Supply Chain Information Technology Perspectives

Are You Dreaming of a WMS in the Cloud?

techblog.nospam@nospam.tompkinsinc.com (tom.singer) — Wed, 14 Sep 2011 08:07:00 -1100

I got a couple of emails recently pitching HighJump’s report, WMS in the Cloud, Real World Business Option or Just Fluff. HighJump has its sights firmly set on cloud computing as a key component of its sales and marketing strategy for its Warehouse Advantage WMS product.

So it shouldn’t be a surprise that the report outlined reasons why moving to the cloud for WMS functionality may make sense for some organizations. The reasons given were sound and familiar to anyone following cloud computing – lower capital investment, reduced impact on IT resources and faster implementation times.

However, HighJump’s pursuit of WMS opportunities in the cloud isn’t unique. RedPrairie reached for the WMS cloud last year through its acquisition of SmartTurn, but SmarTurn is a pure multi-tenant SaaS solution. It is only sold on a subscription basis where customers pay a monthly fee for usage. Its functionality and features appeal to small to modest size operations with limited complexity.

This is not a market segment that RedPrairie’s flagship WMS product can effectively address. HighJump is offering its Warehouse Advantage product on a hosted basis; users will pay a subscription fee to access a unique instance of the application in a remote data center. And HighJump will continue to sell Warehouse Advantage as a traditional on-premise, licensed basis.

So HighJump is effectively becoming the software vendor version of a brick and motor fashion retailer that has decided to open an ecommerce channel.

Offering a hosted solution means HighJump can reach customers that will not or are hesitant to buy an on-premise solution, but it also means that its existing customer pool now has a choice in deployment models. It will be interesting to see how HighJump factors this choice into how it prices, supports and markets both models.

A multi-channel retailer can anticipate that a substantial portion of its customer base will use both channels. I don’t think that this assumption holds true for software vendors looking to sell the same application on a hosted and on-premise basis.

I haven’t seen a quote from HighJump for its WMS cloud option, but I have seen quotes from other vendors offering the same package on both hosted and on-premise terms. While these vendors don’t break down the components that go into their hosted pricing, you can see the elements by comparing the hosted price to on-premise license fees and maintenance costs.

Of course, the vendor needs to cover hardware acquisition and operating costs in its subscription fee. However, they also appear to recoup the license fee over a three- to four- year period, as well as cover the maintenance contract element of their on-premise pricing model.

Depending on the subscription fee, a customer who utilizes the WMS for eight years might end up paying double for license usage for hosted services over an on-premise approach. The latter requires an upfront capital investment for licenses, while the former is spread out as an annual expense.

Still, 2x is a heavy premium for avoiding a capital investment. Maintenance may seem a wash for both options over the eight year period, but an on-premise customer can always choose to go off of maintenance at some point during the system’s lifecycle. I doubt the hosted customer will have this choice.

WMS vendor hosting services also cover IT infrastructure and operating expenses. These costs and associated headaches are hardly inconsequential for top-tier WMS solutions. You can always turn to another third party for IT hosting services, though there is comfort in having a single source provide and support both the application and the hardware.

I don’t think there are any WMS bargains to be found in the cloud if you only look at the proposition from a license, maintenance and hardware fees perspective. This doesn’t mean that I don’t think HighJump and other vendors can’t generate significant business with their hosted services.

I think success in the cloud will boil down to the value adds that a vendor can provide through a hosting model.

There should be a synergy between providing the application and hosting IT services that go beyond the data center. Any WMS vendor who can exploit this synergy by making the implementation process and ongoing WMS operations more effective and less costly for the customer will really have something.

If they can’t look beyond annual subscription fee and hardware infrastructure, then their hosting options may only be viewed as a method to hook customers into an annual revenue stream.

So what is your take on WMS in the Cloud? Is it for real or merely fluff?

-- Tom

Photo Credit: Fractal_Artist

Mid-Year Checkup on the Top 11 Priorities in 2011 for Supply Chain IT

techblog.nospam@nospam.tompkinsinc.com (david.meyers) — Mon, 18 Jul 2011 05:47:00 -1100

Earlier in the year we published our list of the “Top 11 Priorities for Supply Chain Information Technology in 2011.” Now I’d like to look back on a few of them and see how things are tracking. While I’ve only focused on a few in this blog that have recently been impacting my daily life, you can read the entire top 11 here.

