Executive Briefings

Third-Party Business: Dream or Nightmare?

If selling software to individual companies is like fishing for trout, then selling to a third-party logistics provider would be like hooking a whale.

That's how Renaissance Software Inc. must have felt when it secured Air Express International (AEI) as the first 3PL user of its warehousing software package on behalf of multiple customers. Renaissance quickly found out how demanding its newest client would be.

First rule of third-party logistics: Don't say no. So when AEI announced that the entire system had to be up and running within six weeks, Renaissance scrambled to comply. It was merely responding to the same kind of service expectations imposed on AEI by its own customer base.

Renaissance, based in Lake Success, N.Y., signed a contract with AEI, headquartered in Darien, Conn., in October of 1997. The package in question was Renaissance's International Warehouse Management System (IWMS). While AEI licensed a variety of supply-chain applications from Renaissance, its primary interest at the outset was in installing warehouse software that could be applied to any customer.

The buyer's decision was by no means automatic. Steve Schwark, AEI's vice president of worldwide logistics, hired an outside consultant to validate his choice of Renaissance. In the end, the consultant agreed that the vendor was best for AEI, both in software functionality and sales support by management. As for Schwark, he was lured by the system's AS/400 platform, conforming to AEI's own, along with its ability to handle multiple customers and shipments moving under humidity and temperature controls.

What put Renaissance over the top, said Schwark, was its willingness to meet AEI's specific requirements, including the need to respond quickly to the underlying account base. "As much as you try to convince new customers not to add unique requirements to your plate, they always seem to want to do that," he said.

"They took the time to understand that we were going to be different. There was a lot of exchange of information and business plans." - Steve Schwark of AEI

In reality, about 80 percent of the system is usable by all customers without the need for modifications, said Schwark. But that remaining 20 percent can pose problems if the software provider isn't willing to cooperate. In addition, AEI needed IWMS to blend smoothly with other parts of its information-technology offering, including transportation management.

In turning to Renaissance for WMS, AEI was going with a vendor that had no prior experience with third parties. The package was bound to be deployed differently than in the past. "You're always implementing, always winning new business," said Steven J. Christensen, vice president of sales with Renaissance. Which may help to explain why Schwark sought backup from a consultant.

Even now, he admits to some initial hesitation. "You always have a little uneasiness," he said. "But they convinced us that they had the desire and the wherewithal to support our needs. We decided it was worth the risk."

Renaissance's first implementation for AEI was at a multilingual warehouse in Singapore. But the job is far from finished. AEI's worldwide warehouse network totals some 2 million square feet, with individual facilities ranging in size from 5,000 up to 125,000 square feet.

As of May, the task of installing IWMS at all locations was about 60 percent complete. At the same time, AEI was looking to another software provider to create a bonded-warehouse module for its European operations. The whole project was due to be finished by the end of the year.

Having a sophisticated WMS in place systemwide is of clear benefit to AEI, which is depending on the package to enable 20 percent annual growth in its warehouse product. But Renaissance wins, too.

The arduous task of supporting AEI prepares the vendor for additional sales to third parties - a seemingly endless source of new business. Renaissance continues to handle most of the system changes demanded by AEI's customers, as well as 70 percent of warehouse personnel training, according to Louis J. Schilt, chief operating officer.

His chief concern is that companies tend to implement too quickly. "They don't want to do the classic business study before going live," Schilt said. Training, too, may get short shrift if a warehouse is under intense pressure to turn on the system. And companies end up paying for their impatience in the end.

It was the commitment of both sides to a true partnership that ensured the successful implementation of IWMS at AEI's facilities. Schwark praises the vendor for paying attention to the third party's unique needs.

"They took the time to understand that we were going to be different," he said. "There was a lot of exchange of information and business plans."

AEI drew heavily on the resources of Renaissance to get the system in place - and was willing to pay for that expertise. "We were both looking for a relationship where we could make some money," Schwark said.

Schilt attributes Renaissance's success to its willingness to do whatever it takes to support a valued client. Often that meant long hours for the vendor's employees, but Renaissance made the deadline. And it learned just how demanding third-party logistics and warehousing customers can be.

"Anybody who wants to get into the 3PL or 3PW business had better be ready to jump through hoops," Schilt said.

