Why It's Hot
After sustaining a strong blow from the recession, the supply chain management industry is now poised for sustained growth. Companies offering services and products that cater to transportation management, warehousing, consulting, and logistics will see higher demand as businesses ramp up production during the economic recovery.
The industry is already on the rebound: In 2011, revenue hit $141.2 billion, a 10.9% increase from 2010, according to Armstrong & Associates, a supply chain research and consulting firm. The recent upswing in domestic manufacturing should fuel even more growth.
Barriers to Entry
Certain segments, such as warehousing, require expensive physical assets, but it's possible to launch companies in transportation management and software development with minimal capital. Scaling up, however, can be a difficult feat for small players in the industry, says Evan Armstrong, the president of Armstrong & Associates. Transportation management companies, for instance, will have a tough time negotiating prices with trucking companies if they don't bring in significant business.
Over the next five years, the global supply chain management industry is expected to grow more than 9% annually, according to ARC Advisory Group, a technology research and advisory firm.
Watch for growth especially in freight transportation arrangement. Sales in that sector have risen an average of 20.5% over the past two years, according to Sageworks. If you have products or services that help firms lower their environmental impact, as well as costs, you'll see even more growth opportunities over the next five years, says IBISWorld analyst Lauren Setar.
Where the Action Is
As manufacturing companies increase production and freight volume they're going to need to fine-tune efficiency. So, the industry is especially ripe for new technologies and software that make supply chain management easier and more accurate, says Jack Plunkett, the CEO of Plunkett Research.
For instance, Amazon recently acquired, for $775 million, past Inc. 500 honoree Kiva Systems, which makes robots for order fulfillment. "Advanced software, machinery, third-party logistics services, all those types of things help American manufacturing companies," Plunkett says. "I see them growing along with the industry."