GPS – Affordable Fleet Tracking

More and more companies are turning to Global Positioning System (GPS) technology to find out where their fleet vehicles are or have been. GPS is a satellite-based navigation system that can determine the location, speed and direction of a vehicle anywhere on the globe. Unlike cellular communications that can run into “dead spots,” GPS receivers and satellites are always able to maintain strong locks, even in regions with dense foliage or urban settings with tall buildings.

GPS fleet tracking can help in many ways including:

Control labour costs

GPS tracking helps companies get a grip on labor costs, especially overtime. Employees on the road typically keep their own vehicle history records and write their hours on a timecard each week. With the GPS system, those timecards are replaced by precise reports printed straight from a computer, which list the history of each vehicle from the time it started to the time it finished, including how many stops it made and the length of each stop. Thus work can be verified and analyzed.

Increase Fleet Efficiency

With GPS tracking data you can determine an individual or group’s average length of a service stop; or analyze a service stop vs. non-service stop; or the actual length of a service call or installation. Corrective measures based on this information gets job productivity up and wasted time and inefficiency down.

Lower your fuel bills

GPS tracking information attacks high fuel bills in three areas: Controlling Speeding, Idling and Unauthorized Use. Tracking data is captured for all three items allowing fleet managers to take steps to address these and measure the results of their actions. As a result, fuel consumption and costs can drop dramatically. Speeding increases your maintenance, fleet insurance premiums, fuel expense, gas mileage and your liability when an accident occurs. With GPS tracking there is no need to rely on the public to report unsafe drivers.

Control Moonlighting

GPS tracking units monitor who, what, where and when your vehicles are or have been. This puts controls on unauthorized usage and moonlighting.

Vehicle & Cargo Security

Every year companies lose over billions a year because of cargo thefts. And much of this happens during transit. Tracking systems can play a major role in preventing both vehicle & cargo thefts as well as aiding recovery.

Resolve billing disputes

Arrival and departure times are recorded. Determine exactly when your vehicle arrived and departed from a customer’s address.

The detailed, accurate information available from GPS has made it popular within aviation, sea navigation, various outdoor activities and sports, and automotive vehicles. There are numerous benefits of GPS tracking for managing transportation fleets and the cost has become affordable in recent years.

WMS and The Small to Mid Sized Company: Does it Make Sense for Your Operation to Implement a Warehouse Management System?

wms2It’s conventional wisdom: small companies want the benefits of warehouse management systems but they can’t afford them.

Conventional wisdom might say that it’s too expensive; return-on-investment takes too long for smaller and medium sized companies; it’s too complex; too expensive; too difficult. If you listen to the conventional wisdom, you might believe that the technological edge WMS offers is strictly for huge companies.

There’s just one thing: conventional wisdom has been known to get it wrong.

In recent years, the technology, like many other technologies, has improved and become more affordable. It scales to small and medium sized companies much easier than it ever has before.

The Objectives are the Same.

Typically, Fortune 500 companies have the same WMS objectives as small and medium sized companies:

  • Inventory Control
  • Cycle Time Reduction
  • Order Accuracy
  • Labor Productivity
  • Real Time information about DC Performance

Sound familiar? This is what people who operate DC’s are looking for whether they operate one or one thousand of them, whether they measure their annual revenue in hundreds of thousands, millions, or billions. Regardless of the size of your company—and of what you do—you are probably seeking one thing from your warehouse: Control. You need it just as much as larger companies do. WMS systems are one great way of delivering it.

Is a warehouse management system a viable option for you? Before you answer, we hope to provide information to help you make the call based on the facts, not conventional wisdom.

In WMS, your options include Locator Systems, Transaction Processors, Inventory Control Systems, Warehouse Management Systems, and ERP Systems.

Your fist hurdle in determining if WMS is right for your company is one of economics: you have to consider your Return on Investment, the competitive advantages a system might give you, its contributions to your long term profitability, pressures from within your industry, and customer compliance.

For small and medium sized companies, these questions are not as difficult to answer as you might think. Typically, the information is available. It’s a matter of analyzing it and your situation. WMS may or may not be for your company, but you may never know the truth if you dismiss the concept before you investigate.

Create a Multifunctional Team

To find out, you’ll need to assemble a project team. It should be multi-functional including Executives, Operations, Warehouse, Corporate IS, Inventory Control, Customer Service, and Vendor Application Team personnel. You should have a Corporate Product “Owner” and a Time-Committed Project manager involved.

This team will help you create a Systems Requirement Document.

The Implementation Partner is a time-dedicated partner experienced in WMS implementation. It supplements the company’s project team, and is project-focused. It should be an impartial advisor specifically not attached to a WMS software company so it can provide an independent perspective on all project phases. (Note: CEI Logistics provides this service).

The project should break down into four phases:

  1. Operations Assessment
  2. Vendor Selection
  3. Development/Configuration
  4. Implementation

Phase I, The Operations Assessment

Your team will study your company and analyze the way you operate to gain a full understanding of your situation.