If selling software to individual companies is like fishing for trout, then selling to a third-party logistics provider would be like hooking a whale.

That's how Renaissance Software Inc. must have felt when it secured Air Express International (AEI) as the first 3PL user of its warehousing software package on behalf of multiple customers. Renaissance quickly found out how demanding its newest client would be.

First rule of third-party logistics: Don't say no. So when AEI announced that the entire system had to be up and running within six weeks, Renaissance scrambled to comply. It was merely responding to the same kind of service expectations imposed on AEI by its own customer base.

Renaissance, based in Lake Success, N.Y., signed a contract with AEI, headquartered in Darien, Conn., in October of 1997. The package in question was Renaissance's International Warehouse Management System (IWMS). While AEI licensed a variety of supply-chain applications from Renaissance, its primary interest at the outset was in installing warehouse software that could be applied to any customer.

The buyer's decision was by no means automatic. Steve Schwark, AEI's vice president of worldwide logistics, hired an outside consultant to validate his choice of Renaissance. In the end, the consultant agreed that the vendor was best for AEI, both in software functionality and sales support by management. As for Schwark, he was lured by the system's AS/400 platform, conforming to AEI's own, along with its ability to handle multiple customers and shipments moving under humidity and temperature controls.

What put Renaissance over the top, said Schwark, was its willingness to meet AEI's specific requirements, including the need to respond quickly to the underlying account base. "As much as you try to convince new customers not to add unique requirements to your plate, they always seem to want to do that," he said.

"They took the time to understand that we were going to be different. There was a lot of exchange of information and business plans." - Steve Schwark of AEI

In reality, about 80 percent of the system is usable by all customers without the need for modifications, said Schwark. But that remaining 20 percent can pose problems if the software provider isn't willing to cooperate. In addition, AEI needed IWMS to blend smoothly with other parts of its information-technology offering, including transportation management.

In turning to Renaissance for WMS, AEI was going with a vendor that had no prior experience with third parties. The package was bound to be deployed differently than in the past. "You're always implementing, always winning new business," said Steven J. Christensen, vice president of sales with Renaissance. Which may help to explain why Schwark sought backup from a consultant.

Even now, he admits to some initial hesitation. "You always have a little uneasiness," he said. "But they convinced us that they had the desire and the wherewithal to support our needs. We decided it was worth the risk."

Renaissance's first implementation for AEI was at a multilingual warehouse in Singapore. But the job is far from finished. AEI's worldwide warehouse network totals some 2 million square feet, with individual facilities ranging in size from 5,000 up to 125,000 square feet.

As of May, the task of installing IWMS at all locations was about 60 percent complete. At the same time, AEI was looking to another software provider to create a bonded-warehouse module for its European operations. The whole project was due to be finished by the end of the year.

Having a sophisticated WMS in place systemwide is of clear benefit to AEI, which is depending on the package to enable 20 percent annual growth in its warehouse product. But Renaissance wins, too.

The arduous task of supporting AEI prepares the vendor for additional sales to third parties - a seemingly endless source of new business. Renaissance continues to handle most of the system changes demanded by AEI's customers, as well as 70 percent of warehouse personnel training, according to Louis J. Schilt, chief operating officer.

His chief concern is that companies tend to implement too quickly. "They don't want to do the classic business study before going live," Schilt said. Training, too, may get short shrift if a warehouse is under intense pressure to turn on the system. And companies end up paying for their impatience in the end.

It was the commitment of both sides to a true partnership that ensured the successful implementation of IWMS at AEI's facilities. Schwark praises the vendor for paying attention to the third party's unique needs.

"They took the time to understand that we were going to be different," he said. "There was a lot of exchange of information and business plans."

AEI drew heavily on the resources of Renaissance to get the system in place - and was willing to pay for that expertise. "We were both looking for a relationship where we could make some money," Schwark said.

Schilt attributes Renaissance's success to its willingness to do whatever it takes to support a valued client. Often that meant long hours for the vendor's employees, but Renaissance made the deadline. And it learned just how demanding third-party logistics and warehousing customers can be.

"Anybody who wants to get into the 3PL or 3PW business had better be ready to jump through hoops," Schilt said.