Supply & Demand - Supply Chain and Warehouse Management - July 2007 report

Following on from our special 10th Anniversary Report on Manufacturing software in Mays edition, we now point the spotlight on some of industrys key Supply Chain Management and Warehouse Management System vendors who consider some of the most striking developments within their market over the past decade...

The Internet, real time data capture and relay, increases in functionality integration and hardware advancements the list of major technological advances within the Supply Chain Management (SCM) and Warehouse Management System (WMS) space over the past decade is indeed formidable. But, from the perspective of the solutions vendors themselves, what have been the most notable system improvements and remaining obstacles, and how are these benefits and hindrances impacting on the end user? According to Martin Hiscox, RedPrairies managing director and president International, the late 90s saw vendors investing in deepening of their core functionality so that customers were able to minimise on modifications.

However, in more recent years, he has witnessed a distinct shift towards broadening the range of functionality and redefining the boundaries of each area within the enterprise application ecosystem, including Supply Chain Execution (activity related to the physical movement of goods up and down the supply chain). Hiscox also observes that in the current marketplace there are solutions such as Supply Chain Planning systems that help predict whats going to happen to a product, and over the past few years vendors such as RedPrairie have brought together a large number of these different product sets and put them within the execution environment. Hiscox also points out that the requirement for systems to be able to communicate together better and integrate Internet technologies has driven investment toward developing service oriented architecture and web services. This enables business logic to be exposed to partners and customers systems, he said.

In addition, Hiscox observes that a lot of the supply chain planning activities of old are becoming unworkable in todays supply chain market. This is because the dynamics of whats happening within the supply chain change so often that many organisations are changing from a supply chain push environment into a pull environment, where demand associated to whats happening within the shop/outlet is what pulls product through the supply chain. Hiscox adds that fast reactions associated with manufacturing and distribution environments, and making sure customers can have things delivered just in time, are starting to become much more the fashion.

Real-time advantage
In the view of Allen Scott, UK managing director, Manhattan Associates, there are three main developments that have stood out over the past few years. First, there is the transformation of warehouse management systems from paper based batch environments into real-time, radio frequency (RF) enabled solutions. Even a few years ago, most warehouses operated with a picking report that would be printed from a desk, distributed, and followed by a picker who referred to the printed sheet. Today, instructions are issued in real time to warehouse operatives via RF devices. Scott adds that enormous productivity gains have been achieved following the installation of voice equipment in warehouses. Not only are there the obvious benefits of using a technology that leaves both hands free for lifting, but voice also simplifies the training of employees whose first language is not English. Scott also highlights configured software. Ten years ago, Warehouse Management Systems were custom built and had to be heavily adapted for each customer. Today, 90 per cent of the solutions we install require no major modification and can be tailored for the particular application purely via configuration.

Noah Dixon, vice president, product management. Catalyst International, points out that although he takes it for granted now, the rise of the Internet has completely transformed Catalysts product line. Ten years ago, we had no application that was web enabled; now they all are, he said. Over the past decade, Dixon has also seen huge consolidation in the software market, particularly with regard to WMS. A decade ago there were 273 known WMS vendors; now there is less than half that number, mainly due to smaller vendors being bought up by the larger players, he said. In addition, the trend to move development to China and India means that standard software producers have the freedom to be more business oriented.

Opening the door
From the perspective of Bill Petersen, vice president, business development, Precision Software, advances in hardware (faster and cheaper) have allowed companies to run algorithms that would have been impossible 10 years ago. Now you can run things on a PC that would have required a water cooled Cray in 1997, he said. This has opened the door to solving much more complex problems. David Stanhope, CEO, VoiteQ, has observed that the traditional batch driven WMS solutions that were prevalent 10 years ago are now a thing of the past. The implementation of the true real time WMS systems has significantly improved delivered service levels and greatly aided the Just in Time requirements of todays Supply Chains, he said. Stanhope also points out that, although voice directed warehousing was available 10 years ago, there were virtually no implementations of any voice directed systems in the UK at that time. Now, voice has overtaken the more traditional forms of RF as the most efficient form of data capture for almost all warehouse functions, he remarked. In the view of Tony Beales, distribution systems director at Business Computer Projects (BCP), the past decade has seen supply chain software becoming much more accessible to mid market and smaller companies, both in terms of cost and ease of implementation.

