Supply chain management (SCM) means different things to different people. For some, it is all about getting the numbers right, and so tools to better forecast demand are a key market for SCM software vendors.

But plans are worthless if they cannot be implemented, and so many businesses prefer to focus on supply chain execution (SCE), which includes tasks such as transportation, order and warehouse management.

The relative merits of these two distinct approaches to managing supply chains have long been a source of debate. In the late 1990s, the planners definitely had the upper hand and i2, the pioneer of demand planning, saw its revenue and stock market valuation soar to stratospheric levels.

But i2 was particularly hard hit by the dotcom crash. ”There was a big over-consumption of supply chain software as companies got over-excited about selling goods over the internet,” says Sanjiv Sidhu, the company’s founder and chairman.

In the chastened market conditions that followed, supply chain planning lost its allure and the spotlight shifted to the SCE vendors and their more down-to-earth approach to managing supply chains.

By 2002, the pendulum had moved so far that i2 was supplanted as the largest specialist SCM software vendor by market capitalisation by Manhattan Associates, then a relatively-unknown company that made warehouse software.

Five years on, i2 has put its past troubles behind it and demand planning is no longer such a dirty word – although Mr Sidhu now prefers to talk of demand ”sensing”. It and Manhattan now jostle neck-and neck for leadership among the so-called ”best of breed” SCM vendors – those that only sell supply chain software.

But the real winners in the SCM industry over the past five years have been the big broad-based enterprise suite vendors SAP and Oracle.

SAP snatched the pole position in the SCM market from i2 in 2002 and has never looked back. By 2006, AMR Research estimates that SAP’s revenues from SCM had grown to more than $700m compared to $260m for i2. Oracle, arch-rival to SAP, is second in this market with SCM revenues of $585m.

A company that is gaining ground quickly is Infor, an enterprise software business that has grown through acquisitions. It bought rival SSA Global Technologies last year and besides giving Infor a bewildering number of ERP platforms to support, the deal has vaulted it into number three up supply chain management hierarchy. According to AMR Research, Infor sits in fifth place by SCM revenues, just behind Manhattan and i2.

The enterprise software companies adopt a different approach to the SCM specialists. Whatever the customer wants, be it demand planning software or a transportation management system, they aim to supply it. In the past, that usually meant developing specialised SCM modules in-house. Oracle, for example, developed an advanced planning module for its e-business suite eight years ago. About the same time, SAP developed a similar module, called advanced planning and optimisation (APO), which is now well regarded within the supply chain community.

The best-of-breed vendors argue that although the SCM offerings of ERP vendors like SAP have improved in recent years, they still cannot compete with their dedicated products. ”ERP systems may be a good solution if you have a relatively simple supply chain process, but they are not good at producing the deep knowledge needed to run your supply chain system,” says Allen Scott, managing director for Manhattan Associates.

Mr Sidhu is more forthright. ”You don’t go to your GP when you need a heart transplant, you go to a specialist and it’s the same with supply chain software,” he says.

Undaunted, SAP continues to develop and broaden its SCM offering. The latest initiative, for example, is called the “inventory collaboration hub”, and is aimed at fostering greater visibility and collaboration with suppliers.

Analysts say SAP’s SCM software has a good reputation but inevitably cannot cover all the bases equally well. One weakness is its warehouse management software.

”SAP’s warehouse management software is less mature compared to the offering of Manhattan,” says Mark Hillman, research director for AMR’s SCM practice. ”But where SAP does have an advantage compared to the best-of-breed vendors is in its mindshare with CIOs and CEOs.”

He says that unless they have very specialised needs, businesses already using other SAP products, such as its ERP software, are more likely to buy its SCM software rather than that of a specialist vendor. One reason is SAP’s products are designed to link together, although this ”integration” is not as easy as SAP salespeople make out, Mr Hilman warns.

But the biggest sales aid, particularly for CIOs and CEOs, is the comfort factor. It is better to deal with a vendor you already know rather than a new one, particularly a small best-of-breed vendor that could fall prey to the consolidation sweeping through the industry.

SAP recognises that it cannot be all things to all people and for those customers with more specialised SCM needs, SAP will refer them to its ”ecosystem” of smaller SCM partners, which includes suppliers like LogicTools, Optiant, SmartOps and Toolsgroup.

Oracle has adopted a very different strategy. After initially trying to develop its SCM offering organically like SAP did, it is now aggressively buying up smaller specialist companies. A year ago, it acquired Demantra, a best-of-breed vendor a specialist in supply chain planning.

”We had our own demand planning product but it wasn’t where we wanted it to be so we bought Demantra,” says Rick Jewell, Oracle’s senior vice-president for applications development.

A similar ”build or buy” decision led to Oracle buying G-Log, a specialist in transportation management.

While the driving force for these acquisitions was to incorporate the technologies into Oracle’s own SCM offerings, the company continues to offer Demantra and G-Log as standalone products, and to support their existing customer bases – even if they are using rival products elsewhere. Mr Jewell says, for example, that that the G-Log customer base has doubled to almost 140 customers since Oracle acquired it in 2005, and around half of them use SAP as their ERP ”backbone” system.

Other recent deals in the industry include the purchase by JDA Software, a company that was hardly known a few years ago but which is now growing fast through acquisitions, of Manugistics. Also, Manhattan Associates has bought Evant, a specialist in supply chain planning and replenishment.

The pace of consolidation seems set to continue but, at the same time, new companies will likely emerge, such is the dynamic and complex nature of the supply chain industry today.