UPDATES

Priority #1 - Make some SCIT investments now. The halt in purchasing new systems or upgrades has generated a backlog that will cause bottlenecks in the future. Don’t wait until the masses make their decisions to invest.

UPDATE: Many of you have taken action to make this a top priority. From what we are seeing, companies are kicking off new projects or are already in full swing – SCIT vendors are also seeing very high levels of activity. If you haven’t already started, time is getting short and it may be too late for this calendar year. If you haven’t gotten capital approved for 2011, now is the time to plan for 2012.

Priority #2 - Decide whether to replace or upgrade. Deferment has been a common tactic for making a decision on replacing or upgrading a system. Now is the time to understand the status of your current system(s) and make an educated decision before the purchase.

UDPATE: According to our contacts in the industry, this is taking up a lot of the bandwidth related to priority #1. Technology assessments and deployment planning projects will help you make the right call here.

Priority #4 - Establish the ‘Next Step’ in Your WMS Strategy. Evaluate your current situation relative to your original selection objectives and develop a plan for the ‘Next Steps’ to drive further efficiencies. Conduct an operations and technology audit and identify the specific opportunities to leverage the benefits of the investments made to date.

UPDATE: Whether this priority is a strategy for the future or a tactic related to an upgrade/replacement decision that you are considering now, your “go-live” date should still be just another jumping off point for the next phase.

Priority #9 - Contend with the talent gap. The competition to hire and retain key positions will be fierce. As one means to deal with the talent gap, companies can look at their core competencies and determine the best areas for outsourcing.

UPDATE: I wish this wasn’t true, but it is. Yet, despite the overall disappointing employment numbers, experienced folks in Supply Chain Information Technology are in high demand. Outsourcing may still be your best bet to help bridge the talent gap, but the best resources are seeing higher and higher utilization.

Priority #11 - Close the open checkbook. SCIT projects have been fertile grounds for time and expense vendor contracts. Now is the time to establish stronger vendor-client relationships, and focus on the terms and specifics of the contract.

UDPATE: This is as true now as it was earlier in the year, but it’s becoming more of a challenge due to Priority #9 above.

I’d really like to hear your perspective on these or your other priorities.

-- David Meyers

Other Resources:

Top 11 Priorities for Supply Chain IT in 2011

Top 11 for Profitable Growth in 2011

How Are Your Top Priorities for 2011 Moving? Global Supply Chain Firm Releases Mid-Year Analysis

What will make the Top 10 Supply Chain Apps List for 2012?

techblog.nospam@nospam.tompkinsinc.com (tom.singer) — Fri, 03 Jun 2011 07:27:00 -1100

In his recent Techwatch column, DC Velocity’s James Cooke reflected on the results of a panel session at the 13th annual Logistics CIO and Supply Chain Technology Form.

The session addressed the question of what technologies will have the biggest impact on supply chain in coming years. One of the technologies cited was mobile computing.

Given the latest generation of tablet computers and smart phones, this isn’t too surprising. These devices have already made significant inroads into our daily lives. Even people who don’t own one can’t escape them. There is no doubt in my mind that these devices are going to have a huge impact on how we use technology within the supply chain.

It isn’t difficult to find articles or blog postings touting the top 10 or so mobile apps for personal or business use. However, I haven’t seen anything yet on the top 10 supply chain apps.

I think that this omission will be shortly addressed as developers start targeting tablets and smart phones as logistics systems platforms.

Tompkins Associates is currently working on a tablet-based reporting app for our Tompkins Warehouse Control System (TCS). And many supply chain software vendors are already working on the next generation of mobile supply chain apps (see RedPrairie’s recent press release on mobile solutions group.)

So what will these supply chain apps look like? I must admit that my vision is somewhat fuzzy although I have a basic inkling.

Part of my vision problem is that mobile computing is hardly a new topic within the supply chain. Mobile computers have been used for years by supply chain operations to track and manage goods movement.

They have gotten more powerful, flexible and cheaper over the years. But in many ways, they are used in the same manner today in logistics as they were employed 15 years ago. While they have become relatively ubiquitous, they remain transactional devices that direct and capture activities through bar code scans and key board entries.

Although I expect to see some apps that turn smart phones and tablets into data collection devices for supply chain systems, the really killer apps will undoubtedly look quite different. They will take advantage of capabilities that these devices offer over the current generation of mobile computers found in warehouses and delivery vans.

