Magic Quadrant for Supply Chain Planning in Distribution-Intensive Industries, 1H06

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Industry Research

Publication Date: 31 March 2006 ID Number: G00138362

© 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

Magic Quadrant for Supply Chain Planning in

Distribution-Intensive Industries, 1H06

Andrew White, C. Dwight Klappich, Tim Payne

As the economic climate improves, the environment for innovation in SCP emerges with suite vendors (mostly technology/service-oriented architecture driven) and with best-of-breed vendors (mostly with differentiated functionality).

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WHAT YOU NEED TO KNOW

ERP suite vendors are leading the change toward a foundational, near-commoditized set of functionality for supply chain planning (SCP), but large customer bases and core ERP technology frameworks are enabling these vendors to innovate across the enterprise, as opposed to

specifically within supply chain management (SCM).

Best-of-breed SCP vendors are beginning to innovate at the edge of SCM with differentiated solutions related to complex SCP, sales and operations planning (S&OP), and so on.

ERP users should still compare best-of-breed vendors with their incumbent ERP vendors when complexity and innovation are required or sought in their supply chain.

MAGIC QUADRANT

Gartner introduced a new methodology for developing Magic Quadrants in 2005, so users should not simply compare vendor positions with previous SCP Magic Quadrants. Vendors have not "moved" between reports — Gartner has changed significantly the measurement process, so this Magic Quadrant should be treated as new (see Figure 1). For distribution-intensive enterprises that also manufacture, refer to the relevant process manufacturing or discrete manufacturing SCP Magic Quadrants ("Magic Quadrant for Supply Chain Planning in Process Manufacturing

Industries, 1H06" and "Magic Quadrant for Supply Chain Planning in Discrete Manufacturing Industries, 1H06").

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Figure 1. Magic Quadrant for Supply Chain Planning in Distribution-Intensive Industries, 1H06

Source: Gartner (March 2006)

Market Overview

The SCP market grew in 2005 by about $40 million to a total of approximately $741 million. SCP is the largest segment within SCM and, in 2006, is forecast to grow to approximately $784 million (see "Forecast: Supply Chain Management Software, Worldwide, 2005-2010").

With the restoration of growth to the SCP market, albeit slow, the various segments within it have seen an upswing in interest from end-user organizations, and innovation is once again appearing at the edges of SCP. This emergence of innovation is not uniform across SCP, however. The market is showing signs of a future bifurcation, although the impact is minimal: One part of SCP is gaining momentum toward a level of standardization where functionality requirements are

common and hard to separate across customers, and another part of SCP is showing signs of innovation outside the base. The Magic Quadrant for distribution industries presents analysis of

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the SCP market before this bifurcation has made clear the separation in technology and vendors. Within distribution-intensive SCP, the focus on complex business processes, such as inventory strategy optimization, is emerging as a new area of innovation, though the concept of multi-echelon inventory optimization is not new. What is new is the practical realization of what technology is needed (simultaneously optimizing multiple tiers in a network) and the different industry templates that vendors can bring to market to help end users extend their previous SCM programs:

The SCP market for distribution-intensive industries is characterized by a range of business drivers, notably the need to:

• Cope with high-demand variability

• Optimize customer responsiveness across the supply chain

• Increase external intelligence of extended supply and demand chains • Optimize or maximize inventory use

• Cope with or exploit supply chain complexity • Ensure promise date compliance

• Cope with the impact of product proliferation

These issues in SCP are commonly observed across a wide range of vertical industries to varying degrees of intensity, including consumer products, food and beverage, telecommunications, industrial, pharmaceutical and life-sciences, and wholesale. This Magic Quadrant does not cover retail SCP — nor does it include service parts planning, which was broken out as a separate distribution-intensive MarketScope in 2003; it will be updated in 2006.

Market Definition/Description

Gartner defines an SCP suite as a multiproduct SCP software application that includes supply chain collaboration, supply chain network design, capacity and material planning, demand planning, manufacturing planning and scheduling, distribution and deployment planning, and transportation planning.