It starts with Process Maps, which document current processes and identify opportunities for improvement. These are easily created in a number of software packages such as Visio, and should be easy to follow.

The team should move on to Activity Profiling. This helps you to capture peak transaction volumes by functional area. You’ll interview key stakeholders to develop vision of future requirements and project activity over planning horizon to create design database.

Future Business Requirement: Develop “to-be” process maps to define future operations. The team will identify IT functionality required to support future processes.

The next step is the IT Gap Analysis. In this step, you compare desired “to be” functionality to existing system functionality and document gaps in the current system.

The New System Justification phase defines recommended solution based on gaps identified, and develops a business case for new system or system enhancements as appropriate.

Phase II, Vendor Selection:

This phase helps you find and specify the right vendors for various parts of the project.

It begins with Development of Functional Specifications. The information gathered in the Assessment Phase is developed into an application specification. The application specification typically provides a list of what you need from this project to make it work for your company. It helps you qualify potential WMS vendors, which is the next step…

Next, you engage in Vendor Pre-Qualification. In this step, vendors are pre-qualified based on their experience, capabilities, and project capacity. From here, you’ll have a qualified list of vendors to work with.

The Bid Process is next. The formal Functional Specification is extended to the qualified vendor list for costing.

Once the bid process is finished, you’ll have a number of bids from software vendors. An Evaluation Matrix is established at this point. All vendor offerings are evaluated on the established criteria, and a recommended supplier selected

Finally a Vendor is selected in the final step of the Vendor Selection phase. A contract is offered to the supplier who best fits the evaluation matrix. This is the beginning of the Phase 3 activity: Software Development.

Phase III, Software Development/Configuration:

By now, you have identified the issues and the best software vendor for your needs. You’re now working with your team and the vendor you’ve selected to develop a package that works best for your company. By now, you are beyond answering the question of whether or not WMS is for your company and on to developing a software package that best fits your needs.

The Systems Requirement Document is developed at this point. The Systems Requirement Document (SRD) defines the complete software solution deliverable including client and supplier obligations. The Functional Specification is the reference document for this activity.

The final element of the systems requirement document is the project Master Schedule. It includes all mission critical milestones, and dates for required deliverables. It becomes the roadmap for what happens, when it happens, and how it happens.

Application Configuration / Development: Your Implementation Partner (an independent company that does not sell software) manages the software vendor with regard to final functionality and required modifications.

To complete this phase, we move to the Site Preparedness Audit. This is a formal activity to insure both you and your selected WMS vendor are prepared for installation and testing. It helps everyone understand what needs to be done before the project can move ahead.

Phase IV, Implementation:

This is where the project becomes reality. It’s often the most difficult time of any project, but if you completed the previous steps, it should go smoothly and on-time.

  1. Site Coordination: Actual on-site installation and testing of solution
  2. Installation
  3. Project Management
  4. Application Training: On-Site training of the user group
  5. System Acceptance Testing: Solution is tested thoroughly for both functionality and reliability, based on an established test plan
  6. Ongoing System Evaluation: Through annual check-ups and discovered opportunities for improvement, this assures a solution that maintains its usefulness through several years of business cycles.

Does WMS make sense for your company? The answer is out there, and it isn’t automatically “no” because you aren’t the largest player in your market or you don’t have two hundred locations. That’s conventional wisdom talking, and it is known to be wrong.

WMS has improved the operations of companies smaller than yours, quite likely. Only a careful analysis of your current situation can tell you for sure.

The ERP Warehouse Module vs. Best-of-Breed WMS

wmserp1. Business Strategy

Before you make a decision on which approach to choose—your ERP’s warehouse module or a best-of-breed WMS—it is imperative to understand the business strategy, tactics, operational requirements and goals the system is intended to support. This might seem obvious, but when it comes to execution, the business strategy is often given lip service as opposed to serious consideration. Without a detailed understanding of all the requirements that need to be met, a sound decision is impossible.

The ERP approach and the best-of-breed WMS approach have radically different capabilities that will ultimately affect the success of the project.

This success needs to be measured by the ability of the chosen solution to enhance business value. Line executives must recognize that this decision will drive their ability to deliver on their key performance indicator (KPI) goals.

Because of this, they must be directly involved in making the decision. This cannot be left solely to technology-centered analysis. It must be a collaborative effort. The only reasons that will make sense in determining the decision are those that will enable you to drive value to the bottom line as measured by the KPIs. These should include the following:

  • Your customers’ requirements
  • The nature of the competitive landscape, and what it will take for your business to differentiate itself
  • The level of domain expertise your business has with respect to supply chain execution and warehouse and fulfillment operations
  • The technical expertise of your business
  • Any appropriate technology standards that have been adopted

Additionally, you must balance the value derived from all of these areas against the cost, implementation and timeframe risks of the path being considered. As an aid to evaluating vendors in this area, consider the following questions:

  • What are your business’ long-term objectives?
  • How do you measure performance? What are the key metrics?
  • How do your customer service requirements impact these objectives?
  • What execution capabilities (or metrics) must be supported to meet these objectives?
  • What must your business do to differentiate itself in the marketplace?
  • What are the logical first steps to accomplish these objectives?