Specifically these apps will leverage the enhanced graphics, wide-area connectivity, and flexible form factor capabilities provided by tablets and smart phones. They will utilize GPS, integrated cameras, voice recognition and cloud computing in truly novel ways.

As Cooke’s column points out, smart phones and tablet computers offer flexibility not found in traditional computing devices currently used in the supply chain world.

They can help break the bounds that tie managers to desktop computers. They can make control panels and dashboards accessible on truly portable devices. They can also eliminate the need to carry multiple devices (e.g., cell phone, hand held computer, GPS, and others) to do the job.

The possibilities are numerous and intriguing. All we need are for developers to bring them forward. But don’t put your imagination on hold until you see the inevitable articles and press releases.

Let me know what you think will make the top 10 supply chain apps list for 2012.

-- Tom

Photo Credit: nvidia corp

Closing the Open Checkbook on Implementations

techblog.nospam@nospam.tompkinsinc.com (tom.singer) — Fri, 15 Apr 2011 09:54:00 -1100

Before you open your checkbook on a system implementation, let me ask you a question: “How many supply chain system implementations sub-perform?”

While I can’t cite any specific statistics, I have read articles stating that more than 60% of ERP implementations fail.

Failure can imply a wide range of outcomes, but I think a common factor among companies that have fallen victim to this statistic is that their ERP implementation ran significantly over budget. I also believe that many large-scale supply chain systems deployments end up exceeding their budgets. This may actually be the norm for top-tier WMS implementations rather than the exception.

Time and materials are the favorite contract terms for most top-tier supply chain suite vendors. It is very comfortable ground for vendors, especially when significant complexity and process re-engineering is involved.

Unfortunately, it can produce some very painful results for supply chain executives and managers who must explain major cost overruns on implementation projects.

It’s no wonder why more companies are pursing fixed-fee or not-to-exceed terms on their implementation projects. Implementing a supply chain execution package can involve considerable uncertainty, which can result in more time and effort to complete the project than was originally budgeted.

A time and materials contract implies that the customer covers any potential budget overrun for vendor services, while fixed fee or not-to-exceed terms mean the vendor is responsible.

So, fixed fee or not-to-exceed terms definitely appear to be the way to go.

By using them you eliminate the risk of vendor cost overruns and get rid of the hassle of managing vendor hours. Unfortunately, it doesn’t always work out this way, and you may end up paying more than you need to control this risk.

Vendors tend to incorporate a contingency factor into their bids when providing fixed or not-to-exceed terms. The amount of contingency that a vendor incorporates into the bid is generally directly proportional to the knowledge available on the customer’s true requirements. The more the vendor knows, the less contingency the vendor must incorporate into its bid to cover uncertainty.

Many software selection processes do not do a very thorough job specifying requirements. Because of this, significant knowledge gaps may still exist even when the customer feels it has developed a solid set of requirements.

There may be a gap between what the customer initially believes it requires and what it truly needs. There certainly can be gaps in understanding what customer-developed requirements mean between the customer and vendor.

If these gaps are too great, you may end up paying more for vendor services under a fixed fee or not-to-exceed contract.

Few contracts under these terms end up costing less than the vendor originally quoted even if the level of effort needed turns out to be less than entailed in the dollars quoted.

While you may think that the risk of vendor cost overrun has been adverted, without detailed requirements that truly meet needs and measurable performance milestones, a not-to-exceed contract can also be an invitation to a slew of change orders and endless haggling.

Avoiding an open checkbook project is a goal that every supply chain systems implementation should reach.

It’s important to know that simply executing a not-to-exceed contract with the vendor may not be enough to truly cap final expenditures and deliver on the benefits that originally prompted the project.

Not-to-exceed and fixed-fee terms require clear and concise requirements to deliver the intended value. Furthermore, they do not eliminate the need to effectively manage vendor performance. They are merely a tool that must be properly applied in order to produce the desired results.

In certain situations they may not even be the right tool. However, when applied and managed correctly, they can prevent many implementation projects from blowing out their budgets.

What has been your experience?

