Every cloud has a silver lining

LinkedIn +

As the economy flounders and margins become increasingly tight, companies are turning to their supply chain to save some extra pennies and there seems to be no better solution for improving efficiency than implementing a supply chain execution system.

Chad Collins, vice president of marketing and strategy at HighJump, describes SCE as the “transactional backbone” to any supply chain operation. He says: “SCE systems are the only types of supply chain technology that are inherently able to deliver visibility and collaboration – both of which are critical to the success of your supply chain.”

However, he reckons more and more customers are now demanding underlying flexibility too to cope with ever changing market conditions. “Companies want to position themselves strongly for when the economy begins to recover. They are looking for maximum flexibility so they can adapt when they need to and expand in the future.”

At first glance investing in new technology as we head into a recession might not seem like the wisest move, but Alex Mills of Chess Logistics Technology says improving warehouse systems during a downturn could actually be a good idea as not only could it help your company in the short and medium term, “it could also leave it more efficient and better organised to cope with economic recovery later”.

It does seem that the types of applications customers are looking for are changing though. Collins says: “More customers are focusing in on heavy operation systems that can support their business now in manufacturing products, loading trucks or delivering goods, rather than planning or process optimisation where return on investment is a bet on future sales, instead of hard operational expense reduction.”

The increase of globalisation in the market place has altered the way supply chains operate, as tracking data has become more complex, so the need for traceability and visibility is even more apparent.

But, Ronald Teijken, industry executive for manufacturing operations EMEA at Sterling Commerce, suggests: “There is still a lack of integration with partners across the supply chain in many companies. In fact, recent research from Sterling Commerce revealed that nine out of ten European retail and manufacturing businesses are struggling to automate the order-to-fulfilment cycle, as a result of major application integration challenges.

“Without integration there is little information and without information it’s impossible to achieve visibility. Investment in integration and cross-enterprise order management solutions for demand and fulfilment will deliver multiple opportunities for cost reduction in traditional supply chains, which cannot be achieved by traditional ERP and/or MES. It will also enable companies to have much greater visibility of the supply chain.”

But it’s not all doom and gloom. Andrew Kirkwood, executive director of RedPrairie, says: “Despite the economic slowdown, from our perspective we are still seeing significant demand for our warehouse management systems… We are also seeing increased demand for our transport management system, which I think has been triggered by the rise in fuel prices earlier this year.”

Call for the company’s labour management solution is also increasing. After deploying RedPrairie’s Warehouse and Workforce Management Systems at its Northampton distribution centre, John Lewis was able to improve operator efficiency by 16 per cent and reduce labour costs by eight per cent through automating time and attendance management, analysing workforce metrics and improving the efficiency of key processes. As a result, the systems have now gone live at all six John Lewis sites.

Dematic’s Simon Barnwell, sales manager integrated systems northern Europe, agrees that optimising labour productivity is a critical element of any supply chain operation, particularly in the current economic climate. “Correctly designed and implemented, software systems can play a key role in ensuring that labour resources are used as productively as possible, and that the best performance is achieved from individual members of staff.

“Within a DC, Dematic’s labour productivity software module can show precisely where and when staff will be needed to meet daily targets. Over the longer term, forecasting can be used to indicate labour requirements to meet seasonal peaks or troughs in demand.”

But in these turbulent times outlaying huge amounts of capital can be a daunting prospect. The initial investment can be substantial and although the outcome of a successful deployment is likely to create huge savings in the long run, when the market is in such a state of flux it’s understandable that companies are reluctant to part with their cash.

In light of this, the concept of cloud computing as a method of IT delivery, which encompasses Software as a Service (SaaS), is becoming increasingly attractive to companies, particularly those having to cut back on IT spend, as it offers lower cost of entry, quicker deployment and fewer risks. “SaaS has been fashionable for a few years now, displacing the vogue for application service providers that began in the late nineties. Today, cloud computing has become the hot technology that will change everything.

“In reality, all are variations on one simple proposition: that it’s a good idea to let someone else manage the applications you use while you access them as you need via a network connection… SaaS frees customers from the IT management business and gives them time to focus on running their real business.”

