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Supply-chain execution software is supposed to be easy to deal with. It meets a well-defined need, such as improved warehousing or transportation management. And it yields a quick payback, at least compared to big planning or accounting systems.
Recently, however, companies have begun asking for more from their execution tools. Vendors are responding with systems that are broader in scope, address unique challenges and link up with other parts of the organization. The result is a more complex universe of options, along with new thinking about what used to be viewed as discrete links in the chain.
Casual Male Retail Group Inc., the nation's largest retailer of big and tall men's apparel, purchased what might be considered a typical warehouse management system from Manhattan Associates. But the company's warehousing and inventory needs are anything but typical. In catering to this special segment of customer, Casual Male seeks to outdo the competition on product availability. It carries up to 48 sizes for each style of pants-some 30,000 SKUs overall. "Our [inventory] turns can be likened to a shoe retailer instead of apparel," says chief operating officer Dennis Hernreich.
Based in Canton, Mass., Casual Male is the product of assets picked up in bankruptcy court by Designs Inc. in May 2002. At the time, Designs was an operator of outlets for Levi's and Dockers; it sold the last of those businesses in November 2004. Now, it operates more than 500 Casual Male Big & Tall Stores, including 13 in Canada, as well as 22 under the name of Rochester Big & Tall. The company also maintains an e-commerce and catalog business.
Designs acquired a valuable asset, but one with poor distribution infrastructure. Productivity and order-processing time at the Canton distribution center was unacceptably low, says Hernreich, with key activities carried out manually. The WMS from Atlanta-based Manhattan gave the company automated labor applications, along with streamlined processes and global visibility. In particular, it allowed Casual Male to stock a large number of SKUs while keeping a lid on inventory costs. It also supports special situations, such as the handling of truckloads of seasonal pre-pack merchandise. The offloading, sorting, repackaging and shipping of such items used to take between two and three days; now it's all done in two hours.
Of special concern to Casual Male was the system's ability to handle growth, especially in the catalog and internet business, which is managed in the same building as store-bound product. Hernreich says the Manhattan WMS will work well with any new physical handling system that the company might buy, including a new sortation system which would place all jeans into one slot and drop them into the appropriate box or bucket for shipment to individual stores.
The company may soon ratchet up customer service another notch. Hernreich says it's considering a guaranteed in-stock program for core items. "If we can't get it to you in five days," he says, "then you'll get it for free."
For Casual Male, supply-chain execution isn't primarily about cutting costs or boosting the efficiency of internal operations, as attractive as that prospect might be. "Our issue," says Hernreich, "is about not disappointing our consumers."
Increasingly, companies aren't looking at execution tools in isolation, says Prashant Bhatia, director of product management with Manhattan Associates. Casual Male installed its WMS simultaneously with a merchandise management system, incorporating planning and allocation functions, from JDA Software Group Inc. And Manhattan, which started out as a pure WMS vendor, now offers software for transportation management (through the acquisition of Logistics.com) and distributed order management (from Avere Inc.), among other things. Says Bhatia: "Planning and execution solutions are going to begin to blur over the next few years."
All About the Web
The internet sits at the core of all modern-day execution software. ADP Investor Communication Services, which mails out more than 850 million financial documents to corporate shareholders each year, was in need of a Web-based system for ordering from suppliers. Last August, Roseland, N.J.-based ADP purchased the Supplier Advantage application of HighJump Software.
Supplier Advantage gives ADP visibility of what its suppliers have produced, according to Cliff Heney, senior director of material and logistics. Say the company needs to order a couple million envelopes. It can instantly view what product vendors have on hand and what has already been shipped. Arriving shipments have barcoded labels, created to ADP's specifications, identifying their origin and contents.
Decisions on price and quantity have already been made for the year. By automating the execution of those contracts, ADP spares itself hours of phone calls and reams of spreadsheets, Heney says. Moreover, through labeling and automated receipt with advance shipment notices (ASNs), "we took a step out of the operation."
ADP ships out of a 430,000-square foot warehouse in Edgewood, N.Y. A HighJump WMS ties the operation together. Heney says the company can easily handle surges of activity during its peak season of March and April, when most financial reports are sent out.
More integration, especially with suppliers' inventory systems, is in the works, says John Miceli, ADP's warehouse systems manager. For the moment, the transfer of inventory data is done manually, a system which parties at both ends of the order process would like to discard in favor of "a seamless operation," he says.
Companies have worked hard to optimize ERP systems at one end, and execution at the other. Now the challenge is to link the two, says Chris Heim, president and general manager of Eden Prairie, Minn.-based HighJump. In measuring performance, enlightened executives are going beyond the amount of product that can be pumped through a factory, or inventory through a warehouse.
"People are [adopting] much more of a supply-chain concept," Heim says. For software vendors, that means being able to demonstrate a lower total cost of ownership, rather than just the ticket price of a given application. Special attention must be paid to the aftermath of an installation, including the cost of upgrades, additional reports and new technology such as radio frequency identification (RFID).
