Management Update: Gartner s SCP Magic Quadrant and Options for Process Manufacturers

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1 IGG K. Peterson, M. Jimenez, A. White Article 12 March 2003 Management Update: Gartner s SCP Magic Quadrant and Options for Process Manufacturers As Gartner s Supply Chain Planning Magic Quadrant for Process Industries matures, new solutions for process manufacturers focus functionality on industry-specific needs, rather than providing generic tools that have limited support for unique requirements. Many enterprises are looking for insights on supply chain planning (SCP) suites. As Gartner s SCP Magic Quadrant for Process Manufacturing Industries matures, new solutions for process manufacturers focus functionality on industry-specific needs, rather than providing generic tools that have limited support for unique requirements. Greater Range of Solutions The SCP suite market overall has experienced contraction in revenue, as well as in the number of vendors. However, manufacturers in the process domain find themselves with a greater range of solutions, because of vendors expansion of functionality and the larger number of competitive suites that serve these industries. That can be attributed to two factors: Maturing process industry solutions being offered by large, best-of-breed and enterprise resource planning (ERP) vendors Growth in the number of suite solutions being offered by smaller, best-of-breed vendors that solely support the process industries Solutions Are Maturing In some respects such as integration and breadth of industry coverage the SCP suites serving these industries are less mature than those that serve the discrete manufacturing and distributionintensive SCP domains. The immaturity can be attributed to slower adoption by these industries, because of lower IT budgets and more conservative buying habits. However, the solutions continued to mature during the past year, and Gartner expects them to mature more rapidly through year-end 2004, as vendors seek to meet the needs of this largely untapped domain. That gives process manufacturers an opportunity to invest in robust optimization solutions at a lower price, because SCP license fees have declined during the past few years. SCP Magic Quadrant Inclusion Gartner Entire contents 2003 Gartner, Inc. 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. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 Inclusion in Gartner s SCP Magic Quadrant for Process Manufacturing Industries (see Figure 4) requires the following: A credible vision for a multiproduct, process manufacturing-oriented SCP suite (including network planning, capacity planning, demand planning, manufacturing planning and scheduling, distribution and deployment planning, and transportation planning) An effective sales distribution channel for a global presence Figure 4 Gartner s SCP Magic Quadrant for Process Manufacturing Industries 1Q03 Challengers Leaders Ability to Execute J.D. Edwards Oracle Logility OM Partners WAM Systems i2 Finmatica SAP Manugistics AspenTech Agilisys Niche Players As of January 2003 Visionaries Completeness of Vision Source: Gartner Research However, a particular position on the Magic Quadrant does not guarantee that a vendor s capabilities will match a particular enterprise s requirements. Enterprises should match their needs with vendors specific functionalities and be cognizant of vendor competence within their particular industries and global scope. The Magic Quadrant is a graphic description of global vendor performance in a market segment, based on viability, service and support, features and functionality, and technology. Ability to Execute

3 shows Gartner s view of how well a vendor performs today. Completeness of Vision is Gartner s view of how well a vendor will do in the future, based on where a market is headed. The Four Quadrants Magic Quadrants are meant to provide an understanding of vendor positioning and to set performance expectations for providers. Gartner describes the four quadrants as follows: Leaders: Execute well today and are positioned well for tomorrow Challengers: Execute well today and may dominate large segments, but are not in synch with the market s direction Visionaries: Understand where the market is going or have a vision of changing market rules, but do not yet execute well Niche Players: Focus on a small segment of the market and do it well, or are unfocused and do not out-innovate or outperform others Leaders Quadrant No vendors are in the Leaders Quadrant. That is because of the immaturity of the large-vendor solutions and the financial performance of the best-of-breed vendors. Challengers Quadrant No vendors are in the Challengers Quadrant. Visionaries Quadrant Agilisys has made the break from SCT, its former parent company. It largely serves batch process industries, and its ability to handle the complexities of disassembly, shelf life, characteristics and volume-based scheduling makes it especially suitable for enterprises in the food and beverage, pharmaceuticals and specialty chemicals industries. Agilisys recent release of more robust collaboration capabilities and the promise of Applied Relationship Technology to model and manage complex, multienterprise trading partner interactions signify a unique approach to the support of extended enterprise relationships. However, the company s recent acquisition of Brain AG, a German automotive ERP (enterprise resource planning) vendor, should be watched, because it could cause deviations in focus and direction at a time when Agilisys must strengthen its foothold as an independent software vendor. AspenTech continues to offer differentiating best-of-breed functionality for such process industry verticals as bulk chemicals, specialty chemicals, and oil and gas. Many of its customers that have deployed configurable applications are quite satisfied, and others have found that Aspen s flexibility has enabled them to solve problems that could not be solved by more-generic vendor solutions. Its initiatives in supply chain inventory visibility, performance management and portal technologies put it ahead of many of its competitors in vision, especially when linking plant floor events to decision support.

