ROI like that. • If you already own SPP software, evaluate your current vendor first—Several user references mentioned that they were either not using all of their current product’s functionality or didn’t understand all the functionality available to them. Take advantage of the vendor’s user groups, customer advisory boards, and training or consulting services. A few extra thousand dollars invested can potentially yield millions in savings. A few users admitted that they also didn’t necessarily understand what industry best practices were or their staff did not possess the proper background to run the applications effectively. What are your next steps for your service business? Can your SPP vendor provide additional service modules, such as field service, pricing, MRO, warehouse management, or transportation management? Is that important to your business? You need answers to these inquiries. • Perform a check-up on the health of your SPP application annually to make sure you’re using all the features to their fullest—Make sure your team members are up to speed on any new functionality that has been released. If you’ve had turnover, take the time to train planners on the application. Consider retraining any existing team members. Consider contracting with your vendor for a strategic system assessment for one or two years after the initial implementation to check the configuration and performance of the system. One company we interviewed has monthly meetings of system power users to share best practices and put together a wish list of functionality requests. • Look for additional areas to roll out SPP, including additional product lines or business units—We spoke with one company that was planning and optimizing for all parts in the field that were more than four years old. Now they are going to apply the software to parts less than four years old. One high-tech company was using SPP for their server business, but not its laptop business. Look for other opportunities like this to expand the application. • Consider using managed planning services to augment your own staff—Tap into the experience and knowledge of the vendor. Benefit from their views into other customers and verticals and apply lessons to your own business. Apply best practices, and augment your own staffing knowledge, especially if the people tasked with spare parts planning do not have a background in this area. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 23 • Consider offering managed services to your network partners —On the flip side of the above recommendation, consider buying the software and running it on your network partners’ behalf. We’ve seen this model work very well in the automotive industry, where the OEM will purchase the software and run the optimizations for the dealerships. The OEM gains insight into dealer inventories and sales histories, and the dealership benefits from lower inventories, improved service levels, increased sales, and, in some cases, guaranteed parts. For vendors • Tailor value messages to the intended audience —Our research indicates that when buyers of SPP software are in planning, their concerns are more tactical in nature. They want to make sure they have the right part in the right place at the right time. They want to lower their inventory and reduce back orders. They’re not necessarily in the market for a full-blown service management suite, nor are they ready to, or even have the clout to, champion a strategic services message. Take that message to a higher level executive in charge of services. • Look for opportunities to create value beyond just inventory reductions —While inventory reductions and increased fill rates are certainly goals for which to strive, continue to look for other opportunities to help create strategic differentiation for your customers. Consider offering managed planning services or help your customers provide managed services to their network partners. • Factor in the service providers and 3PLs to understand how you can complement their supply chain efforts—As mentioned earlier, service providers will be attracted to service parts planning and optimization projects as a gateway to broader supply chain transformation work. While we don’t currently see them in smaller tactical deals, we fully expect to see them more in higher level strategic supply chain work. SPP software vendors should consider how they might fit into these projects and begin to form partnerships with the service providers and 3PLs that are taking over service and other supply chain functions from the OEMs. • Figure out your differentiation strategy—Some of the world’s largest software vendors and service providers are actively ramping up development in SPP. If you’re a small best-of-breed vendor, now is the time to figure out how you are going to differentiate yourself. Maybe it will be through managed planning services. Perhaps it will be broadening SPP into a service suite. Maybe you want to position yourself to be acquired by another player in this space. Whatever the case may be, now is the time to figure out how SPP fits into your vision of SLM as this functionality becomes a piece of greater service, supply chain, and ERP offerings. 24 © 2007 AMR Research, Inc. Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series Notes Supply Chain Planning and Execution Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 25 Research and Advice That Matter Founded in 1986, AMR Research provides subscription advisory services and peer networking opportunities to operations and IT executives in the consumer products, life sciences, manufacturing, and retail sectors. We are the No. 1 research firm focused on the intersection of business processes with value chain and enterprise technologies. AMR Research has published more than 15,000 pieces of research. Grounded in industry and business process expertise, our analysts deliver independent, leading-edge research on established and emerging technologies. This analysis is supported by the best research data in the industry, expert-led Peer Forums, and daily interaction with our members, the most comprehensive community of practitioners in the industry. More information is available at www.amrresearch.com. Your comments are welcome. Reprints are available. Send any comments or questions to: AMR Research, Inc. 125 Summer Street Boston, MA 02110 Tel: +1 (617) 542-6600 Fax: +1 (617) 542-5670 This is printed on 100% post-consumer recycled fiber. It is manufactured entirely with wind-generated electricity and in accordance with a Forest Stewardship Council (FSC) pilot program that certifies products made with high percentages of post-consumer reclaimed materials. AMR-R-20939
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