Manufacturing & Logistics IT spoke with some of the leading names in supply chain consultancy about the state of the art in supply chain and warehouse management solutions, and what the key drivers for change are among both the vendors and end users.
A number of key drivers to achieve a competitive advantage in the marketplace have put pressure on solutions providers to further enhance the supply chain capability. This includes reducing cost while increasing innovation and helping to improve the end users customer service and responsiveness. This is the view of Tim Edwin, principal consultant, TATA Global Consulting Practice. Edwin believes that this implication has been addressed by building many possible solution options to accelerate time-to-value and lower Total Cost of Ownership. Some of the primary options, believes Edwin, are: closed-loop integration of supply chain planning and execution with real-time planning process capabilities; integration with the plant floor infrastructure; data and process visibility across the end-to-end supply chain and from plant floor-to-top floor; and the monitoring and analysis of the extended supply chain.
Commoditisation 
Tim Payne, research director, SCM EMEA, Gartner, observes that over the past few years there has been a very high degree of commoditisation and functionality similarity within the supply chain management and warehouse management solutions space. However, unless the vendor is very small, very niche or very localised, the company is going to be looking at adopting a Service Oriented Architecture (SOA) approach, if it hasnt already taken this route, in order to move forward. Those vendors that can crack the code in terms of how that provides business value from a supply chain perspective will really start to put some clear water between them and the rest of the pack, said Payne. If you look at companies such as i2 who made the move from client server to SOA as early as five years or so ago, they have provided a platform environment and a modelling environment that is very suited to much more complex supply chain scenarios. This is where the innovation is going to come from. Leveraging the architecture and the technology is important to provide greater application agility and flexibility as it is required to mould to the business processes that users have in place, therefore ensuring the business process drives the application rather than the other way round. Were seeing the tip of the iceberg but that will become a much bigger differentiator over the next five years or so.
Mark Blowers, enterprise architectures practice director, Butler Group, also cites SOA as well as Software as a Service (SaaS) as key areas to watch as is the general issue of integration of supply chain management and warehouse management solutions with, for example, ERP. He also highlights the fact that Wireless access is moving to industry standards.
Capgemini Consultings head of supply chain, Steve Freshwater, believes that it is getting harder for vendors to differentiate, but also recognises that some ERP solutions, instead of being a kind of Frankenstein with of lots of acquired companiess systems bolted together, are improving from an integration standpoint. ERP is starting to make sense and connect, he said. Freshwater also references the emergence of the structures and architectures of these solutions, and how they have moved forward from being monolithic mega systems to structures that allow plug and play, modular approaches with Open Standards.
Edwin believes one significant current value-added service offering of note is SaaS. This new delivery model dramatically reduces the effort and cost required to obtain new enterprise software features and avoid infrastructure investments, he pointed out, adding: Some 12 per cent of users are already using SaaS applications, with another 40 per cent reporting that they are interested in the SaaS model. Blowers agrees, maintaining that one area that could be given the accolade of value add is the ability for a vendor to provide a hosted service or SaaS. However, in a more general sense, Blosers is not convinced that there are value-adds in the true sense of the phrase. This is because things such as service, support, and training are considered to be a given today. Indeed, he suspects the expectation in the current marketplace is that a vendor should be able to offer a complete package.
For Payne, one value add concerns domain expertise. Users are looking not only for a suitable application, they also want to understand what it means for them in the way that it could change and improve their business processes, he said. Some users are not just looking, for example, at scheduling software and its capability, they also want to know whether they should replicate what they essentially already have as a process or whether they should expect to get some best practice benefits and take things to the next level. So the domain expertise of the vendor, and of the consultants, is what customers are looking for.
Payne explained that this attitude can be seen at SME and Tier 1 level. Theres a huge amount of functionality in some of these solutions that users often dont tap into, he pointed out. However, they find it difficult to identify those skills sets whereby they can move from the basics up to the next level by utilising more of the advanced capability thats actually built into the software. And they are looking more to the vendors to provide that capability. Companies such as SAP and Oracle have really started to focus on that. They have optimisation teams that can help users identify opportunities for additional benefit from the applications.
Freshwater is witnessing the convergence of whole business models in some cases. At one end you have the software vendors, such as i2, putting managed services around their software not just implementation and at the other end there are some 3PLs who are moving into the market of offering technology, he said. In addition, he added, some consultants are talking to and working with companies to manage their logistics, so moving away from just the procurement outsourcing and into logistics service provision, and into planning as well. So theres a trend towards the service provider running the companys software. This activity is out there and there are studies and reports about this activity going on.
On the subject of system functionality, Freshwaters perception is there are many more productivity tools being applied to existing solutions, including those capable of measuring KPIs. He also believes one of the biggest services vendors are providing as a value add is the restructuring and re-architecting of their solutions to be more plug-and-play and scalable; highly suitable for companies as they start to go global, for example.
Eco-system
Blowers perception is that the supply chain and warehousing management market is now quite mature, with many vendors offering similar features and functionality. If there is any marked differentiation, he believes this can be seen in the form of ease of integration, deployment, migration from existing system, as well as support, brand and hosted services. Payne also recognises the markets maturity or commoditisation, but points out that some vendors have in place an effective strategy whereby end users can buy backbone, commoditised functionality that can be applicable across a number of different industries. Then, if they want a point of competitive advantage in certain areas, these vendors call on their partner network to discuss additional, differentiated processes. So a platform plus the eco-system, thats where that innovation is going to come from, said Payne. The larger vendors of this world can provide that bundle of commoditised processes, and then the small niche companies can develop the innovative solutions, and work as part of the eco-system of the larger vendors. Payne points out that this process is still in the early stages, but that the dynamics are in place.