We analyzed the market the same way we did in 2004. Accordingly, we created three related pieces of research:

• "Magic Quadrant for Supply Chain Planning in Discrete Manufacturing Industries, 1H06" • "Magic Quadrant for Supply Chain Planning in Process Manufacturing Industries, 1H06" • "Magic Quadrant for Supply Chain Planning in Distribution-Intensive Industries, 1H06"

(nonretail, excluding service parts planning, which is covered in "MarketScope for Service Parts Planning, 2Q05")

These Magic Quadrants represent large vertical-industry aggregations.Although this breakdown is not entirely representative of the market at large, it is indicative of the large pockets of

functionality being offered by the SCP vendors to those industry segments. This Magic Quadrant reviews the vendors and technologies focused on the distribution-intensive industries. For those manufacturing enterprises with a strong focus on manufacturing, it is recommended that the analysis in this Magic Quadrant be combined with that in the Magic Quadrant for SCP in the discrete and/or process manufacturing industries.

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Inclusion and Exclusion Criteria

The inclusion criteria are unchanged from the last analysis:

• An SCP product that has to include supply planning, and a range of offerings through collaborative planning, demand planning, inventory planning, distribution planning, and manufacturing planning and scheduling

• Annual revenue at least $20 million

• Of this, license revenue of at least $10 million or over 50 percent of reported revenue • Global coverage — at least 5 percent of license revenue reported outside of the

headquartered region (Americas, Europe/Middle East and Asia/Pacific)

• The vendor must have a presence in multiple sub-vertical industries to have an ability to execute score high enough to be placed in the Challengers or Leaders quadrants To qualify for inclusion in two or more Magic Quadrants, the criteria for revenue (annual and license) have to be met for each. A vendor will need to show that it has achieved the $20 million annual revenue ($10 million license or more than 50 percent of reported revenue) threshold for each Magic Quadrant.

For this Magic Quadrant, an SCP vendor has to have a product centered on manufacturing planning and scheduling suitable for process/repetitive manufacturing-centric industries. Some vendors that are analyzed may not automatically qualify, according to these criteria. In our analysis, we will highlight any vendors that have particularly interesting, innovative or important offerings.

Added

Oracle (see notes below)

Dropped

Swedish-based International Business Systems (IBS) was dropped from this Magic Quadrant due primarily to a lack of market traction and a lack of inbound inquiry. Gartner does not see IBS in the SCP market.

Evaluation Criteria

Ability to Execute

Gartner evaluates providers on the quality and efficacy of the processes, systems, methods or procedures that enable IT provider performance to be competitive, efficient and effective, and to positively affect revenue, retention and reputation. Ultimately, providers are judged on their ability and success in capitalizing on their vision.

Product/Service: Core goods and services offered by the technology provider that compete in/serve the defined market. This includes product/service capabilities, quality, feature sets and skills, whether offered natively or through original equipment manufacturer

agreements/partnerships as defined in the market definition and detailed in the subcriteria. We will look at general/horizontal functionality for SCP, industry-specific functionality, technology and integration.

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Overall Viability (Business Unit, Financial, Strategy, Organization): An assessment of the organization's financial health, the financial and practical success of the business unit (for a product) and the likelihood that the business unit will continue to invest in the product, offer the product and advance the state-of-the-art in the organization's portfolio of products.

Sales Execution/Pricing: The providers' capabilities in all pre-sales activities and the structure that supports them. This includes deal management, pricing and negotiation, pre-sales support and the overall effectiveness of the sales channel.

Market Responsiveness and Track Record: Ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the provider's history of responsiveness and its installed base.

Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message to influence the market, promote the brand and business, increase awareness of the products, and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotion, thought leadership, word-of-mouth and sales activities.

Customer Experience: Relationships, products and services/programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support (via references). This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, service-level agreements and realized case studies.

Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure, including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis. Management and R&D viability are looked at in detail.

Table 1. Ability to Execute Evaluation Criteria

Evaluation Criteria Weighting

Product/Service high Overall Viability (Business Unit, Financial, Strategy,

Organization)

high

Sales Execution/Pricing standard

Market Responsiveness and Track Record high

Marketing Execution low

Customer Experience high

Operations high

Source: Gartner

Completeness of Vision

Gartner evaluates providers on their ability to convincingly articulate logical statements about current and future market direction, innovation, customer needs and competitive forces, and how well they map to Gartner's position. Ultimately, providers are rated on their understanding of how market forces can be exploited to create opportunities for the provider.