2. Maximizing Business Results: The Cost Factor

The key measure of the project’s success is whether the implementation of warehousing capability maximizes business results. This can be measured by comparing the benefits your business receives versus the cost required to generate them. Even if the ERP warehouse module is presumed to be “free,” it may not generate an ROI equivalent to that of a best-of-breed WMS because it lacks key functionality, or the vendor lacks the domain expertise to deliver missing functions through customization.

This is more about the TCBO, the total cost of business opportunity, than it is about TCO, the total cost of ownership. Functional fit, operational effectiveness, order-fulfillment costs, customer satisfaction and integration with existing modules/applications all contribute to the TCBO equation. Other factors include labor and inventory costs, and productivity. Unfortunately, most organizations focus only on controlling the initial costs of purchasing the solution and overlook the need to contain implementation costs. This often translates into buying the ERP warehouse module because it is included in a bundled license agreement. It is hard to convince most CFOs that a license that costs money is a less expensive option than one that is essentially free. But this measure is limited at best.

The additional costs that must be considered are the complexity of the implementation and the skills and time required to execute it; the functional fit of the solution and its ability to meet functional requirements without added time and cost to modify the product; and the training fees and learning curve end-users should expect.
The compromises made for functionality shortfalls, for example, can often add recurring annual costs that far exceed the perceived savings of the “free” license. Additionally, there is a perception that if the module is already part of an integrated solution, then the implementation will be simple and costs will be contained. This can be a dangerous assumption.

3. Functionality Fit

Functionality is a key component of a successful implementation. The functionality of the solution you choose MUST meet or exceed the requirements stated in your business strategy. Additionally, in today’s dynamic business environment, your ability to quickly and cost-effectively adapt the solution to your changing requirements and upgrade to the latest version are equally essential. Talk to your vendor about their upgrade process to ensure that you can take full advantage of their latest functionality enhancements without excessive time and cost. As previously discussed, business strategies are typically translated into a series of key performance indicators (KPIs). These KPIs are then used to measure the performance of each department. If the functionality is not present to effectively pick, pack and ship a customer’s complete order on time via the required shipping method to the correct destination, then how can KPIs associated with customer satisfaction be met? If excessive work-arounds are required to make the functionality fit your business requirements, how can labor utilization KPIs be met? If the solution is weak in terms of inventory management and control, how can KPIs for inventory cost and turn-times be met? Hence, functionality is the key to delivering the results required by your business strategy; it is the key to a successful implementation.

Many organizations utilize detailed functionality checklists to assess the functional fit of an application. While a valuable approach overall, there can be confusion between you and the vendor over the terminology used to explain functionality. Furthermore, vendors often look at these checklists as an obstacle that needs to be overcome so they are not eliminated from further consideration in the search process. Because this can lead vendors to over represent their capabilities, you should ask for demonstrations of key functionality you require. Most ERP warehouse modules force significant operational compromises in dealing with larger, more complex operations. Besides limited functionality and adaptability, the transaction-oriented ancestry common in these modules also creates limitations in complex warehouse operations where real-time direction and management of activities are a must. Although it is true that these transactions are updated as they occur, the presumed sequence in which these transactions are executed is typically not consistent with real-world activities in the warehouse.

A real-time execution paradigm for the warehouse floor is foreign to the architectural foundation of most ERP offerings.

For example, a WMS tracks exactly where each element/load of inventory is located in the warehouse, including material that has been received but not put away. Typically, this material is not available to fill orders. In many ERP-related systems, once a receiving document is completed, the inventory is available for picking even though it has not been put away. The transaction is complete, but the warehouse process is not ready to use this material for order fulfillment.

However, these types of limitations do not mean that there is no place for ERP warehouse modules. Many warehouses have smaller, less complex operations, even in major multinational corporations. In those situations, where the warehouse is small or simple and the value proposition for a third-party WMS installation is problematic, the ERP warehouse module should be considered.

A major point of difference between the best-of-breed WMS and ERP worlds is how they model the processes being executed in the real world within their applications. The solution’s model of the world and the fit with your operational world will drive whether the solution is seamless or incompatible. The completeness of this fit between two worlds and the ability of the software solution to adapt to the changes in the operational world are critical success factors for the implementation. This is where the typical financial transaction view of an ERP clashes with the operational realities of a real warehouse operation, regardless of its size. This is also where most best-of-breed WMS applications, with their in depth domain expertise, can add real value to your business in the form of measurable results. Ultimately, this should drive your decision.

4. Vendor Focus on Supply Chain Solutions

Understanding the vendor’s domain expertise and commitment to warehousing and logistics is an important element in this decision process. An overall commitment to the industry is essential and can be evidenced by membership and active participation in professional organizations focused on education and continual product improvement.