According to Phil Greening, logistics consultant, Swisslog, WMS solutions have developed in two distinct directions over the past decade. The first involves the tighter integration of IT packages across the supply chain, facilitating the planning function, he said. The second major development, according to Greening, is the increase in the richness of execution functionality. A good example of the overlap in both development dimensions is our LoadBuilder, which optimises pick paths based on stackability, thereby optimising trailer cube utilisation and reducing transport costs. In simple terms, according to Andrew Kinder, director, product marketing, supply chain management, Infor, the market has matured and along with this maturation more robust, more functional, and easier to use solutions have arrived. These solutions have a lower cost of ownership and are therefore more widely deployed, he said. Kinder also highlights the growth of solution footprints. They are both wider and deeper to cover a much wider spectrum of supply chain issues that are faced by organisations today, he said. If you look back to 10 years ago, the software solutions were considered to be innovative. With this market maturation has come commoditisation. In addition, Kinder points to the number of mergers and acquisitions within the vendor market. [These] have ensured that large solution providers are able to provide really quite sophisticated solutions in a turnkey way to a large community of supply chain users. According to Alex Mills, sales & marketing director, Chess Logistics Technology, support for business to business e-commerce is probably the single most important development over the past few years. It has streamlined the exchange of information between companies and facilitated the now accepted high levels of supply chain efficiency, he said. Clearly the web has impacted on all forms of business, with web enabled features now increasingly required/expected by customers.

The key developments are less about something new and more about existing technologies becoming stable and mature, according to Mark Croxton, managing director, Aldata Solution UK. The best supply chain solutions are now rock solid and they deliver on their promises, whilst reducing risk for users in both development and use, he said. In the opinion of Mark Cockings, president, Central Europe for IBS, the use of warehouse automation systems with conveyors, automated picking via A frames and technologies such as pick to light have become more prevalent over the past decade. As the costs of labour have increased and restrictions on working hours have materialised within Europe, more companies have been able to justify the capital expenditure both from a cost efficiency perspective and accuracy of operations, he said.

And what of solution differentiators; have system vendors increasingly established more individuality in product offering over the past decade? In Scotts view, there are certainly differences that can be seen among vendors in terms of functionality. These differences are perhaps most strongly marked in the way in which Warehouse Management Systems integrate with the supply chain as a whole, he said. For example, while most companies will have a Planning, Forecasting, Replenishment and Warehouse Management solution, these will not necessarily be integrated seamlessly. Similarly, links to partner systems differ between vendors. For instance, the receiving process in a warehouse can be speeded up considerably by providing partners with the necessary data to produce Advance Shipment Notices (ASN) which will allow an entire shipment to be processed quickly and efficiently upon its arrival in the warehouse.

From his companys position as an SCM solutions provider for the Tier One space, Hugh Murphy, regional sales & marketing manager, 3M Supply Chain Solutions, maintains that there is little to separate the top three global vendors in functionality terms. Each vendors respective teams have worked on 1000-plus implementations, and as a result, weve all seen most requirements somewhere and had to respond to them, he said. With functionality no longer the differentiator, we believe customers should carefully question potential vendors about the flexibility of their product, and about their responsiveness to customer support needs. Worldwide over the past 10 years there has been a much higher profile given to the supply chain vendors by analysts, the press and consulting partners, believes Dixon. They have done a lot of the differentiating work for us. By the time a project hits the street, companies have already made the initial decision of what vendors are most suitable to their needs and should be on the list. The big selection processes of the past with 10 vendors and 10 demonstrations simply dont happen any more.

