What’s Driving Disruptive Innovation in Supply Chain Planning?

Disruptive innovation is changing the supply chain planning vendor space. Later we will investigate why, but first let’s look at what’s happening, starting with the Gartner Magic Quadrant for Supply Chain Planning System of Record (SOR). In the latest Magic Quadrant there was a fairly major reordering in the vendor landscape. Gartner says the Supply Chain Planning (SCP) market has reached a tipping point after years of relatively slow evolution. They say this has allowed certain vendors “using new approaches and technology to help them leapfrog ahead in the market.” As industry veteran Bob Ferrari observed in his Supply Chain Matters blog, “Best of breed supply chain technology focused niche players such as Blue Ridge and ToolsGroup moved to the Leaders quadrant to join incumbents Kinaxis, JDA Software and OM Partners. The crossing of two quadrants from the bottom left to the upper right quadrant in a single bound is a relatively rare occurrence in such rankings.” Meanwhile, he notes that larger IT companies and ERP vendors have gone in the other direction. Oracle slipped from the Leaders quadrant to Challenger. SAP APO dropped even further from Challenger to Niche Player. According to Ferrari, “Commentary provided by Gartner indicates below average level of capability as well as below average customer satisfaction.” Infor also dropped from Challenger to Niche Player. IBM sold off its supply chain planning offering, disappearing from the Magic Quadrant altogether. What’s driving the disruptive innovation in what was a mature stable market? Gartner says its the changing priorities and needs of end users. They surveyed 380 vendor reference companies about their SCP technology experiences and preferences and found that they were concerned about being able to obtain an integrated planning environment, functional SCP depth and breadth, analytics, TCO, and the ability to manage planning processes. Gartner says that these evolving SCP requirements, when combined with volatile and dynamic supply chain planning environments, have driven significant product development in the vendor community, including:

• Consolidation and/or rewriting of previously separate modules into single unified planning solutions with horizontal and vertical integration
• More extensive use of in-memory computing to help with planning speed, granularity and model adaptability, as well as to help drive convergence between planning and execution
• Advanced predictive and prescriptive analytics to drive process automation and increased insight from planning and transactional data and to help better cope with increasing levels of volatility.

“Those vendors that are leveraging technology advancements more quickly in line with user requirements are making the most progress,” Gartner reports, while “some longtime established market leaders could get left behind, in terms of their SCP SOR capabilities, if they don’t embrace the ‘new normal’ for SCP SOR solutions.” Lora Cecere at Supply Chain Insights has been writing about this disruptive supply chain technology for several years. In her blog entitled “2016: The Start of the Third Act?” (January 11, 2016), she sums up her observations, “In the market there is a clearer understanding that the software planning functionality by Oracle and SAP does not meet today’s business requirements. Oracle and SAP have not been able to bring enough domain expertise to solution development to stay current with the market requirements. As a result, more and more companies are starting to experiment with new forms of SaaS technologies. I believe we are starting to see the beginning of The Third Act of supply chain planning technologies.” Writing in The Wall Street Journal, Christopher Mims offers a broader explanation as to what causes this sort of industry disruption, popularized by Clayton Christenson in his seminal book “The Innovators Dilemma”. Citing venture capitalist Ashnu Sharma, Mims says that large IT vendors often fall prey to what Sharma calls “the stack fallacy”, the mistaken belief that it is trivial to build the layer above yours in the IT stack. But in fact, more nimble competitors often prevail because large IT companies moving up in the stack don’t have the first-hand empathy and understanding of what customers one level above theirs really want. He offers several examples, including Oracle’s inability to beat Salesforce at their core competency, Customer Relationship Management CRM). Next week we’ll dig deeper into what supply chain planning customers told Gartner they want to see from vendors and how vendors are responding to those requests. Click below to read a brief on Digital Transformation in Supply Chain Planning.