The Crisis brewing in Supply Chain Solutions space

The inspiration to write this post comes from a “Brand Boost” initiative I saw from one of the Supply Chain solutions provider yesterday.

The Competition intensifies with every passing day

A couple of weeks ago, I posted a video on LinkedIn with the theme that Analytics solutions and services are currently the most competitive market currently. And this should be a no brainer even in the Supply Chain space, if you follow Supply Chain solutions space. In fact, it is much more competitive and fierce than some other functions. This is ironic because in my mind, Supply Chain has been a laggard in adopting recent advances in analytics. So where is the intense competition coming from ? Well, two aspects are in play: One, the legacy providers like JDA (now Blue Yonder) still exist (though in an evolved form), and the classic optimization based tools hence are still flooding the market (this does not mean that they are not needed-they are). The second aspect is that as technology became mature and easily available, many ex-employees at these companies ended up floating their own platforms. Subsequently, we are in a situation where there are hundreds of different brands in Supply Chain solutions space, each promising to solve the same set of problems.

And new solutions are still coming out on a daily basis. Why ? Because the Analytics hype means that if you market it well enough, you will either have a good base of initial clients or get a good exit through an accquisition. That works for new entrants as they can cash in on the hype. But it makes the life of established major players much more difficult. Each new solution that comes into the Market is like a new car. Comparing tech on 2015 car with tech on a 2020 car will never work favorably for the 2015 car. 😀

Can you see the cliff yet ?

But the party will not last for very long. Few years ago, I shared a deck with a senior leader with my then employer on why building an in-house AutoML platform is not prudent for a company that does not have core competency in it. Now, when you see the start of the fierce competition in AutoML, Enterprise AI or Supply Chain solutions space, you know where it is going and why I said so years ago.

The players in this intensly competitive space will consolidate through M&A. And if your purpose was not to make a quick buck, you just wasted your time developing something that is now easily available and in next two years, will be entirely commoditized. Anyways, my deck back then was trashed after a one word reply -“cool!”. I printed that and put it on my desk, with some other emails on my desk wall. Each of those messages convey a career lesson to me and this one was one that has been shared thousands of years ago in Indian epic “Panchtantra” -” For certain groups, NEVER give and advise unless you are asked for”.

Anyways, so the mayhem has begun. The Market will consolidate. Smaller player may actually benefit. I see some of them are very much under the radar and pretty lucrative from their capabilities perspective and complement the capabilities of some of the existing big players.

Also, I see some of these companies as good candidates for accquisition by large companies, whoc can then very rapidly reporpose them to build their own platforms leveraging these. Some of the capabilities built can provided competitive edge.

But the main challenge is being faced by Big player

Life cycles of Supply Chain solutions have become extremely short. And that makes it much more difficult for big players. All of them were startups at one point and as a startup, their technology was new and shiny, which allowed them to grab clients and markets faster. But then some other poster boy comes along.

They have then only two options. Either consistently expand their portfolio with what is hot (ex:Llamasoft expanding into Enterprise AI) or enhance capabilities of their existing systems and go though a major brand boost exercise (ex: JDA-Blue Yonder and o9 Solutions). The challenge however is, that there is no end to this strategy. The “Car example” I used above will always be into play. Each new entrant grabs market from and challenges the current dominant player. You can imagine the extremely short popularity cycle of this space from the fact that relatively new entrants also have to go through “Brand boost”, around the same time as very old (relatively) players like JDA rebranded themselves as Blue Yonder.

But what is the way out then ?

Partnerships- and consistent pipelines of unique solutions from those partnerships.

The Market has coined the term “solution” for these platforms. But now that there are hundreds of them. Most of them with similar functions and functionalities and each new incumbent may offer better functionalities with significantly lower fees. In order to stay relevant and/or retain ledership, organizations will have to create true solutions. There are two aspects of it:

What type of partnerships and how those partnerships will help is out of the scope of this article. But the gist is that the only way forward in this extremely competitive market is consistently developing new solutions, that can only be done by forging very close partnerships with clients across Industries.

Views expressed are my own.

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