Track record
In Stanhopes view, very few, if any, vendors now offer functionality that isnt available from somewhere else. The key differentiator between vendors these days is the range of integrated solutions that they can offer, he said. In my experience the least number of software providers needed to deliver your overall system requirements the better . and vendors with a good track record of delivering, of course. Beales has no hesitation in pointing out that there are huge differences between vendors, especially in terms of using voice in the warehouse. In this area there are only one or two vendors able to offer a fully integrated voice WMS, which is very different for the user when compared to a vanilla voice offering being bolted onto an over complex WMS, he said. According to Kinder, the vendor community has definitely polarised over the past 10 years. On one hand we have the broad solution suite providers and then we have the independent best of breed vendors, he pointed out. Its the broad solution suite providers who have had to develop their key differentiators to stand out from the crowd.

Core functionality
In Mills view, the vendor community has been effective in promoting the WMS cause and convincing many new customers to adopt systems. Part of this process has established what might be described as core functions in terms of what customers should expect from a basic system, even if different vendors then promote widely differing solutions, he said. Mills also maintains that it is clearly in the interest of each vendor to differentiate its own product from the competition. According to Croxton, most vendors in their marketing are singing from the same hymn sheet, but the key differentiator is in delivery. This is why companies need to depend on good references, the best proof that the vendor can deliver on its claims, he argues. In the view of Cockings, it is typically not the functionality that differentiates vendors but the way in which this functionality is implemented into the specific business or industry that will create the value. We all have a hammer and chisel in our tool boxes, but that does not make us all master craftsmen; that takes skill, practice and experience, he said. The same applies for software; it is the combination of the functionality of tools and application of those tools that really defines the difference and delivers the result.

Global influence
And what of the growth in globalisation; has this impacted on the type of functionality offered by the SCM and WMS vendor community? In Hiscox view, global companies tend to have different SCM deployments in each territory, each of which will likely require integration with a different ERP or technology platform. so we see system openness and platform independence as more important than functionality in working with global customers, he remarked. However, he adds that the exception to this rule is that the global movement of goods means that companies are placing increasing importance on creating a tax efficient supply chain. this is one of the areas of functionality that we are seeing strong demand for, he said.

Dixon believes the growth of globalisation has had an impact on the functionality of the software, particularly in Europe. Functional requirements for WMS, Transport Management Systems (TMS) and even Demand Management have very different characteristics on different continents, he said. Transportation planning and execution for the US is about long hauls and carrier freight charge optimisation. In the UK and Europe transportation is more about establishing relationships with country oriented carriers and minimising duties and tariffs, and international compliance. For the US and Europe, WMS and other execution products are focused largely on labour optimisation. In Asia and Central America, labour concerns are not the issue; customer compliance is much more important.

According to Scott, global companies want a view of their logistical operations across their entire supply chain, regardless of the number of subsidiary companies, divisions and national boundaries. Its up to the vendor community to provide them with the necessary software to achieve that, he maintains. In practical terms, it is now possible to view inventory in five continents at the same time, continued Scott. Vendors need to ensure that everything they design has the potential to be used worldwide. For example, we use Unicode throughout our products to ensure that they can be used in multiple languages and we also offer local time zone support.

Shifting demand channels
In Murphys view, the globalisation of the supply chain has had a dramatic effect on the solutions corporations need to stay competitive. Shifting demand channels constantly push the boundary and envelope on business processes, he said. Further, he added, in the past 10 years technologies such as the Internet and the rise of Microsoft as a mission critical enterprise-ready option have really put pressure on vendors of legacy solutions. In addition, argues Murphy, the supply chain today is no longer solely about process optimisation; it is instead about the incorporation of trace information into a flexible, highly adaptable solution. A software vendor today must be able to offer a solution that matches these needs, as they are commonplace for most businesses, or else that vendor is simply no longer relevant, he remarked.


Petersen has no doubt about the importance of the impact of globalisation. In order to be competitive, the TMS vendor needs to be able to support its customers regardless of where their facilities are located, he said. This is quickly leading to a situation where you have to be able to ship from anywhere to anywhere. In a global market, this means full import and export capabilities to and from all of the major markets, being able to provide all of the documents required, and being able to do denied party screening based on the data being supplied by multiple governments. In addition, maintains Petersen,

companies are going to have to start to deal with many more carriers as they expand the geographic markets they serve. This is particularly true in the parcel space, he said. Stanhope believes that globalisation has certainly aided the rise of the major ERP systems, but thinks the need to compete generally has led to what were traditionally specialist business management software vendors adding additional functionality, typically via acquisition of other specialist companies. Globalisation has definitely led to the plethora of mergers and acquisitions within the business software market, he said, adding: How well some of these mergers and acquisitions have subsequently integrated into one global solution is certainly open to debate.