Still to be achieved is the seamless flow of data between businesses. Heim says companies have built a number of strong links between execution and planning within their own walls (although others dispute that they've come even this far). "Where information is sticking," he says, "is between companies and their supply-chain partners." That includes the crucial link between buyers and suppliers.
A major area of focus for users of execution systems is the management of mobile resources such as containers, trucks, material-handling equipment, shipments and even people. The explosion of wireless and handheld technology has liberated both workers and their equipment. But it has also created new challenges in real-time visibility and clean data transfer. RedPrairie Corp., headquartered in Waukesha, Wis., has responded with an application which integrates various data-collection tools, including RFID (using both active and passive tags), barcodes, cell phones and satellite tracking. The whole system is designed to hook up with ERP, WMS or other supply-chain applications, keeping track of assets both in motion and at rest.
The development of mobile resource management (MRM) leads directly to workforce performance management, a contentious issue for workers who are uncomfortable with their every move being tracked by bosses. But Mike Dempsey, RedPrairie's vice president of corporate strategy and business development, says this seemingly Orwellian tool is really a means of optimizing labor scheduling. And it gives workers a clear set of standards against which they are measured, coupled with incentives for top performers.
Cardinal Glass Industries, also based in Eden Prairie, Minn., is using MRM to keep track of the heavy, expensive racks used to transport its product. Cardinal, the world's largest maker of insulated glass, has 26 plants across the country. Distribution center manager Jeff Haney says customers often receive racks from one plant, and return them to another. New MRM software from RedPrairie can help the company to balance its inventory and keep product flowing smoothly. The system, employing active RFID tags, is in the pilot stage.
Cardinal is also implementing a RedPrairie WMS at the Hudson facility, which runs a dedicated, just-in-time operation on behalf of its biggest customer. Drawing on product from four plants, the supplier keeps five hours of inventory at the customer's site, shipping out glass in the precise sequence that it's needed by the window manufacturer. The old WMS, which will be completely replaced as of July 1, dates back to the third-party logistics provider that used to run the facility, says Haney.
The RedPrairie WMS has several advantages over its predecessor, Haney says. It provides engineered labor standards for higher productivity, it can locate product by slot, and it gives customers better visibility of items in the pipeline.
TMS Software Matures
Outside the warehouse walls, companies are looking for ways to stretch the capabilities of their transportation-management systems. Created to help companies book and track shipments, mostly by truck, TMS software is now expected to provide status information over multiple modes. And it must handle related tasks such as rate calculation and shipment planning.
In the case of the latter, TMS must integrate with WMS so that the optimization of one link in the chain doesn't sub-optimize another. (For example, a TMS might call for the use of cost-efficient truckloads, leading to additional dwell time for shipments in the warehouse.) Throw in recent congestion on the road, rails and at sea, along with the desire of many companies to grab control of their inbound transportation, and a state-of-the-art TMS becomes more critical than ever.
The internet has given companies a single place where all information resides, says John Murphy, director of product marketing with Shelton, Conn.-based G-Log. In theory, data generated at the execution level can be used to balance supply and demand. Product can be released against purchase orders, production plans, production lots or standing inventory. With better responsiveness in execution, companies gain more flexibility on the production side, especially for global orders with longer lead times.
Through the global rollout of G-Log's TMS platform, known as GC3, DuPont saved $25m in inventory costs and cut at least three days out of its order-cycle time, Murphy says. The company can view all shipments and demand signals on a global basis, allowing it to balance product within its massive supply network.
Transportation systems used to be focused solely on reducing cost, says Murphy. Now they're evolving into tools for meeting customer demand. Pricey airfreight, for example, might be the way to go in cases where a buyer is running out of stock. Systems that tie together discrete applications such as TMS, WMS and even ERP can give companies a higher view of the supply chain, yielding the best decisions from a customer perspective. At the same time, they can issue alerts when any part of the network malfunctions.
Just two years ago, many companies didn't want to talk about full-blown TMS packages, says Paul Svindland, senior director of transportation and logistics with ICG Commerce in King of Prussia, Pa. Their sole focus was on getting better freight rates. But the past nine months have seen a shift of attitude. Companies now want to know how TMS meshes with ERP and other components of information technology. "Clients want to understand the true value of TMS," he says.
Why the sudden change? After several years of tight or non-existent IT budgets, companies are finally spending again. What they're buying is tools that demonstrate a clear return on investment and make a solid business case for supply-chain improvement. On the TMS side, they want a system that will help them choose the right carrier for the right lane.
Still, there are gaps in the system. Few companies have done an excellent job of integrating all of their supply-chain systems, says Svindland. The problem isn't a lack of technology; it's people. Different individuals are responsible for making decisions on planning at one end, and execution at the other. Even TMS and WMS management remains fragmented in many cases. Responsibility for IT budgeting, too, might be scattered throughout corporate silos.
