SMEs plan to spend average of $30,000 on supply chain software in 2015, says study

16 May 2015

More small businesses are investing in supply chain management software, according to a study by a research and advisory firm.

Software Advice found small businesses –  with revenues of less than $50 million (£31 million) – are preparing to invest an average of $30,000 (£19,000) on commercial supply chain management software this year.

Medium size and large firms will spend an average of $171,000 (£109,000) for new software.

The research found that 21 per cent of large firms use supply chain management software, 6 per cent of SMEs do so but this is up from 2 per cent in 2013. Software Advice said software manufacturers were increasingly providing smaller businesses with lower cost solutions and subscription-based services.

Software Advice said the software was being used to strengthen supply chains, increase transparency and visibility, harmonise data flowing in and out through multiple channels and eliminate manual tasks, data entry or more complex warehousing operations.

Some 27 per cent of larger businesses cited stronger integration as a reason for seeking new software, compared to just 16 per cent of small businesses. This was likely to be, the study said, because bigger businesses worked with more clients, suppliers, vendors and contractors, tended to have more physical locations, and sold a higher volume of goods across a wider geographical area.

Automating tasks were also significantly more important for larger businesses at 37 per cent, than for small businesses at 24 per cent.

Among buyers wanting new warehouse management software, 20 per cent of larger businesses and nine per cent of small businesses want radio frequency identification (RFID) capabilities.

Improving purchasing is a top concern for businesses of all sizes and for most firms looking for supplier relationship management software, having access to a vast supplier database and the ability to rank suppliers based on key performance indicators was essential.

Procurement is another top requested application with purchase approval automation the most requested functionality.

The report said supply chain management software could streamline the purchasing workflow. “Procurement systems generally offer multi-currency support as well as tools that can automate purchases and purchasing approvals. These systems can also connect users with vast networks of qualified suppliers – a critical capability for supply chain professionals who are trying to identify the most reliable raw materials suppliers at the best price, wherever they might be sourced from.”

A third of mid-size and large businesses, and 39 per cent of smaller ones are currently using manual methods to execute supply chain management processes.

Software Advice said businesses looking to buy supply chain management software must ensure it can integrate with existing applications, and should evaluate perpetually licensed versus subscription software. They should be specific about which processes they want automated and think about how this will impact the workflow of employees.

The study talked to a random sample of prospective software buyers from 100 small and 100 large businesses in the US.

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