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Market Understanding: The ability of the provider to understand buyers' needs and translate them into products and services. Vendors that show the highest degree of vision listen and understand buyers' wants and needs, and can shape or enhance those wants with their added vision.

Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the Web site, advertising, customer programs and positioning statements.

Sales Strategy: The strategy for selling products that use the appropriate network of direct and indirect sales, marketing, service and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base. We also review vendors' sales processes and how they align with customer buying cycles.

Offering (Product) Strategy: A provider's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature sets as they map to current and future requirements. Technology is rated, along with product functionality, for industry-specific requirements.

Business Model: The soundness and logic of a provider's underlying business proposition. Vertical/Industry Strategy: The provider's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including vertical industries.

Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or pre-emptive purposes.

Geographic Strategy: The provider's strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the "home" or native geography, directly or through

partners, channels and subsidiaries, as appropriate for that geography and market. Table 2. Completeness of Vision Evaluation Criteria

Evaluation Criteria Weighting

Market Understanding high

Marketing Strategy low

Sales Strategy standard

Offering (Product) Strategy high

Business Model high

Vertical/Industry Strategy high

Innovation standard

Geographic Strategy standard

Source: Gartner

Leaders

There are no leaders in this market. In addition to the criteria for inclusion, to be a leader, a vendor has to demonstrate:

• A sustainable (profitable) annual license revenue run rate more than $200 million • A global support organization

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• At least five references using vertical-specific scenarios within each targeted industry segment

• At least four vertically differentiated solution offerings

• A multi-enterprise architecture, supporting Web-oriented architecture and service-oriented architecture (SOA), in a fully distributed (peer-to-peer) deployment model • A significant presence in the market that leads to influence and activity in how the

market evolves

Challengers

There are no challengers in this market. In addition to the criteria for inclusion, to be a challenger, a vendor has to demonstrate:

• An annual license revenue run rate of $150 million • A global support organization

• Some customer references using vertical-specific scenarios across one or more targeted industry segment

• More than one vertical-specific solution offering • An extended-enterprise architecture

Visionaries

In addition to the criteria for inclusion, to be a visionary, a vendor has to demonstrate: • A developing global support strategy

• Five customer references in each targeted vertical industry

• Differentiated vertical-industry domain expertise and unique industry-specific functionality

• Development beyond a third vertical-industry-specific solution

• Development support for a multi-enterprise architecture on an SOA platform

• A targeted presence leading to influence and activity into how aspects of the market evolve

Niche Players

In addition to the criteria for inclusion, to be a niche vendor, a vendor has to demonstrate: • A local support organization

• Five customer references

• A vertical-specific solution offering

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Vendor Comments

Demantra

Demantra is a U.S. SCP vendor founded in 1996 and headquartered in Waltham, Massachusetts, with additional offices in Europe and the Middle East. Demantra's roots are in demand planning; it originally started out as an original equipment manufacturer (OEM) supplier of demand planning to other ERP and SCP suites. Demantra's solutions focus on advanced demand planning, vendor managed inventory, trade promotions management and S&OP, supported with analytics and strong collaboration and workflow capabilities. The vendor is weakest in the area of supply planning. The company had a partnership with Tools Group, a European SCP vendor stronger in this area, but the partnership ended in 2005. Demantra has developed its own supply-planning capability, but has far fewer customers and experience in this area. Demantra's target verticals include consumer packaged goods, consumer durables, and media and entertainment. The solution is built on the Demantra Spectrum Application Framework, which is a business process platform for Demantra-based business processes. The Demantra Business Process Platform enables users to extend Demantra workflows, but Demantra does not license or have the offering supported, mixing and matching Demantra and non-Demantra business objects. The user interface (UI) is a mixture of Web UI for most user interactions via the Demantra dashboard, with a client/server application for workflow and maintenance programs.

