The overall technology market for SCM will reach US$12.5 billion by 2004, a compound annual growth rate of 28 percent from 1999, say researchers with Datamonitor. North America currently represents two-thirds of this market, but other regions such as Europe will grow faster over the next several years.

The retail sector will be the primary driver of this growth, says Datamonitor. Investment in global software licenses for the industry will hit $560 million by 2004. Spending will also affect food, drink, and consumer packaged goods manufacturers, who will have to keep pace technologically with retail trading partners in order to remain competitive.

The logistics industry (i.e., shipping and delivery) will be touched by SCM developments too, says John Manners-Bell, lead logistics and transport analyst with Datamonitor. In fact, he says, many logistics providers have started to acquire technology that will let them integrate within supply chains. To compete effectively, these firms will have to upgrade their warehouses and transport management systems so that customers can operate within vendor-managed inventory (VMI) and collaborate planning, forecasting, and replenishment (CPFR) systems.

"By providing the SCM capabilities and a scalable fulfilment solution, the logistics provider will become a supply chain facilitator, rather than a commodity supplier," says Manners-Bell. "Combine this with a suite of ancillary services such as call centers, order management, payment processing and reverse logistics and they have a very powerful proposition."

Ultimately, all manufacturers and retailers will have to address supply chain management, says Manners-Bell. He cites examples of companies that have used supply chains to cut inventory levels by 25 percent and order lead times by up to 57 percent. By 2003, retail and manufacturing companies will demand complete front- and back-office integration.