-- Tom

More Resources

Supply Chain Information Technology: Creating Shareholder Value

Top 11 Priorities for Supply Chain IT in 2011

Technology Investments: Plan Ahead for the Payoff

Where are my dashboards?

techblog.nospam@nospam.tompkinsinc.com (tom.singer) — Fri, 11 Mar 2011 04:43:00 -1100

Last fall, I attended a review meeting to discuss a client’s options on upgrading or replacing their existing warehouse management system (WMS). During the session, someone mentioned the importance of factoring Business Intelligence (BI) into the equation and began to explain why the dashboard and reporting capabilities of any prospective solution should be considered.

This provoked an immediate reaction from a senior logistics VP, who said that he had heard this same song and dance before when his company’s current WMS was selected. And he has been waiting seven years and still does not have his dashboards.

Many organizations have an untapped wealth of supply chain performance data locked away in their systems. Executives and managers constantly clamor to get their hands on this information so that they can identify issues and trends in a timely manner.

Considerable efforts are spent developing a plethora of custom queries, reports, databases, and spread sheets to meet this demand. And they typically produce additional requests for even more performance data and metrics.

Supply chain executives and managers want information presented in a timely, concise manner; sifting through a variety of reports and spread sheets is impractical. They want to see trends and issues that matter to them presented in an actionable format. So, they tend to be very interested in getting tailored dashboards on their desktops and mobile devices.

Many companies pursue BI initiatives that seek to extract value from information locked away in databases across the enterprise. Some enterprises standardize on platforms from SAP, IBM, Oracle or other full BI solution providers.

These solutions provide tools to build data marts, perform analytical processing, and extract and disseminate performance and trend information. Other firms use BI modules and tools provided by their supply chain suite vendor to get actionable performance data into the hands of supply chain executives and managers.

These traditional BI solutions typically provide tools to develop and deploy dashboards. While they may provide some templates that are relevant to a particular supply chain operation, it is up to the enterprise using the tool to develop dashboards and reports that meet the specific needs of its supply chain user community.

This is why the plight of the aforementioned senior logistics VP is not uncommon. The platform can do the job. But from discovery to deployment, it takes a lot of resources to fully construct these solutions to meet the needs of every potential user in the enterprise.

I recently sat through demonstrations of two BI solutions that target special supply chain audiences: Blue Sky Logistics and Oco. Both vendors offer pre-built content that can be integrated with multiple data sources. Both deliver content through intuitive dashboards and reports.

Blue Sky offers a collection of more than 100 instrument panels that focus on performance data primarily inside the warehouse. Their solution employs a proprietary data model that is fed by client transactional systems. It is typically deployed on-premise. Blue Sky provides professional services to support the integration of client data sources to their data mart.

Oco offers a SaaS BI solution that provides pre-built analytics that focus on inventory, transportation and procurement. Customers typically feed Oco’s cloud-based data warehouse on a daily basis through a FTP upload. Oco provides a standard data exporter for SAP, but they also provide services to help map non-SAP sources to their data schema.

The Oco presentation included a transportation spend analysis demo that included information extracted from transactional sources and industry-specific benchmarking data from Tompkins Supply Chain Consortium. (View the press release on Supply Chain Intelligence: Next Generation of Benchmarking and Analytics is Powered by SaaS.) The prospective user was able to compare their performance against relevant benchmarks with the help of some really cool drill-down and discovery capabilities.

While I was impressed by both solutions, my initial reaction was to ask: How do you position these solutions to enterprises with top-tier ERP and supply chain suite solutions?

Many of these organizations already have a standard BI solution and tool set. If I am running BusinessObjects, Cognos or Hyperion, why would I be interested in Oco or Blue Sky? But then I remember the senior VP who has been waiting seven years for his dashboards.

I understand why an IT department using a full BI package may not be that adverse to an Oco-like solution. They may even jump at the opportunity to get logistics off their back.

It may take many person-months to develop similar content as Oco provides using their standard BI tools. Oco can do it in weeks within a SaaS framework.

The BI world is not one-dimensional. There is room for agile solutions that can bring immediate value to a targeted audience at an attractive price.

These solutions and traditional packages are not mutually exclusive. In many ways, these solutions complement full BI packages by offloading content and audiences that are better addressed by a specialty solution. Plus, they keep important audiences from waiting seven years for their dashboards.

So where are your dashboards?