Freshwater observes that the types of offerings from the vendor community are converging. The software marketplace is huge with lots of available functionality, but what were seeing as a differentiation often relates to a specific sector or niche, he said. So whether thats something very specific for retail, whether its data monitoring or tracking, these sorts of things have differentiators within the solutions. Freshwater also believes the market is seeing differentiators in terms of what could be described as usability. For example, he points out that more vendors are selling a lite version of the solution rather than only offering a larger solution, such as full WMS.
Easing integration
And does the concept of Best of Breed still have any weight in the marketplace? For Blowers, the move to SOA is possibly making it easier to contemplate a Best of Breed solution, as the problem of integration is eased. However, he adds that there is still a strong argument for an SAP or Oracle suite approach. From Paynes perspective, there is becoming less of an argument for Best of Breed, although the pendulum swings on this one, he said. Payne added that there is also the concept of Best of Suites, where users want to focus on a particular process. Freshwater maintains there is a strong argument for Best of Breed because Best of Breed will continue to be the source of some innovation and some leading-edge thinking. From Edwins perspective, Best of Breed is expected to increase as a selection strategy through technological advances such as SOA and open source alternatives through the componentisation of enterprise solutions.
Another key talking point in the supply chain industry is that of globalisation. Payne points out that the market has had for a while the capabilities to cope with relatively complex supply chain models; multiple nodes, countries, factories, etc. What were seeing is the need for mid-sized companies to have adequate capability as they become more globalised, he said. This is driving some of the mid-market ERP vendors to add in multi-site planning, network planning, and forecasting capabilities.
However, things have been different on the execution side, added Payne: Whereas on the planning side end users have for some time looked for centralised planning organisations and the technologies to support that, on the execution side even large companies have still stuck with localised warehouse management solutions, he said. The European WMS market is still very fragmented and the global players are trying to make their mark and then theres a whole raft of local solutions that are still out there doing business. Whats changing is more and more companies are increasingly recognising that they need greater visibility across their networks, and need to flow products around more effectively within those more global networks. Its about getting warehouse management and transportation solutions linked to run multiple networks or multiple warehouses. And thats often a driver for the large logistics service providers. There are a lot of those in Europe. Some have a whole array of systems in play and theres a lot of replacement activity going to achieve greater visibility across multiple distribution centres in multiple countries in order to facilitate the flow of information and control.
Freshwater has no doubt as to the impact of globalisation on companies supply chain requirements. Were currently working with a company thats supporting 152 countries; its keeping design in the UK, and moving its manufacturing East and it needs the ability to manage the transactions and information flow. etc., he pointed out. Globalisation is re-shaping the way companies with global operations operate, and as the emerging economies continue to develop, this should continue to influence software vendors offerings. If youre setting up plants in China and need to be able to plug and play, you dont want to buy a solution that you cannot scale effectively and quickly.
According to Edwin, globalisation has focused on having collaborative capabilities with the trading partners and web-enabled solutions. Information made available through these product-based solutions, in balancing supply chain visibility and velocity, is key to achieving strategic KPIs, and the lack of harmonised global business operating models plagues the clients, he said.
Edwin added that he has seen clients who have streamlined and harmonised their operations across multiple sites and created a collaborative networked model between suppliers, partners and manufacturers. He added that, today, integration of internal operations is very much possible with the availability of SOA-like integration frameworks and related technologies. This provides seamless integration to achieve better interpretability in effectively managing governance and risk, and compliance to gain momentum in competitive advantage, said Edwin.
Gaining leverage
As for the future, Edwin maintains that, although basic product solutions will enable a significant portion of organisations business requirements, there will be times when there will be a need to enable business differentiating capabilities, necessitating the extension of core product capabilities. The approach will be to leverage Composite Application Framework (CAF) as the foundation for development of extensions, he said. The CAF is a design and run-time environment for the development of composite applications that provides a model and metadata driven environment for modelling and generation of applications. The CAF is both a repository and runtime framework with aggregated APIs to allow access to services and objects.
Blowers anticipates that SOA will increasingly impact the way functionality is provided. He also forecasts that SaaS will be utilised more. Payne agrees. There will be increased use of SOA, Business Intelligence and master data management, and a greater move to business process platforms all this is going to gain traction, he said. Theres a lot of work that the vendors are doing in terms of how they can bring all those elements together, and this is the key to ensuring the adaptability and agility that companies are craving from their applications to support their ever changing business environment. Again, this ties in with the issue of globalisation and the complexity debates that rage around supply chains.
Over the next two to three years, Payne maintains that one of the key developments is going to be the convergence of Business Intelligence and Business Analytics; something that he believes is really going to impact the supply chain. Up to now theres been this sort of breakage point between business applications focused on warehouse solutions, planning solutions, transportation solutions, purchasing and so on, but theyre all very functionally focused, and when you try to look across your supply chain and run processes across your supply chain, its incredibly difficult to do that with the applications that are there today, said Payne. And then youve got BI coming in so companies are saying lets put this data warehouse in place, and put some analytical tools on the top, and the decision making gets pushed into BI. Supply chain organisations are huge consumers of BI reports and spreadsheets and access databases because their applications often dont help them to make decisions; what they get from the application is how to take a decision. So the process is separated; the decision making is in BI and decision taking is in the business applications. What were seeing is that if you role forward a few years, the two will become converged because there will be common data underneath; theyll be running off the same data services, and the analytics will be embedded into the applications as the required application is composed.
In the meantime, Payne observes that the market is seeing business applications, particularly in supply chain, adding in more BI-type capability. We see that in things such as demand management solutions, which go beyond the traditional exception management that weve seen for the past few years in those applications and that convergence will accelerate, he concluded.
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