Vendors should demonstrate dedication not only to an industry vertical but also to a “horizontal” discipline. From a warehousing operations perspective, the contents of the box, case or container are not as important as how the box, case or container is handled. The fact that material is received into a warehouse as boxes on a pallet and shipped as eaches being picked from the boxes and packed with other eaches into a shipping carton is more important than the fact that the contents are pieces of clothing, electronic components, automotive parts or bottles of pharmaceuticals.

An extension of understanding the vendor’s commitment to warehousing and logistics is to understand what part of their corporate vision is made up of the product vision for this area (do they put their money where their mouth is). Historically, when ERP companies sensed a drop in the revenues from sales of their traditional, core products, they invested in other areas such as advanced planning and scheduling and customer requirements planning. These additions then became focal areas simply until the next new revenue stream came along.

One example of this is an ERP company that has not produced a new version of its warehouse application in more than two years. Its focus and R&D dollars have been directed elsewhere. For a best-of-breed vendor, the warehousing and logistics industry represents their focal area and is a strong indicator of their commitment. Best-of-breed vendors tend to invest heavily in R&D and support programs that strengthen their solution offering. The point in this comparison is to understand whether your selected vendor is truly committed to developing the type of software applications that will support your needs both now and in the future.

5. Company Culture

When choosing a product critical to the success of your business, it is necessary to view the vendor as a partner, and not simply as a vendor making a one-time sale. The reason for this is simple: Many system implementations experience some type of failure. The best way to avoid this is to establish a two-way partnership with your vendor so that all potential problem areas can be defined at the appropriate time and resolved before your operations—and therefore your customer relationships and competitive advantage— are put in jeopardy. As the demands of your customers change over time, it is important for you that the vendor will meet your expectations of responsiveness in terms of the new technology, support and assistance with modifications you may require. Ultimately, your company culture must be compatible with that of your vendor for any effective dialogue and collaboration to occur. Culture is driven as much by size as by common values. You need to understand the vendor’s stated values and then conduct reference checks with the vendor’s clients to learn whether these values are evident during projects.

6. Infrastructure and Architecture

The technological capability of your internal resources cannot be ignored in this
decision process. A broad skill set can more easily support a best-of-breed implementation alongside the ERP. If technology skills are more limited, it will be simpler if your organization only has the ERP to manage. In some organizations, the ability of either type of system to interact with other applications you or your trading partners have already implemented (e.g., TMS, small parcel freight rating, yard management, CRM, etc.) may be the more pressing infrastructure consideration. In such cases, the capabilities of most ERPs will be limited when compared with best-of-breed solutions. Best-of-breed WMS applications have always had to interface with other business applications (including ERPs) as well as communicate with trading partners via EDI or other electronic means.

The essential struggle here is driven by your decision either to address your application needs with a single monolithic infrastructure from one vendor (the ERP) or to have a portfolio of solutions to meet your unique needs. The motivation within an IT organization to choose a monolithic approach is quite simple; integrating disparate business applications is hard, dirty and detailed work, and the risk of failure is high (as has been seen in many well-publicized failures). The single vendor approach presumes that the vendor has actually done the integration. Yet, this is not always true. It is imperative that you ask the vendor to prove this assertion. In most organizations, the ERP functions as a replacement for a legacy financial and/or order management application. It may also be true that your organization has more than one ERP that must be addressed in any discussion of architecture (this is typically true in a company that has grown through acquisition). This should not be reason enough to force you toward the monolithic ERP approach. For the ERP to be the right infrastructure choice, it must have the ability to interact/integrate effectively with all of the applications you or your trading partners have already installed.

The architecture of an ERP typically solves integration with other modules using a proprietary approach that often leads to a limited set of external interface definitions. Trading partners must comply with these definitions. This application compliance requirement can be solved through the use of an EDI middleware product or the introduction of an EAI middleware solution. Best-of-breed WMS solutions tend to be more flexible in how they integrate with the applications of the outside world. Remember that for them, integration with disparate applications has always been a requirement. The maturity of their architectures usually leads to existing interfaces to major ERP solutions (e.g., SAP, PeopleSoft and Oracle) with similar approaches available for integration with the applications of trading partners by multiple means (e.g., EAI, EDI, XML, Web services and flat files).

For the ERP to be the infrastructure choice, serious consideration needs to be given to how it solves this complicated integration problem. But the ability to accomplish this is not an automatic “win” for the ERP. In fact, any application that works effectively with today’s EAI tools is going to be more flexible to accommodate a variety of standards and other applications than any one ERP solution will be able to do on its own. Many warehouse operations, especially those with high-volume pick, pack and ship requirements, include sophisticated automatic material handling equipment. This equipment might include conveyors, sorters, carousels, A-frame picking systems, pick-to-light systems, etc. Most best-of-breed WMS solution vendors have extensive experience integrating their solutions with these devices. This level of complexity is typically handled by third-party solutions when an ERP warehouse module is used.

7. Product Composition and Maturity

Product composition and maturity address the viability of the solution beyond a strict analysis of its functionality.