-- Tom

Top 11 Priorities in 2011 for Supply Chain IT: Know What Works for Your Company and Act Now

techblog.nospam@nospam.tompkinsinc.com (SCIT.Team) — Mon, 28 Feb 2011 06:46:00 -1100

It’s no secret that the recession was a test of endurance for most companies, and no area of the supply chain has gone untouched by the shifting economy. But what we want you to think about today is how this has greatly impacted your company’s Supply Chain Information Technology (SCIT).

As the economy continues to strengthen, it’s time to take a look at your SCIT to determine how to get back on track and move toward profitable growth. That is why we came up with the following list of Top 11 Priorities for SCIT in 2011. (Visit our website for the expanded article)

Priority #1 - Make some SCIT investments now. The halt in purchasing new systems or upgrades has generated a backlog that will cause bottlenecks in the future. Don’t wait until the masses make their decisions to invest.

Priority #2 - Decide whether to replace or upgrade. Deferment has been a common tactic for making a decision on replacing or upgrading a system. Now is the time to understand the status of your current system(s) and make an educated decision before the purchase.

Priority #3 - Get a handle on Software as a Service (SaaS) and the Cloud. As these services become more popular, consideration of SaaS and hosting will become the new normal for most SCIT initiatives. While this does not mean that on-premise will become passé, more companies will be making their first foray into the SaaS world or at least factoring Saas into their plans.

Priority #4 - Establish the ‘Next Step’ in Your WMS Strategy. Evaluate your current situation relative to your original selection objectives and develop a plan for the ‘Next Steps’ to drive further efficiencies. Conduct an operations and technology audit and identify the specific opportunities to leverage the benefits of the investments made to date.

Priority #5 - Find TMS solutions even more attractive. Transportation spend is a key source of supply chain cost, yet the majority of practitioners in a recent survey neither use TMS nor have plans in place to even consider TMS deployment. This is an area where you may be able to improve productivity and efficiency.

Priority #6 - Enable SCIT through product extensibility. When considering the right supply chain technology, include “suite vendors” in the mix, as there may be other applications that should be considered. Suite vendors have been known to offer attractive pricing options when multiple modules or products are purchased.

Priority #7 - Handle compliance mandates in an efficient manner. Regulatory compliance already plays a prominent SCIT role in publicly traded companies and certain industries. Effectively leveraging SCIT applications and resources will play a critical role in handling mandates in an efficient manner.

Priority #8 - Put data to work through supply chain intelligence. In today’s market, attempting to use spreadsheets to develop a sourcing model and calculate key factors is not practical, if feasible. Business Intelligence (BI) technology handles considerable data, resources and technology needed to comprehend these key sourcing factors.

Priority #9 - Contend with the talent gap. The competition to hire and retain key positions will be fierce. As one means to deal with the talent gap, companies can look at their core competencies and determine the best areas for outsourcing.

Priority # 10 - Keep a global perspective. As the business world becomes more and more global and security is quickly becoming a larger issue, companies are depending more on technology. At the same time, companies also have the option to take advantage of Global Trade Management (GTM), which is an area that sees a great deal of return in a short time-frame, in terms of IT investment.

Priority #11 - Close the open checkbook. SCIT projects have been fertile grounds for time and expense vendor contracts. Now is the time to establish stronger vendor-client relationships, and focus on the terms and specifics of the contract.

The list above shows how SCIT priorities will be developing throughout the year. However, this is a generalized list that may not be applicable among all companies and industries. With companies trying to improve bottom-line performance, these top 11 will only continue to become more vital. Let us know your thoughts on this list and what you are doing to cope with the challenges of 2011.

-- SCIT Perspectives Blog Team

Other Resources:

Top 11 Priorities for Supply Chain IT in 2011

Top 11 for Profitable Growth in 2011

Supply Chain Information Technology

Photo Credit: elisasizzle

The Ins and Outs to Dock Scheduling: Will Your System Provide the Functionality You Need?

techblog.nospam@nospam.tompkinsinc.com (Susan.Evans) — Wed, 02 Feb 2011 05:00:00 -1100

We welcome Susan Evans back to the SCIT Blog, now, as a regular contributor. Thank you, Susan, for joining us on this blog.

-- SCIT Team

After 20 years in supply chain and logistics technology and working with many shippers, distributors and logistics service providers, I still find it interesting how different companies approach the process of dock/appointment scheduling.

Is it a warehouse process or a transportation process? Does it depend on inbound or outbound and who is managing which? Can the company’s current or legacy systems drive this?