4 However, AspenTech has experienced many of the financial woes that have plagued other vendors in this market. This financial bind comes at a time when it is investing in software development and integration to bring its vision to fruition. Enterprises in process industries that require a good understanding of manufacturing processes should short list AspenTech; however, they should put contractual controls in place in case Aspen is acquired. Manugistics has many solutions that make it a good fit for the process industries. Its distribution and demand-planning solutions are used by many process enterprises that have been very satisfied with Manugistics ability to understand their businesses and partner to deliver suitable solutions. However, its shrinking employee base and management departures in the chemicals industry vertical indicate that, although its solutions will continue to serve these industries, more visionary functionality (such as revenue and pricing optimization) should not be expected during the next 18 months. Enterprises looking for an integrated solution in the process industries especially consumer packaged goods (CPG) and pharmaceuticals should investigate this solution, although they should watch Manugistics quarterly revenue announcements as it continues to struggle with a failure to increase revenue and attain profitability. SAP continues to deepen its support of vertical industry requirements. Recent releases have included campaign and safety stock planning, and many enhancements have been added to enhance usability and data management. However, SAP still has work to do on model scalability, as well as functionality in production planning and detailed scheduling. Although it can handle flow rates and simple linear scenarios, complex task scheduling and formula optimization are still immature. Likewise, collaboration and supply chain inventory visibility capabilities are not widely used and not integrated with its planning modules. SAP customers will find that the solution is more mature than it was a year ago; however, all enterprises should evaluate it against solutions provided by best-ofbreed providers, augmenting where competitive advantage goals are not being met by established functionality. Niche Players Quadrant Finmatica (from Italy) is building its SCP portfolio through acquisitions, and, in 2002, it made two: Ortems (France) in April and Mercia (United Kingdom) in July. Ortems had had a processmanufacturing planning and scheduling solution for more than 10 years and has more than 300 customers, largely in Europe. Finmatica plans to combine the Ortems solution with Mercia s to provide a complete suite of products and to become a European alternative to large U.S.-based supply chain management (SCM) vendors. However, there is no plan to rewrite the applications to have a single code base, and the integration appears to be opportunistic. Ortems serves the pharmaceutical, specialty chemicals, and food and beverage industries, as well as metals. Ortems customers should talk to Finmatica about extending the relationship. All customers should examine ongoing integration plans and look closely at Finmatica s commitment to support their implementations outside of Europe. i2 Technologies, with its reorganization, is again competing in the process industries market. During its downturn and subsequent layoffs, the company failed to enunciate a clear commitment to this domain. Bolstered by its relationship with Royal Dutch Shell, maturity in metals, and capabilities in pulp and paper (some acquired from IBM), i2 has again restructured its organization to focus on the process market. However, these efforts should be considered immature until i2 can prove that it s here to stay. Although metals companies will be well-served by i2 s solution, oil and gas companies should be cautious, because its product is still in progress and, given current financial

5 conditions, may never be complete. Enterprises in other process industries should investigate mature point solutions from i2. J.D. Edwards (JDE) continues to have best-of-breed planning functionality that serves a wide range of process industries. Of note is its Strategic Network Optimization product for strategic planning, as well as its recently released Demand Forecasting module for statistical forecasting. Late to market in delivering comprehensive collaboration capabilities, it has recently announced Supply Chain Management 9.0, which includes multienterprise modeling and event management. JDE customers should short-list these products. Logility continues to focus on the midmarket ($200 million to $3 billion in revenue), and, although it can address batch, as well as some continuous process requirements, its focus is largely in CPG. Logility s Manufacturing Planning application supports several critical requirements in process industries, including constraint-based byproduct and co-product planning. The Manufacturing Planning application s strength is plant-centric and plant-to-plant planning and scheduling. Its Supply Planning offering is better suited to aggregate, constraint-based capacity planning and allocation; however Supply Planning is new and has been implemented by only a few customers. With the exception of its agreement with SSA Global Technologies, Logility sells mainly in the United States. U.S. midmarket enterprises with batch manufacturing requirements should investigate Logility. OM Partners is well known in the Benelux region, but it is now trying to expand into the rest of Europe and the United States in some subindustries. OM s solutions serve flow processes (such as metals and paper) and batch processes, including the food and beverage, chemical and CPG industries. Originally a manufacturing planning and scheduling vendor, OM is now adding distribution-planning capabilities. An original equipment manufacturer agreement with France-based Aperia has given the vendor a forecasting module to offer to its prospects. European enterprises should investigate OM, particularly for manufacturing planning and scheduling problems. Other enterprises could look at point solutions; however, they should get a clear picture of support capabilities and commitments. Oracle, although it has shown little penetration thus far, is beginning to compete in process industry SCP deals. A few recent go lives and a sizable process industry installed base make it a possible contender in this market. Oracle ERP customers willing to take an incremental approach to implementation and increasing levels of optimization should short list the company s product. WAM Systems is an emerging vendor within the process manufacturing domain. Originally founded as a consulting company, WAM has evolved into a licensed-based manufacturing-planning applications vendor since It has also expanded its suite to include demand and distribution planning, as well as collaboration. Although it started in the polymers industry, recent customer wins in several chemicals subverticals and a partnership with Honeywell to develop a refinery planning solution could enable it to expand beyond that vertical. Enterprises in North American chemical industries, especially those that require campaign functionality, should examine this vendor; however, they should get references from enterprises that are using the solution to solve similar problems. Bottom Line

6 Enterprises in process industries should continue to deploy SCP solutions to improve established business processes, and they now have a more-robust selection of options from which to choose. However, they should rigorously push vendors on industry-specific functionality that can be delivered today vs. functionality that is available in a future release (or after joint development). They should also look at a suite as a way to obtain wider capabilities at a lower ownership cost; however, they should realize that many may require augmentation. Furthermore, because many SCP vendors are struggling with continued growth in a constrained market, enterprises should monitor ongoing vendor health during the next 12 months. Written by Edward Younker, Research Products Analytical sources: Karen Peterson, Maria Jimenez and Andrew White, Gartner Research For related Inside Gartner articles, see: Management Update: How to Implement a Successful Supply Chain Management Project, 25 September 2002