Composition

Composition deals with how the product is constructed. Is the technology sound? Does it provide for growth of the functions included and the addition of new functions quickly and cost-effectively without significant limitations to how that growth occurs? Will it handle a growing number of daily transactions as your business grows? If the vendor does not devote the appropriate attention to each of these areas, they are essentially shortening the useful life of the solution.

IT departments often seek applications with a composition that matches their own decisions for application development architectures within the company’s portfolio. The pitfall here is that the IT department will choose what it is comfortable with because that is what represents the best match with existing skills. However, choosing a packaged solution in today’s world does not mean that the IT department has to learn all the new technologies and product idiosyncrasies. The vendor and the associated support and maintenance agreements can provide this support on an outsourced basis, which often represents a significant savings compared to internal IT department costs.

Product Maturity

Product maturity is the outcome of the number of times the product has been “battle tested” by end-users, which results in the breadth and depth of industry-required features in the product. This only comes over time through a number of implementations in specific markets with varied business processes. For many ERPs, their warehousing modules are new additions with adequate functionality for less complex ways of performing warehousing activities. For other ERPs, the warehousing product has been available for years but is still functionally immature. It has been the victim of a lack of focus and the investment required to develop it in a timely manner.

Many of the best-of-breed solutions might have multiple ways to solve a particular functional requirement while the ERP module simply has one. ERPs believe that supply chain visibility is or will soon be the domain of the large ERP vendors. This view is too bullish in that it ignores the general lack of supply chain execution domain expertise within the ERP vendor organizations (warehousing, transportation, logistics, etc.). This lack of comprehension of the domain limits the ability of the ERP vendors to understand how to best construct event notification, visibility and drill-down analysis functions within their products. Only those vendors with an understanding of the true value of supply chain execution have taken their applications beyond four-wall control of the warehouse. Best-of-breed WMS vendors that have worked with EAI tools to build their visibility capability have both the technology platform and the domain expertise to be effective.

8. Implementation and Ongoing Support

Implementing an ERP module is not necessarily less expensive than implementing a best-of-breed WMS. What has been learned is that implementing either solution requires the support of a knowledgeable staff. It is essential to the success of the implementation that a complete plan be developed—one that includes configuration, hardware implementation, modification development (if needed), testing, conversion support and on-site user training. The development and execution of this plan requires experienced leadership and the support of top management.
Many organizations rely on integrators or consultants to provide this skill for the limited duration that it is required. This is appropriate with either option being considered.

A key implementation consideration is whether the vendor has a support staff available to assist you with the implementation of their solution—and whether this staff is knowledgeable both of the product and your industry domain. Ongoing support deals with the ability to perform backups on a moment’s notice, implement changes as needed, and manage the change process—be it code, supporting applications or configuration changes. ERPs with a centralized data model tend to require off-line time to execute many of these functions, whereas best-of-breed WMS vendors have developed techniques that allow these functions to be performed on an as-needed basis.

If either the vendor or your organization lacks the necessary skills, then it may be appropriate to seek a third-party integration consultant. This adds another selection process to the project in that the skills and fit of the third-party system integrator must be evaluated along lines similar to those used in selecting the solution vendor. This may add cost to the project as a whole and often delays the selection process. It may also prolong and dilute ROI. The real issue is whether you will receive a generic, low-value implementation or a high-value one based upon domain
expertise and proven warehouse-specific implementation and performance improvement processes.

9. Conclusion

Maximizing business results is the ultimate objective of a warehouse management system selection and implementation, and you cannot get there if the solution chosen lacks the functionality required to meet your stated KPI goals. If you don’t have a solid definition of your requirements and how they contribute to maximizing your success, you will not succeed. All of the other factors involved with choosing a solution are valid and important but must be subordinate to the focus of maximizing business results and ultimately, the long-term success of your business. If your customers do not get what they want, when they want it, the way they want it, for a price they are willing to pay, they will remember nothing else.

Choosing a best-of-breed WMS or an ERP warehousing module to meet these needs is not a simple exercise; it is critical to your business’ success in the market place. You need to define these requirements carefully with consideration for the future, not just the here and now. You need to evaluate all options against the same criteria and then compare the results. Considering total cost of ownership and your ability to accommodate new and changing business and customer requirements is critical. You must challenge the vendors you evaluate to prove the
true capabilities of their solutions—before you purchase. This decision is something that will impact your business, your operations and your customers for years to come. The value in the solution is in meeting your business requirements cost-effectively, with room for the future—not saving money on a solution that ultimately doesn’t protect your long-term competitive advantage or produce low total cost of ownership.

The Five Dirty Little Secret of WMS Industry

1. Many WMS will hinder your ability to differentiate.

Supply chain and logistics executives are typically interested in two simple things. First, they want to ensure that the product gets to the customer. in a way that meets the customer’s expectations (on time and in full). Second, they want to do this at the lowest possible cost to the operations they manage.