Today, many warehouses, distributors, retailers and other facilities around the world remain challenged with manual processes when trying to schedule arrival and departure of carriers.

This is most painful when there are hundreds of trucks arriving for pick-up and delivery to a single facility each day. And companies that are turning to logistics technology are asking about the capabilities of dock scheduling and are eager to move away from the use of phones, emails, spreadsheets and the dreaded whiteboard.

With these hurdles, it is obvious that dock management is key to on-time deliveries – from the starting point to the end destination.

Depending on the scale of operation, many companies and distributors will schedule a specific delivery time or timeframe, along with a specific docking bay, for both the loading and unloading of goods. Some even offer dedicated dock doors to either carriers or product type due to proximity of unloading/loading to perhaps the cool storage area.

Also, the manner in which the driver receives notification of his or her assigned dock can vary. It could be a phone call or an e-mail, or it could be pre-assigned in the form of a document, note, or other hardcopy. In some instances, they don't create any schedules or assign specific docks, and it is on a first-come, first-served basis, defined by the gate keeper and dock manager on radios.

Companies with growing deliveries and truckloads departing are looking to technology to assist with this time-consuming process. The interesting component that some are looking at is as an extension of a Transport Management System, others as an extension of Warehouse Management System and then some as a completely stand alone application.

So what are the advantages of the systems approach to dock scheduling?

Running Dock Scheduling from the WMS: The main consideration is labor productivity coordination in the warehouse and making sure you have the proper staffing, as well as the correct material handling equipment at the docks to manage unloading and putaway, in addition to loading. The WMS can also factor in the best dock location to minimize travel during the putaway process.

Running Dock Scheduling from the TMS: This provides a more seamless communication with carriers to schedule or to assign appointments. Online systems support self scheduling by shipper, carrier or LSP. And it allows for reminder functionality, attaching Bill of Lading or other paperwork to the appointment schedule to continue to streamline communications and reduce administration time.

Stand-alone Applications: These applications may take on not only scheduling of dock doors but a more comprehensive set of functionality of yard management, including the management of empty trailers and full trailers around the yard to optimize dock activity when waiting on drivers to load.

Functionality varies among dock-scheduling providers. Standard features found across many providers include:

Driver/supplier online self-scheduling
Automated e-mail and text message reminders
Record-keeping and reporting
Internal scheduling option that may include urgent deliveries and rescheduling
Event management and alerting functions

Multiple parties in the supply chain reap the benefits:

Drivers reduce waiting time
Dock staff is available when needed
Administrative and clerical efforts to manage dock activities are reduced
Demurrage and reefer fuel charges are more effectively managed

When considering a dock-scheduling solution, here are a few of components to consider:

Where the critical requirements are (warehouse centric, transportation centric, both)
Integration with other applications
License vs. SaaS solution

Let me know how you are handling dock scheduling.

-- Susan

Photo Credit: lululemon athletica

Maslow’s Hierarchy of Supply Chain Technology Needs

techblog.nospam@nospam.tompkinsinc.com (david.meyers) — Thu, 27 Jan 2011 07:42:00 -1100

I recently read an article in Logistics Management Magazine about Bridging the LTL Relationship Gap. One of the interesting perspectives in this article was to put the LTL relationship under the prism of the widely taught model of human relationships proposed by Abraham Maslow in a 1934 article, A Theory of Human Motivation. His familiar model is shown here:

Physiological Needs: air, food, drink, shelter, warmth, etc.
Safety Needs: security, order, law, limits, stability, etc.
Social Needs: work group, family, relationships, etc.
Esteem Needs: confidence, achievement, respect by others, etc.
Self-Actualization Needs: realizing potential, self-fulfillment, seeking growth and peak performance.

The analogy in Logistics Management was this:

“Based on an adaptation of Maslow’s Hierarchy of Needs, we have to remember that whatever the party’s intent to create a meaningful relationship, the physiological and safety needs of the other party must first be satisfied. Conversely, if a company or individual is struggling to survive, it will be preoccupied with preservation and will not be able to consider the possibility of relationship development, no less an enhancement.

Given the financial challenges facing many companies today, it’s quite understandable that those that are fighting for their very survival will be looking for an opportunity for profitability and not a robust relationship initiative. Yet, without trust, strong communications, and patience, the longevity of maintaining a business relationship is likely to be tenuous at best.”