By next year, more companies will be unifying their systems across transport modes and business processes, Svindland predicts. "We'll start hearing some very good success stories," he says.
A Growing Complexity
No TMS vendor can currently cover all modes on a worldwide basis, claims Svindland. But that's changing, too. More and more, companies are paying attention to the complexities of global trade. Security concerns in the post-9/11 era have given rise to a host of new regulations and demands for corporate oversight of trading partners throughout the global supply chain. At the same time, shippers are grappling with surcharges from carriers and bureaucratic requirements by origin and destination countries alike.
In response, vendors are offering a variety of execution software for managing cross-border trade. Atlanta-based UPS recently unveiled TradeAbility, a system which helps global shippers figure out duties, taxes and transportation costs, as well as access compliance rules in dozens in countries.
Such tools are an answer to increased global sourcing by manufacturers, says Alan Amling, director of UPS's international forwarding and customs brokerage arm, Trade Direct. Overseas sourcing might cut costs, but it complicates the everyday details of logistics. Services like TradeAbility are a supplement to UPS's basic tracking capability, and can be integrated into customers' web sites, Amling says.
UPS hopes that global companies, as they rely more heavily on outsourced manufacturing, will in turn outsource more of their logistics processes to experts. The idea is to offer a full range of services and systems, says Amling. Trade Direct will pick up shipments at the point of origin, consolidate them into full containers if necessary, move them through the U.S. destination port, and deliver to the customer's door, either via less-than- truckload or UPS's traditional small-package service. Says Amling: "We've staked our future on globalization."
Not surprisingly, some of the big "enterprise" software vendors are getting into the act as well. Walldorf, Germany-based SAP AG has recently updated its Global Trade Solution (GTS) to help companies do business under the North American Free Trade Agreement (NAFTA) and European Union trade pacts. It promises to automate the entire trade process, including vendor certification, as well as help companies comply with all documentation requirements of those agreements.
In the wake of 9/11, knowing one's end customer is vital, says Neetin Datar, director of product marketing with SAP Labs LLC in Palo Alto, Calif. The job of vetting can no longer be handed over to a freight forwarder, he argues, even at a time of increased reliance on third parties.
Meanwhile, efforts by government to modernize its information systems are pushing shippers to address their own technological prowess. Fax and hard copies are no longer acceptable ways to transit key documents to Customs and other agencies. As a result, says Datar, "there's been a huge uptick in interest in GTS."
A Triple Threat
Globalization is having a three-pronged effect on companies and their supply-chain execution systems, says Datar. They are increasing their reliance on strategic sourcing overseas. They are under enormous pressure to boost top-line growth by selling into new regions of the world. And they are relying more heavily on third-party manufacturers in China and other countries where labor is cheap.
No one execution provider can do it all. UPS has gathered around GTS what Datar dubs "a partner eco-system," consisting of carriers and other service providers who support the movement of product from origin to destination. GTS acts as the information repository for all partners, so that a change in customer orders can ripple throughout the network.
The flow of data is far from perfect. "Today, it's a major, major problem," Datar admits. He says companies are moving slowly toward an integrated environment in which information moves effortlessly from point of execution to higher-level planning or transactional engines.
One place where TMS is thought by experts to be lacking is ocean transport. The quality of software for managing the movement of goods by sea lags that of trucking, where TMS got its start. But a recent ruling by the U.S. Federal Maritime Commission could spark a change in that area.
In yet another step toward deregulation of the commercial maritime sector, FMC said that non-vessel operating common carriers, the intermediaries that typically consolidate smaller shipments into full containers, can enter into confidential service contracts with underlying ocean carriers. In the past, only the ship operators themselves have been accorded that privilege. With NVOs rushing to sign private contracts with volume discounts, "ocean-specific TMS applications may now have a reason to come into [their] own," according to a recent report by AMR Research consultant Greg Aimi. Contracting parties will need procurement optimization, rate and service databases, access to sailing schedules and settlement features, he says.
The change also opens up new opportunities for vendors such as Alameda, Calif.-based GT Nexus, which offers a portal to link ocean carriers with their customers. As NVOs jump into the confidential contracting game, ocean-freight procurement is likely to become even more complex, prompting shippers and intermediaries to seek help from execution-software vendors. Manufacturers will also be looking for ways to curb the rise in logistics expense that is the natural outgrowth of outsourcing to China, says Greg Johnsen, vice president of marketing with GT Nexus.
The ever-present focus on cost will drive companies to embrace the "on-demand" model for execution software, Johnsen predicts. Vendors like IBM and Siebel Systems have pioneered the notion of charging clients only for the services that they actually use, foregoing expensive software licenses. Now that approach promises to revolutionize the execution space as well. Multi-partner functions such as shipment and inventory tracing are a natural candidate for on-demand services, Johnsen says.
Shippers and vendors are only beginning to tap the potential of execution systems for managing multimodal transportation on a truly global scale. As Johnsen puts it: "It's an open category. It's early."
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