Your differentiation can be found in how—and how well—you can accomplish these goals. The catch, however, is that customer requirements and expectations are always changing. And you have no idea what will be required of your operations in six months, much less a few years. Ongoing success requires that you have a WMS that will help you meet your functional needs today, while responding quickly to unforeseen changes. When evaluating WMS, is it safe to simply assume that a vendor’s features and functions will help you meet changing needs in a way that will help you differentiate your offering? In any case, why would you risk your ability to accomplish these goals—even a little—when the stakes are so high?

Standard WMS functionality that incorporates industry best practices can be useful for most facets of your operations, but it isn’t enough for you to truly differentiate your operations from the competition. A WMS that enables agile response to change can be a competitive weapon. The problem is that most WMS take a flawed approach to addressing change. These systems feature a wealth of functionality option switches in an effort to keep up with their customers’ changing needs. However, no system can possibly include all the functionality options necessary because every business has different needs. In these types of systems, anything beyond the functionality offered with these switches must be incorporated with the addition of expensive custom coding, most often performed by the vendor. This code is added during the original system implementation to bridge the gap between the standard product and your company’s unique needs.

As new requirements arise, you’ll either have to contact the vendor to make expensive changes, or you can make do with the options in the switches. In an effort to control costs, many companies ultimately forego making necessary changes (as well as upgrading, discussed in secret 2), slowly settling for the standard functionality of their WMS. They opt not to incorporate innovative processes that could help them differentiate their business. Your order profile, business strategy and unplanned events will change, requiring fast action if you are to succeed. When you need to change your WMS, you need a system agile enough to incorporate your new processes—quickly and cost-effectively. You know better than any WMS vendor out there what makes your operations and your customers tick. It’s key to implement a system that will truly enable your ability to take every possible advantage of new operational ideas.

What you can do:

  • Ask your vendor to give detailed demonstrations of how changes are made in the system.
  • Talk to customer references to find out how quickly they can respond to new requirements and how expensive these changes were. Ask how much change orders have added to the price of implementation and how much they cost on a recurring basis.
  • Find a consultant who is experienced in business evaluation and system selection. These firms provide strong guidance when it comes to performing operational assessments and carrying out vendor searches.

2. WMS upgrades can be a nightmare.

The WMS industry has largely been driven by providing services to customers, not developing agile software products. Many WMS vendors generate a great deal of revenue from customizing their standard solutions. These applications are not supportable over the long term. They can hold you captive to the vendor not only for ongoing changes necessary to keep up with new business needs, but often more importantly, the technological advances the vendor offers in the form of upgrades.

Why can such an undertaking paralyze your operations and your profitability?The reason: many conventional systems contain a shortcoming in their design in that many changes can only be accomplished through switches. Change requests that go beyond these switches require custom coding, which doesn’t carry forward with an upgrade. As mentioned in secret 1, this custom code is added during the original system implementation to bridge the gap between the standard product and your company’s unique needs. As further needs develop, more code is added.

In some situations, this reaches an extreme where so many changes have been made that any new modifications become a major undertaking, effectively reducing or even paralyzing the system’s ability to be altered at all. Upgrading these types of warehouse management systems with additional code-level changes leads to a potentially disastrous spiral of exorbitant costs, extended timeframes, and system and operational risk. All previous codebased modifications have to be re-applied when the system is upgraded.

For you this could mean a never-ending process that results in loss of competitive advantage and possibly irreparable damage to key customer relationships. At some point it could become difficult to recognize any return on investment because the upgrade process contains nothing but negative outcomes. The upgrade nightmares have been told. Companies today are becoming smarter in their technology choices and expectations. However, the WMS industry overall has been slow to respond to these needs with the right kind of solutions. Companies want to have upgradeable solutions and the autonomy to make solution changes without spending a lot or waiting for an opening in their vendor’s schedule. Because of this, a culture shift is going on as the industry moves from its vendor-centric, service-driven roots to more customer-centric, flexibility-driven enablement.

What you can do:

  • Evaluate the total cost of ownership for the system over several years and track this metric with vendor’s customers. Have users been able to make system changes themselves or was the vendor always involved?
  • Ask vendors for customer references to learn about the time, cost and overall approach to upgrades. Did changes carry forward or did they require re-application? Was custom code involved?

3. The so-called “service-oriented architectures” of many WMS will probably make you change your business practices to fit the software.

Demands for more flexible business software and emerging technologies such as XML, WSDL and SOAP have driven the adoption of serviceoriented architectures (SOA). And for good reason. SOA allows for cost savings and faster system changes. It drives low total cost of ownership by putting flexibility in the hands of the system owner. However, for the SOA to deliver these benefits, the applications must embrace flexible software intrinsically from the beginning of their development. Many software providers have taken legacy code bases and exposed elements of these code bases as services. While this does provide additional flexibility, it does not provide the level of flexibility that most businesses require. This approach lacks flexibility for two reasons. First, the company is completely dependent on the vendor’s decisions about which business functions are exposed as services. This means that flexibility will always be constrained by the software provider’s product roadmap. Second, this approach makes an invalid assumption that users will never need to change the underlying behavior of a service. A software provider with a truly flexible SOA will allow users to change the underlying behavior of a service to support unique business requirements.

The most important thing to remember is that legacy systems can be migrated to SOA, but this may have little positive benefit other than chasing a technology story or market requirement. An SOA is not a monolithic system constructed from inflexible, dated technology that has been patched to work with the latest standards. This approach is akin to retrofitting a Model T to operate on today’s roads. The resulting car will be “street legal,” but it would not contain the performance characteristics that most drivers expect. A true SOA is actually capable of manipulating the behavior of the system itself. Because of this capability, it will allow you to embrace the changes your business will face over the long term. You won’t have to change your business practices to fit your software.

What you can do:

  • Consider the cost advantage of true flexibility and evaluate the vendor’s business model accordingly. Learn how to distinguish vendors’ SOA claims—whether they differentiate technology for the sake of marketing, or clearly communicate an enduring strategic direction.
  • Ask vendors to demonstrate system changes and give specific examples of how customers have made changes. Option switches are not always an effective way to handle change.
  • Ask about how upgrades are carried out. Do previous changes automatically carry forward, or must the vendor or a consultant re-apply them to the new version?

4. Vendors’ idea of “meeting your requirements” can result in a messy hodgepodge of systems.

The following scenario has become common during WMS selections—in fact, you might have experienced it. Many companies go through the exercise of understanding their order profile and documenting their functional requirements across the business to gain a clear picture of the type of features required. They even gain budget approval and support from key decision-makers in their organization to begin the software project. So they send a request for proposal (RFP) to several vendors in the space, most of whom have been in the industry for more than 10 years. Almost all vendors answer that their systems are capable of providing the functionality requested. And yet…there are still horror stories of cost overruns and failed projects.

How can this be?

How SOAs Work A service-oriented architecture enables solutions to be constructed from pieces of business functionality exposed as services. These services span business logic, devices and all manner of business technology. They may be run separately and/or assembled in various ways to create business processes. If business needs dictate change, the services may be re-orchestrated to adapt to the change without involving costly edits to underlying code—in essence, customizations. If an architecture is truly an SOA, it should allow for upgrades without extensive consulting projects to bring system changes into the latest version. It should provide for a “platform” in conjunction with the operating system and a unique development environment that optimizes the behavior and assembly of the services rendering the solution. 4 Many companies wind up in this situation because they do not require vendors to give responses based on a single, deliverable WMS. The vendor might indicate that it meets all requirements, yet its response mixes functionality from several WMS—which doesn’t paint an accurate picture of what can actually be implemented. In fact, many vendors have multiple WMS offerings due to acquisition/consolidation. It is also impossible to document your specifications to the point of eliminating scope creep. You will want to change the system to meet your requirements. Features and functions do not save money and do not mitigate risk. The only thing that saves you money and mitigates risk is a system that matches your business needs today and can adapt to meet future requirements.

What you can do:

  • Demand the vendor stick with one specific WMS throughout the evaluation cycle—for RFP responses, demonstrations and customer references given. Vendors with multiple systems may respond positively for RFP questions and give demonstrations based on functionality contained in different systems. You don’t want to receive an RFP response that looks favorable given your requirements only to discover later you’d need to buy three separate WMS to actually have the right breadth.
  • Ask about the vendor’s license-to-services ratio to see if you’re buying a solid software product or simply services to tweak your system continually over the long term.
  • It is also important to consider the cost-to-benefit ratio: buying a WMS is not about gaining ROI over 18 months. It is about total cost of ownership over a multi-year period. The biggest cost of a system is likely not purchasing the software or even the services to initially implement it. It is usually forced upgrades and making ongoing changes, which can often surpass the cost of license fees.

5. Most supply chain execution suites aren’t really sweet.

The typical supply chain execution (SCE) suite is comprised of systems that manage warehousing (WMS), transportation (TMS), yard operations (YMS), labor (LMS) and have some sort of application to link them together. Optionally, this family may even extend to supplier enablement and other applications. Order management and supply chain planning are typically seen as supply chain management or advanced planning and scheduling solutions, not supply chain execution.

What makes a suite truly valuable is clear visibility to material flows in a boundary-less state. This requires a single, scalable technology structure that spans all applications—one platform, one database, one user interface and one set of tools. In the 1990s, ERPs had to have each of these elements (and a few others) to be considered an ERP. As these requirements were adopted, they rendered silos of functionality and technology obsolete (i.e., material requirements planning (MRP) vs. order management vs. financials). The integration of MRP with order management, finance, DRP, CRM, etc. was predicated on an integrated database that could scale. But is this the case in SCE suites today? Not usually. Many vendors have pieced together their suites through acquisition. Some even have multiple WMS applications which they market as being “industry-specific.”

However, these applications typically reside on different platforms. They rarely share data at a common platform level; instead they rely on merely interfacing disparate modules. In addition, they are typically developed by different teams that use different technologies and focus on contending business objectives. These are not suites. They really are different software products sold by a single vendor. This poses many risks to buyers. You may select a product that is soon to be discontinued or that will become secondary to other solutions in the vendor’s long-term product development plan. You may also have to spend considerable hardware dollars to make applications work together.

It is not uncommon for some supply chain execution vendors to require a mixture of AS/400®, UNIX® and Windows® servers to run the entire suite of applications. Additionally, there may be a mix of core technologies such as Java®, .NET and legacy code (RPG, COBOL) running across this collection of disparate servers. This inconsistent approach requires your internal staff to be fluent across hardware and technologies that are not core to your IT strategy. The deployment may also be problematic (if you try to launch them together) or expensive (because you’ll most likely phase them in).

What you can do:

  • Evaluate platform and interface requirements closely. Ask vendors if they built the application or bought it. If they built it, are all solutions based on a single execution platform? Do they share a common data model or rely on interfacing their modules?
  • Ensure that your maintenance finances will go toward R&D or investment in the platform your purchased; you don’t want to be funding the continued development of another technology (or technologies) with no benefit to your own system.

Conclusion

Purchasing a WMS is an important decision for your business. A great deal of productivity in the United States over the past two decades has beenbased upon WMS applications. WMS software vendors are able to drive ROI better than most other software industry players. You can boost your company’s ability to realize its own ROI by understanding the nature of the industry and demanding more from the vendors you evaluate.

The Rise of Fourth Party Logistics (4PL)

01-4plThe customers’ expectation towards external providers is continually growing. Third party logistics companies are necessary to continuously invest in procuring technologies and developing skills to meet growing expectations. Sometimes, the required internal capabilities in order to provide the broad set of skills, technology and strategies go beyond the capabilities of third party logistics companies. So as to meet the expectation of customers, the third party logistics companies may align with leading edge consulting 4 firms, technology providers, and other logistics providers to enhance their own capability and provide integrated service to customers. This group of organizations can be called Fourth-Party Logistics Providers (4PL) (Bade and Mueller, 1999). The 4PL Provider was first registered and defined by Andersen Consulting, now Accenture, in 1996. It defines “a 4PL is an integrator that assembles the resources, capabilities and technology of its own organization and other organizations to design, build and run comprehensive supply-chain solutions” (http://www.accenture.com).

The Differences between 3PL and 4PL

In the traditional view, management consultants focus on strategic supply chain solutions such as reinvention and transformation. They utilize their consulting skills to redesign and integrate the whole supply chains. Also, they may focus on improving specific supply chain functions. In contrast, 3PL focused on operational issues such as implementation and execution. This includes the integration of technology across the members of supply chain and the movement of material and goods within supply chain (Bade and Mueller, 1999). The 4PL try to leverage the capabilities of both management consultant and third-party logistics providers to provide the 4PL solution which include reinvention, transformation, implementation and execution (Blade and Mueller, 1999). Also, the 4PL can be an interface between a primary client and several logistics provider. They make sure all providers work together (Tom, 1999). This reduces the coordinating effort by the primary client. The main reason for the appearance of 4PL is the service vacuum of 3PL. In contrast to 3PL, 4PL focus on process, people and technology. It combines these three elements and gives customer more reasonable expertise to meet their demands. To be a successful 4PL, both strategic and tactical know-how are necessary. They should have the real logistics experience that can better understand the situation of process, people and technology.

Furthermore, 4PL handles the process and helps customers manage it. In his article (http://ops.fhwa.dot.gov), Jack Roeser, a long-time logistics consultant, defines the difference between a 3PL and a 4PL provider in this way: “[A 4PL] acts as the integrator of multiple 3PLs all working for a company which requires multiple 3PL services, no 3PL having the ability to provide all of the required services itself. The multiple 3PLs work through the integrator to the company itself. The 4PL integrator…is the direct contact to the company.”.

The Expanding Role of Third Party Logistics (3PL)

01-truckThe modern information management systems available today to logistics businesses of all sizes generate measurable improvements in warehouse operational efficiency. These systems impact floor operations, administrative operations, transportation systems and billing processes. They reflect a new set of realities that make advanced information systems a requirement for short- and long-term success. Traditional Warehouse Management Systems (WMS) were stand-alone products primarily focused on inventory control and the creation of certain routine documents. There was little or no operational knowledge built into these systems. As long as the inventory balanced against the activity, everyone was happy with the results. In the 3PL arena, these systems were somewhat enhanced by activity billing features, but these were usually implemented as an afterthought and not truly integrated to the process. Therefore, these traditional WMS products left operational management completely in the hands of the warehouse personnel and their supervisors.

02-fig1

The effective range of responsibilities of a 3PL now extends beyond the four walls of your warehouse. Clients are now commonly asking you to manage everything from the front-end where orders are captured, all the way through the warehouse, shipping dock, and to the customer’s location where delivery is made. Table 1 shows the possible systems you may need if the work you are being asked to handle extends beyond your walls.