I thought this was great viewpoint, and it reminded me of Jim Tompkins’ model of the Six Levels of Supply Chain Excellence and how it also relates to Maslow:

Level I, Business as Usual: Working hard to instill best practices in individual departments within your link.

These are the Physiological components of your supply chain’s motivation. Basic questions – is there a roof to keep my inventory dry, is there proper ventilation, and are there “facilities” for my people to perform the very basic of human needs – are answered.

Level II, Link Excellence: Looking within your link for opportunities to remove boundaries between departments and pursue continuous improvements.

These are the Safety components of your supply chain, such as security, order (order management, inventory management, warehouse management), and stability (ensuring that your processes and technology are stable) and determining if they are the best they can be within the domain of a single link of the supply chain.

Level III, Visibility: Turning the lights on outside your organization to see the information that needs to be shared with other members of your supply chain, revealing what is and isn't working.

This is where we are talking about supply chain visibility, information technology and best practices. Looking at Maslow’s Social level, you are now sharing information in real time and extending your field of views to links that are not yours, but that are attached to your own link. Think of it as extending your family and your relationships.

Level IV, Collaboration: Working with other suppliers, vendors and customers to maximize customer satisfaction and drive out costs throughout the chain.

These are the Esteem needs of the supply chain that take the Social needs to the next level. Not only are you sharing information, but you are acting in a truly collaborative manner. This is demonstrated by implementing processes and technology such as Customer and Supplier Relationship Management tools.

Level V, Synthesis: Synchronizing new ways of thinking and strategies to provide even greater cost reduction and enhanced customer satisfaction.

This is the Self-Actualization needs of your supply chain, and continuous improvement is the evidence of success here. You are now looking to optimize your link as well as your trading partners’ links – sharing experiences, technology, best practices, and investing in each other.

Level VI, Velocity: Reducing the lead-time to incorporate continuous improvements throughout the supply chain.

Although Maslow does not have a level of need that is a one-for-one match with the supply chain analogy here, what we can do is increase our speed-to-market for our continuous improvement efforts.

No matter where you are, either in Maslow’s model, or the Tompkins model, you cannot go to the next level until the needs of the previous level have been satisfied.

-- David

Negotiate the Best Deal on Software Applications, but Invest in the Vendor Relationship

techblog.nospam@nospam.tompkinsinc.com (tom.singer) — Tue, 28 Dec 2010 06:50:00 -1100

If you are considering or about to undertake the acquisition of a new supply chain application, you may find the cover story from Computerworld’s December 6 issue interesting. The topic was How to Negotiate Better Enterprise Software Deals.

Having participated in numerous supply chain software selections, I can confirm many of the article's points from experience.

While the article dealt with software acquisition in general – including operating systems, office suites, SaaS-based sales automation solutions, and enterprise systems – there were several observations that were particularly germane to the pursuit of supply chain applications.

Taking some liberties, I have summarized a few key points as follows:

1. Haggling is a best practice.

Like buying a car from a dealer, prospective buyers should be prepared to haggle for the best deal from a software vendor.

The article gave some tips for pressing a vendor’s hot button by raising the specter of competitors or alternative solutions. I’ll go one step further for supply chain software. There is nothing like a selection process that forces vendors to go head-to-head for your business to help you get the best deal.

You’ll really get the competitive juices flowing if you include arch competitors in the process. All is fair in love and buying software. So don’t hesitate to tell a vendor what the other guy is offering when attempting to extract concessions.

2. Know what to buy.

This may seems like an obvious point. But knowing how many licenses you need to buy for immediate and future use is critical in getting the best deal. Buying more than is needed can result in wasted money. Buying too little can mean paying a premium for additional licenses at a later date.

Supply chain software selections can also inject additional elements into the equation. If suite vendors are included in the mix, there may be other applications that should be considered. Vendors have been known to offer very attractive pricing on secondary applications to get the sale on the primary product in question. Also, some have been know to get creative in offering additional licenses to cover peak season demand.

3. Consider pushing back on maintenance.

For many firms, the reward for completing a selection is the dubious honor paying for all licenses purchased, plus a full year of support and maintenance. Some firms find the total cost of support and maintenance over a five-year period exceeds the initial license value.

Vendors may also routinely increase support costs for older releases. Once you get around to an upgrade, you may be faced with a substantial bill for vendor professional services and modifications. Companies with long or delayed deployment schedules may end up paying for maintenance and support on licenses for years prior to their actual usage.