Supply chain risk
For Greening, there are two phenomena of interest with regard to globalisation. The first accepts that regardless of ownership, the assets of the supply chain (factories and warehouses) can now be optimally located anywhere in the world, he said. The second phenomenon has seen an increase in outsourcing, resulting in multiple ownership of the supply chain assets. According to Greening, whilst the Supply Chain Planning (SCP) software has proved extremely useful over single ownership supply chains (the same 
company owning assets in many countries) it has not yet proved highly effective across supply chains involving multiple organisations. Furthermore, he maintains, globalisation has undoubtedly increased supply chain risk, often mitigated by standardisation and interchange ability of supply chain components. Both SCP and Supply Chain Execution (SCE) software often incorporate a global view of inventory and multi-site capabilities, both of which help to mitigate the risk of extended supply chain operations, and intra-firm process coordination. Whilst there isnt much evidence of specific software packages extending their reach beyond the firm boundaries, there is plenty of evidence of user friendly interface capabilities being incorporated into packages.

Kinder has no doubt as to the impact of globalisation on supply chains. Aside from the obvious changes such as language enabled systems and currency conversions, globalisation has brought about a raft of other developments, he said. When supply chain solutions were first implemented 20 years ago, they mostly dealt with individual country operations and business processes that assumed that users were in close proximity with one another. Since then, globalisation has seen the rise of multinational and multi-site organisations which rely on open communications, cross functional working and global business processes that extend beyond the enterprise. In order to meet the supply chain challenges of their customers, vendors have had to develop new and exciting ways of working such as new channel structures, collaborative working, web based systems for ease of access and systems which are architecturally open so that they can co-exist with multiple systems to support freedom of information flow. As companies have scaled up, so the software has developed to keep pace and to boost productivity and performance.

Many of the recent changes in the supply chain industry are being driven by global end users, according to Mills. This is a long established tradition in the automotive industry, but retailers and consumer electronics manufacturers are now playing a major role in driving demand for standards and adoption of new technologies such as RFID, he said, adding: Where this is currently impacting on the WMS sector is when a supplier to a multinational/globalised business is specifying support for certain platforms, functions and data formats in the tender document. Croxton takes the view that global companies tend to want global vendors, particularly where the vendor can provide multi-language and multi-currency systems and local support in countries where the user may have limited footprint or experience. The vendor needs to have modular solutions because a company moving into a new sector may only need core functionality in order to get started, he added.

Next generation
And what of some of the key developments we will possibly be witnessing over the decade to come? With customers expecting ever shorter order fulfilment times, Hiscox believes supply chain planning solutions with their batch processing approach
will be increasingly producing plans that are out of date as soon as they are created. So the first key development will be that business will look for supply chain execution solutions to incorporate real time demand data and integrate with retail systems, he said. These next generation demand driven SCE solutions will increasingly replace the current generation of deployed applications and unify the SCE segment of our customers application portfolio. Secondly, because of proliferation of global sourcing, Hiscox anticipates that advanced tracking and recall capabilities will stretch from the supplier to the point of sale.

Murphy believes the software industry is shifting and that the consumer has been ill served by the business models that have emerged. The consolidation of the industry has given rise to companies that focus on company acquisition for the sole purpose of expanding maintenance revenue only, he said. This business model does not emphasise R&D. In fact, it considers it an unnecessary cost and cuts it. The other model, according to Murphy, is private equity firms buying software vendors. This ensures that the acquired software company is no longer viable; private equity is all about selling the investment. The software industry was created through the need to enable companies with information and business process innovation. Never before have businesses needed more from an industry, and had less to choose from. For us at 3M, all we think about is innovation According to Dixon, massively distributed computing technology, such as the iPhone, will have a major effect on the warehousing and distribution industry. Its not quite there yet because of mixed communication and presentation standards however, once these standards are unified, access to systems via a mobile phone will revolutionise our industry, he said. Another key element that will effect changes in the future, believes Dixon, is interoperability standards between business applications.