Demantra has about 150 customers, mostly U.S. based, and employs about 100 people. The current release of Demantra is 7.0, which went on general release in September 2005. The product is normally licensed, but Demantra has offered a hosted version since December 2005. Evaluate Demantra if you are looking for a strong demand-planning application for more-complex and stressful demand-planning areas. Be cautions when looking at Demantra outside the U.S. and be keen to interrogate the new international partners and resources for their quality and quantity available to you.

i2 Technologies

During its last fiscal year, i2 Technologies' ability to execute recovered as it turned a profit of $43 million on revenue of $336.9 million during the calendar year ending 31 December 2005. This was achieved by painful reduction of operating costs and non-SCP product sales that have helped alleviate some prospect and customer concerns with viability. Although i2's roots are strong in manufacturing, it was not historically as distribution-centric as some other SCP vendors; however, it has increased its focus in distribution-centric areas, such as consumer goods and retail, during the past two years. i2 offers a broad and deep portfolio of individual products that target various SCP processes (for example, S&OP, demand planning, supply planning, inventory strategy optimization, network design), many of which are well-suited to distribution-intensive industries. i2 has fewer distribution-intensive customers using its SCP than some of its

competitors, and only about 5 percent of its business comes from these industries. However, its main value to this market is i2's strategy, via its Agile Business Process Platform, to enable customers to assemble and orchestrate their own unique and differentiated SCP business processes. This is a significant innovation for the market. Users can (and do) use the Agile Business Process Platform to (configure/build/construct/assemble/architect) holistic solutions such as sales and operations management, from individual product components (for example, Demand Planner and Factory Planner). Although its products are functionally rich, i2's strength is not in mass selling its packaged SCP applications, but instead its strengths are in using its domain expertise and architecture to assemble differentiated business processes and workflow templates. Although evolving to configured, holistic, solutions is the right strategy, i2 has yet to articulate specific packaging and pricing strategies for doing this.

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i2's adoption of business process management (BPM), master data management, integration services and spread-sheet integration make it a highly adaptable architecture, though this inherent flexibility adds implementation and support complexity. As such, i2 is best-suited to sophisticated SCM practitioners with complex supply chain problems. i2 completed more than 300 go-live projects in 2005, with more than 130 customers. Companies that place a high premium on supply chain excellence will find the greatest value from i2's depth in functionality and flexibility, and will be the most likely to invest the necessary time and energy in making more-complex solutions work for them.

Infor

Infor's strategy continues to be to growth through acquisition by assembling a large, diverse, customer base and a broad portfolio of individual solutions targeted at many industries and product lines beyond SCP. Of the ERP suite vendors, Infor has most clearly defined distribution as one of its core verticals, and it has acquired many execution and planning vendors strong in the distribution vertical, such as Mercia (planning), NxTrend Technology (execution) and

Daly.commerce (execution). The acquisition of Mercia (January 2005 from Finmatica) provides a stronger distribution SCP solution for Infor as Mercia is strong in forecasting and finished goods inventory planning and analysis. Infor's distribution SCP is well-suited to less-sophisticated distributors and manufacturers where optimization and complexity is less critical. Infor is selling its SCP stand-alone as a best-of- breed SCP offering, unlike the other ERP suite vendors.

Integration between Infor SCP and Infor ERP has been proved via the first couple of custom implementations. Standardization of this integration is likely to take place in 2006.

Infor has approximately 85 customers in the distribution-intensive SCM industries. Its recent organization into a centralized SCM team gives Infor an opportunity in 2006 to leverage the range of SCM assets it has to further develop innovative solutions for distribution-intensive enterprises. A derivative benefit of Infor's growth strategies has been the expansion of it geographical reach, which is particularly strong in Europe, good in North America, and growing in the Asia/Pacific region. However, resource type and quality is not yet consistent across geographies, so careful attention to this is needed for global and local projects.

Intentia

Intentia is a leading European ERP suite vendor that also offers SCP (MOVEX) functionality. In 2005, the company was subject to a takeover bid by Lawson Software, a North American ERP suite vendor. The deal is expected to close during the first half of 2006. Intentia has built a strong, mainly European, customer base in SCP as part of its ERP strategy; it is especially strong in the food and beverage, and fashion industries. The customers in Europe (target is between 75 million euros and 500 million euros) give good references and its functionality is as good as many best-of-breed vendors. Intentia embeds Dash Optimization — one of the several optimization library vendors on the market; however, Intentia has focused the use of Dash where it is strongest — food and beverage-constraint modeling. Intentia does not yet support cost rollup data in its Capable to Promise functionality, but it recognizes the market need, and its future product vision includes the development of this feature.

Intentia has about 400 SCP customers globally; of which food and beverage accounts for about 18 percent and fashion for about 10 percent. Despite the concern over the acquisition by Lawson Software, the strategy for the new combined company seems to suggest ongoing investment. The overlap between the two offerings suggests there is more chance of synergy than for cutting from overlapping functionality. However, the deal is not yet complete, so there is a major

unknown factor hanging over Intentia's position in the market. Intentia has not sold its SCP offering significantly outside its ERP distribution customer base yet, but the plan is to do this via the Lawson acquisition. Prospects of Intentia SCP should assume through 2006 that it will only be

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sold with its own Intentia ERP product. You should include Intentia if you are an Intentia ERP prospect or customer in food and beverage, fashion or general manufacturing, even with complex SCP requirements. Through 2006 or until the acquisition is closed, do not include Lawson

resources in your Intentia SCP plan outside of Europe.

JDA Software Group

JDA Software Group released a .NET-based rewrite of its SCP offering Portfolio Replenishment Optimization (PRO) in 2005. The effort was significant and took longer than two years. This undertaking drew resources away from JDA's older iSeries SCP product, which affected areas such as new product innovation and maintenance — a comment customers repeatedly told Gartner. As a result of the effort, JDA has brought to market a strong SCP offering, though it is too early to evaluate just how competitive it will be. Suppliers that need to handle store-level vendor-managed inventory (VMI) through distribution have a .NET offering (PRO), along with an iSeries offering (VMR) to consider. JDA remains a strong vendor for collaboration with its JDA Marketplace, which hosts more than 300 collaborating trading pairs — the right way to measure scalability and adoptability of multi-enterprise collaboration. JDA's challenge will be managing the resource allocation and costs of investing and maintaining two independent SCP offerings: one designed for the iSeries and the other for .NET. Architecturally, the .NET offering appears stronger, but the bulk of JDA's installed base is on the iSeries. JDA has no inventory strategy optimization offering to help users model simultaneously inventory investment tradeoffs across the entire network. Therefore, with its dual platform strategy in place, it needs to prioritize which platform gets the investment first to meet these needs.

JDA has close to 400 SCP customers: more than 60 percent in the Americas and the bulk of the rest in Europe. Most customers are on the legacy iSeries platform, so check references carefully. You should include JDA if you have a Microsoft or iSeries-centric technology strategy, but look for gaps in functional capability between the two independent platforms. Users that need hosted and/or multienterprise collaboration with trading partners, especially focused on consumer product supply chains, should include JDA in their evaluation.

Logility

Logility's strength is in finished goods inventory forecasting and planning because it has a long history of providing these capabilities in distribution-centric industries. Dating back to its inception, the company provided solutions to pure distribution companies, as well as to the finished goods distribution arm in industries such as consumer goods, industrial, and food and beverage. This focus in distribution-intensive industries was strengthened with the acquisition of Demand Management, which focused on finished goods inventory planning for the small and midsize business (SMB) market. Logility now has solutions and distribution channels that cover the SMB and Tier 1 SCP markets. With Logility’s latest release of its Tier 1 solutions Voyager (February 2006) 7.5, it has a mixed technology framework with a strong emphasis on multienterprise and multidepartmental collaboration, especially those that are demand-driven. Logility is particularly strong for distribution-intensive companies with short and dynamic product life cycle planning challenges because it offers an Event and LifeCycle planning solution that helps improve planning for new product introductions and product end-of-life. Logility's value to total cost of ownership ratio is typically favorable, compared with many of its competitors.

Gartner estimates that about 400 customers of the core Logility Voyager offering have strong distribution environments. With its acquisition of Demand Management, the estimated customer count doubles. Distribution-centric organizations should evaluate Logility's Voyager SCP offerings even for complex SCP problems, though the focus for the vendor is more packaged than i2 is on services. SMB users looking to move beyond spreadsheet-based planning that are not

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understand that support in the U.S. and Western Europe is good, but beyond this, they should rely more on partners.

Manhattan Associates

Evant, an SCP vendor, was acquired by Manhattan Associates, a supply chain execution (SCE) vendor, in August 2005. This is first significant (more than $100 million annual revenue) vendor to combine SCP and SCE (Transportation Management Systems [TMSs] and Warehouse

Management Systems [WMSs]) into a single application footprint. It will take the vendor longer than a year to standardize architecturally on the Manhattan Associates' Logistics Event

Management Architecture (LEMA), its Java 2 Platform, Enterprise Edition (J2EE)-based business process platform for SCM. Evant had emerged in 2005 with its dual strategy in place — its legacy focus on distribution and wholesale replenishment planning solutions (Gartner estimates with more than 50 iSeries customers) coupled with its newer Demand Planning solutions focused on wholesale distribution, retail, merchandising, promotions and catalog planning. The move to J2EE is complete, but the customer base that remained by the end of 2005 was in the mid-teens. Despite the shift in focus, Evant remains a strong SCP offering, though innovations in hardcore SCP had been driven by the demand side. The functionality remains one of the stronger best-of-breed offerings for complex supply chains focused on wholesale distribution and retail-demand-focused industries.

The latest release, version 5.1, was made generally available in October 2005. Include Manhattan Associates (Evant) in your evaluation for SCP if your supply chain is complex and driven significantly by wholesale distribution and retail demand. Be aware that most SCP references are still on the older, but supported iSeries platform.

Manugistics

The distribution industry is Manugistics' primary industry focus (its biggest sectors are consumer goods and retail), and it has capable solutions targeted at the business issues of this sector. Its offerings include demand planning, supply planning and optimization, inventory optimization, network design and S&OP. The vendor's lack of revenue growth and sustained profitability has meant that it has not been able to maintain as high levels of investment in its application or support infrastructure as it had done two years ago. With release 7, the SCP product is entirely server/browser-based, but for the production scheduling and sequencing application. Early adopters of release 7.0 and 7.1 found stability problems that Manugistics claims have been fixed with 7.2. Gartner sees a more-positive, if limited, response from customers implementing the later versions. Manugistics was a late mover in offshoring some of its research and development in 2005, and is still growing this part of the business. The vendor's SCM vision is centered on a tactical message (for example, VMI and S&OP), rather than a strategic message (for example, SOA and its impact on SCM). This reflects Manugistics focus — short-timeline projects. Without realignment to the newly emergent focus on SCM strategy, the vendor will be limited in its ability to drive customer innovation in the future.

Manugistics has about 350 customers in the distribution-intensive industries. Manugistics

solutions can be deployed traditionally or hosted. Global support remains a challenge, though the vendor maintains a smaller European-based support organization with some resources in the Asia/Pacific region. Evaluate this vendor if you require a strong tactical SCP solution with a quick return on investment. Pay particular attention to this vendor's financial position as it strives to achieve generally accepted accounting principles profitability.

Oracle

Previously, Oracle did not qualify for inclusion in Gartner’s SCP for Distribution-Intensive Industries Magic Quadrant, because Oracle did not meet our qualification criteria for vertical

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focus, go-to-market strategies and customer penetration. However, Oracle’s Advanced Planning solution (Oracle APS) was not less suitable than some other SCP solutions for planning in distribution businesses, and it has recently shown improving support and focus for this market. Given Oracle's acquisitions strategy, it has the challenge of having to weave together a cohesive strategy and product road map that spans multiple SCP applications, multiple technical platforms and multiple SCP and ERP customer bases. For distribution-intensive industries, the supply chain planning focus must be on Oracle’s 11i Advanced Planning (APS) product. Oracle plans to consolidate its SCP offerings around Oracle 11i APS for enterprise demand and supply planning, inventory optimization, S&OP, available to promise and collaboration. It will also offer distribution companies network design with Strategic Network Optimization (SNO), which came from the PeopleSoft/JD Edwards/Numetrix acquisition, but SNO will not share an integrated data model until, according to Gartner estimates, later in 2006. Overall, Oracle APS is well-suited to finished goods planning in distribution-intensive businesses, particularly demand and inventory planning and notably available-to-promise, which is best-suited to high-volume, less-complex order promising. The combination of network design (SNO) with Oracle’s Inventory Optimization (IO) product helps users implement a supply chainwide inventory optimization strategy, and is differentiated among ERP SCP solutions. Oracle is not yet taking advantage of the acquisition of Syncra, which it obtained with its own acquisition of Retek, for complex multienterprise

collaboration, and Gartner has not seen any plan to reconcile solutions for such complex collaborative planning.

Oracle has about 50 Oracle APS customers in distribution-intensive SCP industries, and a further 150 or more customers of the SNO product. Because of tight integration with Oracle E-Business Suite (EBS) and the ability to evolve in a step fashion from EBS to Oracle APS, core Oracle APS components remain best-suited to Oracle EBS customers and prospects. Distribution-intensive companies should include Oracle APS in their evaluations if they are or plan to be an Oracle EBS customer, and wish to leverage their Oracle 11i investment with SCP functionality. Oracle's non-EBS customers must remain cautious if considering Oracle 11i APS because integration is not as clean as with EBS and APS. Oracle has demonstrated, via references, an ability to handle aspects of supply chain complexity, but this is with a minority of customers.

SAP

The distribution-intensive industries represent the smallest SCP customer segment within the SAP SCM customer base, with approximately 17 percent, or 300 customers, being consumer goods and related distribution centric. SAP introduced several SCP innovations through 2005 specifically related to its Responsive Replenishment (built on Inventory Collaboration Hub) solution for complex distribution and deployment issues in the consumer goods and retail industries, along with advancements to their VMI functionality. SAP has not yet been able to capitalize on the Responsive Replenishment innovation and is working on achieving a broad customer base. Another growing area of interest for distribution-intensive customers relate to Inventory Strategy Optimization (see "Hype Cycle for Business-Centric Supply Chain

Management, 2005") that helps enterprises optimize inventory and supply chain response strategies more effectively; SAP partners with best-of-breed vendors for this innovation. At the same time, many customers reported SAP Advanced Planning and Organizer's (APO's) inability to cope with all forms of complex supply chain conditions, and so best-of-breed vendors remain a common complement to many SAP ERP and SAP SCM implementations. SAP, with its large customer base, is betting its strong SCM vision on NetWeaver and so its vision for complex distribution is more-reliant on vendor partners coming to SAP and co-developing composite applications (see "SAP Extends Its Vision for Supply Chain Management").

Almost all SAP users of APO are users of mySAP ERP. All SAP ERP customers that need to manage their supply chain efficiently should include SAP in their SCP analysis. Customers who place significant weight on SCM as a core differentiator may still complement any SAP ERP

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strategy with a best-of-breed or NetWeaver Partner vendor. If you are a mySAP SCM prospect, pay particular attention to the level of complexity in your supply chain that is being managed and seek SAP references that exhibit similar levels of complexity management.

TXT e-solutions

TXT e-solutions is a European SCP vendor headquartered in Milan, Italy, with a strong presence in the European luxury goods, fashion and apparel industries. The vendor also delivers offerings in the consumer packaged goods and food and beverage sectors. TXT has been successful in selling, where it can add value through its specific SCP functionality and deep industry knowledge in its target verticals. TXT is growing at well above the overall SCP market level in Europe. The TXT SCP footprint covers some key SCP application areas including demand planning,

distribution and inventory planning, and manufacturing planning and scheduling. TXT solutions are based on the MS Windows operating platform and have a strong MS Office look and feel to them. Internal collaboration is well catered for with "light" versions of the modules for occasional users integrated into MS Excel and MS Outlook, while providing deep functionality for the business power users through reasonable user interfaces. TXT has had a worldwide partnership with MS Business Solutions since 2003, which resells the TXT demand planning solution (renamed as MS Business Solutions Demand Planner) integrated with the various MS ERP solutions. Overall customers report good support from TXT with knowledgeable consultants in its targeted verticals. The offering is sold with a higher degree of consulting and services than many other SCP offerings that enable it to cater to complex and specific customer configurations. However, the downside is that this should not be oversold as an out-of-the-box package.

TXT has about 320 customers; the majority of the customers are in Europe within the distribution-intensive SCM industries. The current release of the SCP suite of TXTPERFORM is 2005.2, which went on general release in June 2005. Evaluate TXT solutions if you are looking for a competent SCP platform and favor a Microsoft platform in Europe. TXT does not sell directly outside of Europe, though this has not stopped the vendor from building a small customer beachhead in the U.S. in 2005 with The North Face (part of VF Corp.) and Russell.

RECOMMENDED READING

"Magic Quadrant for Distribution-Intensive SCP, 2004"

"Magic Quadrants and MarketScopes: How Gartner Evaluates Vendors Within a Market"

Acronym Key and Glossary Terms

APO Advanced Planning and Organizer BPM business process management IO Inventory Optimization

J2EE Java 2 Platform Enterprise Edition LEMA Logistics Event Management Architecture OEM Original equipment manufacturer

S&OP sales and operations planning SCE supply chain execution SCP supply chain planning

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SCM supply chain management SNO Strategic Network Optimization SMB Small and midsize business SOA service-oriented architecture

TMS Transportation Management Systems UI user interface

VMI vendor-managed inventory

WMS Warehouse Management Systems

Evaluation Criteria Definitions

Ability to Execute

Product/Service: Core goods and services offered by the vendor that compete in/serve the defined market. This includes current product/service capabilities, quality, feature sets, skills, and so on, whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the subcriteria.

Overall Viability (Business Unit, Financial, Strategy, Organization): Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood of the individual business unit to continue investing in the product, to continue offering the product and to advance the state of the art within the

organization's portfolio of products.

Sales Execution/Pricing: The vendor’s capabilities in all pre-sales activities and the structure that supports them. This includes deal management, pricing and negotiation, pre-sales support and the overall effectiveness of the sales channel.

Market Responsiveness and Track Record: Ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the vendor's history of responsiveness.

Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message to influence the market, promote the brand and business, increase awareness of the products, and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotional, thought leadership, word-of-mouth and sales activities.

Customer Experience: Relationships, products and services/programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, service-level agreements, and so on

Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure including skills, experiences, programs, systems and

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other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis.

Completeness of Vision

Market Understanding: Ability of the vendor to understand buyers' wants and needs and to translate those into products and services. Vendors that show the highest degree of vision listen and understand buyers' wants and needs, and can shape or enhance those with their added vision.

Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the Web site, advertising, customer programs and positioning statements.

Sales Strategy: The strategy for selling product that uses the appropriate network of direct and indirect sales, marketing, service and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base.

Offering (Product) Strategy: The vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature set as they map to current and future requirements.

Business Model: The soundness and logic of the vendor's underlying business proposition. Vertical/Industry Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including verticals.

Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or pre-emptive purposes.

Geographic Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the "home" or native geography, either directly or through partners, channels and subsidiaries as appropriate for that geography and market.

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REGIONAL HEADQUARTERS

Corporate Headquarters

56 Top Gallant Road Stamford, CT 06902-7700 U.S.A. +1 203 964 0096 European Headquarters Tamesis The Glanty Egham Surrey, TW20 9AW UNITED KINGDOM +44 1784 431611 Asia/Pacific Headquarters

Gartner Australasia Pty. Ltd. Level 9, 141 Walker Street North Sydney

New South Wales 2060 AUSTRALIA +61 2 9459 4600 Japan Headquarters Gartner Japan Ltd. Aobadai Hills, 6F 7-7, Aobadai, 4-chome Meguro-ku, Tokyo 153-0042 JAPAN +81 3 3481 3670

Latin America Headquarters

Gartner do Brazil

Av. das Nações Unidas, 12551 9° andar—World Trade Center 04578-903—São Paulo SP BRAZIL