Questioning any vendor on its support and maintenance pricing will probably result in a serious lecture on the necessity to properly fund new development as well as provide quality support services. But this doesn’t mean that the vendor won’t show some flexibility, especially concerning effective dates and limiting increases in outlying years. If they don’t, you can always mention that you are putting the same question to the other guys.

4. Don’t try to pound the vendor to a pulp.

The final section of the Computerworld article cautioned the reader not to be too rough on the vendor.

Hard nose bargaining is commendable. But getting the rock-bottom price and every desired concession shouldn’t be the sole aim of the prospective buyer. Selecting a supply chain execution or planning package is also about building a long-term relationship with the vendor. You run the risk of poisoning this relationship if you push too hard.

I’ve marveled at the ability of some sourcing and procurement folks to beat software vendors down on price and terms. But you are not buying office supplies or packaging. Totally alienating the selected vendor may result in the delivery of substandard services and support. More likely, it will make the vendor less flexible to work with you in the future concerning any new or changing needs.

The article really didn’t touch on professional services. This is understandable, since it covered office suites and operating systems as well as enterprise applications. But professional services and modifications expenditures can significantly exceed license costs for many supply chain system implementations.

Professional service rates certainly can be the subject of negotiations. But it is more important to place some boundaries or control around the total hours charged. This is a lot more challenging that getting reduced license prices or a deferred date on the start of maintenance.

I think the key to negotiating the best deal on supply chain applications is to fully appreciate and embrace the power you have as a prospective buyer.

Your leverage with any software vendor is never going to be greater than it is prior to signing the contract. You should take full advantage of it.

-- Tom

Resources:

Case Study: Retail Flow WMS Implementation

Photo credit: SEPBlog

Electronic Customs Compliance: Does Your System Require a Pen and Paper?

techblog.nospam@nospam.tompkinsinc.com (kevin.hume) — Fri, 17 Dec 2010 07:52:00 -1100

A few weeks ago, Susan Evans shared with us her insights on “Global” Transportation Management Solutions. Today, she is back to share a little with us about using SCIT systems to help with customs regulations and global trade compliance.

-- SCIT Blog Team

As the business world becomes more and more global and security is quickly becoming a much larger issue than it has been in the past, we are seeing companies depending a lot more on technology.

This is part of the reason why the European Union (EU) is pushing paper-free trade to its member states.

In accordance with the Electronic Customs Decision, a new EU customs regulation, known as Import Control Systems (ICS), will require advance electronic notification of Imports into EU member states as of January 1, 2011.

For those of you who may not be familiar with this new regulation, the ICS is the first phase of the European Automated Import System (AIS).

The introduction of ICS allows information to be exchanged between the office of first entry into the EU and subsequent entry of firms in other member states. And this exchange of information happens before the goods enter the country by sea or air.

This new regulation follows the July 2009 Export Control Systems (ECS) legislation, which requires all documentation on all exports leaving EU member states - regardless of value, licensing or commodity - to be filed electronically.

With regard to the EU’s agenda for a paperless environment for customs and trade, the Electronic Customs Decision aims to establish the seamless exchange of data, which will, in turn:

• Assist import and export procedures,
• Reduce compliance and administrative costs, and
• Improve clearance times.

From the EU’s perspective, paper-free trading is also being implemented for stronger security. These higher security measures come from requesting additional, higher quality data that is of interest to customs. The data shows what is coming in, where it is coming from, where it is going, and if the burden of responsibility is on the buyer and shipper.

Additional benefits of complying with these regulations for the shipper include:

• A reduced amount of paperwork,
• Less administration time,
• Fewer opportunities for documents to be lost in transit, and
• A reduction of manual data input along the supply chain, creating less chance of human error.

So whether you manage customs filings and global trade compliance in-house or outsource, your systems need to be connected with other countries’ customs systems to ensure that you are complying with their regulations.

To help with his knowledge gap on international compliance, companies are selecting external solutions to ensure that they meet EU safety and security regulations, as well as improve overall efficiency and visibility of customs operations.

Solution providers such as Descartes, Kewill, KDS, Portbase, and others are taking a leading role in helping companies prepare to meet current and future compliance requirements.

Are you ready for paperless trade into the EU?

-- Susan

Additional Resources