Increasing concern
Going back 10 years, how would you explain the way Google and eBay have changed our lives? enquired Petersen, who goes on to discuss a particularly poignant issue; the effect of terrorism on the global supply chain. In the US, most people take it as a given that there will be anther 9-11 type attack in the future, and that is becoming an increasing concern in other developed countries as well, he said. Regardless of how or where such an attack is carried out, it will have a major impact on the flow of goods around the

world. But at the same time, we are becoming increasingly reliant on the economies of being able to manufacture our goods in third world countries, and using emerging markets to satisfy our forecasts for demand, all of which involve global trade. The only way that I can see out of this conundrum is to leverage technology even more than we have so far. Stanhope believes that, in many ways, the key developments over the past decade have been about the change in logistics and supply chain business practices and how software vendors have risen to the challenges that those changes brought. Those key developments will undoubtedly continue to filter through to almost all business over the next decade if they are to successfully compete, he said.

According to Beales, we can likely expect a huge expansion of the use of voice technology in the supply chain. Its use is moving away from large corporates, and those with a long record of WMS use in smaller companies, or those that have not yet implemented a WMS, he said. In Beales view, it is also likely that voice equipment will become commoditised, and software will lead the implementation of voice systems.
This will follow the pattern seen by early mainframes, where the sales were hardware led, and software was seen as an add-on to the hardware sale. In this example, servers are now a commodity item, and software is the area that users focus on in their selection process.

Environmental impact
From Greenings perspective, there are a number of change drivers already visible. The increase in direct-to-consumer deliveries, and the accelerated emphasis on recycling, will amplify the demands on reverse logistics functionality, he said. For example, we need only direct our attention to the WEEE directive, which requires manufacturers to take responsibility for recycling electrical and electronic products. Greening adds that there will also be more attention paid to the carbon footprint of a product, not just in terms of its content and manufacture, but also in its distribution. In all probability this will require a calculation of the environmental impact of the product throughout its life, its manufacture, distribution, use and recycling, he maintains.

According to Kinder, the move to embrace open standards-based systems, native web deployments and service oriented architecture-based solutions will be vital to the success of supply chain solutions. By definition, supply chain business processes go beyond your own enterprise and, as you seek visibility and control over the whole length of the supply chain, you need solutions that can access data in disparate systems, work collaboratively with those systems and provide information freely to others, he said. In Millss view, the bigger challenges are likely to focus on the data itself. More technology produces more data and the ability to manage and process this, increasingly in real time, is perhaps the biggest challenge for the coming decade, he said, adding: It is likely that data formats will become even more standardised and open (eg XML) to support greater systems integration and to simplify information flows. Applications which enable ease of integration will be well placed to take advantage of these changes. Mills also points to the future advantages to be had through the World Wide Web. I believe the web will continue to change the way all business applications are developed and delivered, probably in ways that we currently cant imagine. The key developments to look out for, from Croxtons viewpoint, will be more data collection and more mobile computing. This is in order to feed back office systems to run the supply chain better, improve stock management and replenishment, and deployment of business intelligence in order to optimise business performance, he said.

Added value
Cockings points out that we are already seeing a move in specific industries towards a pricing model based on specific added value of each member of the supply chain, rather than a model based on constant mark up of the base product at each stage. In this model companies in the supply chain receive payment for the services they provide rather than the product; i.e. a distributor receives revenue based on stock holding, number of movements, picks, packs, sales calls, marketing campaigns etc., he said. This is nothing new to the traditional 3PL environment, but it is however beginning to impact on other industries where continued downward pressure on end user pricing continues to be an issue and where supply chain transparency is becoming a necessary norm.

Many of our commentators have also cited RFID as something that is due to make a major impact over the next few years. For one view regarding RFID and its destiny, turn to page 50. Our October Special 10th Anniversary Report will also be looking in detail at this subject. As can be seen by the vendor comment in this article, the future will undoubtedly be interesting to behold, even though, as Cockings suspects, there may be a number of hyped false starts along the way. Watch this space in 2017 for the full picture.

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