Teijken says: “Additionally, companies do not need to invest in implementation, upgrades, or meeting the latest industry standards and compliance, so implementation and maintenance is faster, cheaper and more efficient, increasing time to market and ROI.” In today’s climate, he adds, companies are concerned at ROI figures over one or two years, which is half what it was a few years ago.

However, although momentum is increasing, on the whole SaaS still seems to be a fairly unfamiliar concept. According to Prologic’s recently published Technology in Fashion report, produced in partnership with Oracle, only 43 per cent of respondents were even aware of SaaS.

The research, which represents the views of managing, finance and IT directors from across the UK’s fashion retail market, discovered that few within the sector had made any attempt to understand “the new, lower risk approaches to achieving technology change”.

Effective multi-channel

Sam Jackson, chief executive of Prologic, says: “A reluctance to invest capital in the current economy is no longer a barrier to leveraging the best systems to support growth and change. New concepts such as SaaS enable retailers to improve online services and achieve effective multi-channel retailing without incurring upfront significant cost or risk.”

However, while the level of sophistication offered is similar regardless of the size of company, it’s generally felt that SaaS is more appropriate for smaller companies. Hargreaves says: “For SMEs, the cost and complexity of their IT infrastructure has become a management burden and an acute operational risk. SaaS has a lot to offer. In straightened times, the operational savings will likely outweigh concerns about future integration challenges.”

For large businesses though, he reckons the benefits will be less compelling as “rental costs will start to look expensive and complex integration costs will not be significantly reduced”.

Evan Puzey, chief marketing officer at Kewill, adds: “The bigger the customer the more likely they will want to pay for exclusivity in hosting environment, service level and implementation. Depending on the application it may be best to put them on their own dedicated environment.”

Choosing the right SCE system for your business – large or small – is a crucial decision, says Allen Scott of Manhattan Associates. “SCE systems are really mission critical, so it’s important to realise exactly what it is you want to achieve before entering into anything as it’s not something you can switch in and out of easily. The key is to identify a good vendor that has the right vision for a solution for your business.”

He adds: “Supply chains today are really quite complex as there tends to be lots of parties involved, but best-in-class companies have found a way of working together along with a reputable vendor to create an efficient supply chain where data can be shared in a fast and timely manner.”

Barnwell agrees that rather than adopting a one size fits all policy, it is vital that software systems are designed to meet individual requirements and characteristics.

“Reflecting this need for business specific solutions,” he says, “Dematic’s software systems are developed from a series of field proven components that reflect the critical elements of a modern supply chain. As a result, it is possible to create cost-effective, reliable solutions that are configured to individual requirements. This provides far greater flexibility than an off the shelf package, without the cost and risks that are inherent in a completely bespoke approach.”

As many suppliers are likely to have limited IT infrastructure or capabilities, Niklas Rönnbäck, chief executive of CDC Supply Chain, EMEA, suggests SCE systems need to make it as easy as possible for all parties to fit into the operating processes within distribution centres. As the supply chain is the last physical leg between the business and its customer, he says if an error does occur or delay happens there is no time to recover, without significant expense, so it is vitally important to get it right first time.

“By investing in best-of-breed SCE applications as bolt-on extensions to ERP/MRP systems, it is possible to focus on the co-ordination of the inbound and outbound external legs in the supply chain, optimising the ‘in-flight’ warehouse operations and managing contingencies to cope with unplanned events, without compromise to the ERP master processes,” he advises.

Energy consumption

SCE systems are also increasingly being used to support sustainability objectives. HighJump’s Chad Collins says: “It’s becoming more and more common for us to work on a business case with a customer where environmental impact is high on the agenda. Customers are looking to reduce fuel usage on the road and reduce packaging and energy consumption in the warehouse as a result of deploying these systems.”

Alex Mills of Chess Logistics Technology says although there is nothing inherently green about a WMS “it can support a sustainability strategy because of the way it enables greater data accuracy and operational efficiency”.

He says one of the initial benefits of WMS was seen to be its ability to deliver a “paperless warehouse”. In itself a positive attribute as data accuracy is increased, productivity is improved and efficiency is maximised, but more recently companies have also been keen to promote the sustainability angle as it boosts their green credentials. So while it might not have been created as a “green” application it is a welcome by-product and one that more and more companies are becoming savvy to.

Share this story: