Five solutions providers answer five questions about new logistics IT buying trends.
Herzberg (SAP): Given the current economy, companies seek to leverage and/or expand on their existing investment. Adding components such as portals and analytics, as well as utilizing technologies to address pain points in specific areas, are ways to control costs while maximizing investments. These tools allow surgical precision and short implementation time while addressing problem areas.
SAP is investing in the future of IT solutions for manufacturing industries. By working with proven vendors, companies can reduce some of the risk involved in IT projects. For example, Caterpillar and Ford recently selected SAP’s software solution for service parts management to improve service levels and reduce logistics costs.
This initiative leverages the customer’s combined industry knowledge to further develop the capabilities of mySAP.com to speed service parts to market, increase customer satisfaction, and reduce logistics costs.
SAP helps companies leverage their existing technologies by integrating their systems so that production, inventory, and employees can all be managed in a unified IT platform. This results in a greater return on investment.
Mullen (Schneider Logistics): Schneider Logistics has a long and successful history of implementing the SUMIT-hosted software application suite for transportation management and supply chain visibility. Led by the practicing logisticians, we have developed implementation processes to ensure customers quickly receive the maximum benefit from SUMIT.
No transportation management software should be cast as ‘plug and play.’ SUMIT is compatible with any existing system and can be up and running within 90 days for most customers. The use of SUMIT technology achieves the three factors critical for success: scalability, reliability, and speed of implementation.
Franke (Manhattan Associates): As a WMS developer, Manhattan Associates has always had to integrate with other software applications. This has been true since our first installation in 1991. Therefore, our approach has always been to have very defined and very flexible integration strategies. It’s no longer about sending flat files back and forth.
Today, organizations are dealing with multiple systems and multiple platforms that require using EAI tools to help them with the technical side of data conversion. First and foremost, an organization must have applications that are designed to provide for flexibility in integrating with other systems.
Typically, today one finds an overlap of existing functionality with new functionality. With this scenario, one needs the flexibility to handle the overlap.
Landry (Servigistics): Because Servigistics was started as a product company, several important objectives have always been a priority. If the goal is to deliver value quickly to every customer with a single code set or application, that product has to be totally configurable and easy to use and integrate.
Because we use a design based on J2EE standards, Servigistics can run on virtually any server platform, including Windows, UNIX and AS400. Installation is fast and flexible.
The architecture of the product includes a powerful integration gateway, which consists of data transfer tools, a transfer or staging area, and gateway processes that automatically add any missing elements or references. This makes mapping and integrating to the host systems simple and fast.
Many companies require integration to more than one transaction system around the world. We have integrated to many standard systems, such as SAP, Oracle, Clarify, Siebel, and Glovia, as well as many homegrown systems.
Our solution is 100-percent web-based, so deployment to users requires only a standard browser on virtually any desktop system. Customers today have users accessing a single Servigistics system from around the world.
Because Servigistics is built on a configurable, meta-data design, users can configure their own screens. These screens can be delivered in virtually any language and currency, including Asian languages.
Servigistics has invested much into making our product easy to integrate, train, deploy, and support. Global leaders such as Dell, Toshiba, IKON, UPS, EMC, Axcelis, Fujitsu and Cray had complete Servigistics implementations that required only eight to 14 weeks.
2. Soft ROI is out, readers say. Hard ROI is in. Yet there is a balance between short-term return on investment and long-term strategy. How should readers balance this tension and navigate these conflicting demands?
Landry (Servigistics): In a down economy, companies naturally postpone buying new products, and look to make their current assets last longer. Companies must turn to after-sales service as a key strategy to defend their customer base and grow revenue. Because service is often three times more profitable than selling the original product, improved service is a profit lever that adds more to the bottom line.
Solutions must open the door to an untapped opportunity for manufacturers to increase customer service levels, increase revenues, reduce costs, and improve profitability, while directly impacting both the top and bottom line. Ultimately it provides the increased financial security needed to maintain profitability during these tough economic times.
Many leading companies have significantly improved service with 20-to-60-percent less inventory capital and costs. With rapid implementation, customers generally pay for the investment in only four to eight months.
Chung (USBX): The easy answer is to say plan for the long term, but many businesses have other immediate cash needs during difficult economic times. Without proper planning, however, the business may not be around in a couple of years. We speak to a number of business owners each year, and I hear time and again that if they didn’t make that IT investment or hire that key executive, they probably wouldn’t be here now.
To better assess the risk and reward of an investment, you should have a business plan and forecast. If you understand the goals for the company, you will be able to make a better business decision on investments in both good times and bad.
Herzberg (SAP): Despite recent sluggishness in the manufacturing sector, an optimistic report issued earlier this month by the Institute of Supply Chain Management shows forecasters are anticipating 5.4-percent growth in the manufacturing industry over the next year. SAP provides customers with the technology they need to handle this expected growth, without the need for additional IT support.
It is key for enterprises to work closely with a trusted advisor to consider the drivers and key prerequisites for the company’s long-term success. These factors should continually be worked into the equation.
Decisionmakers should be looking at solutions that help companies run more efficiently through a combination of industry process expertise, technology pragmatism, and a strategic view of operations, while not minimizing risk, support, and costs. By working with leaders in every manufacturing segment, SAP has developed a solution that works in complex environments.
Mullen (Schneider Logistics): A tough business climate is precisely what causes customers to demand a high level of innovation and supply chain management performance. They look to service providers for ways to help them improve their operations. Our experience shows that soft economic conditions actually favor lead logistics management firms.
Franke (Manhattan Associates): Our advice is to pick partners that have a long-term vision and upgrade path for products, as well as the financial viability to actually execute that vision both today and tomorrow. Additionally, it’s critical that companies also partner with solutions providers that offer systems that can be implemented in modular fashion. Such an approach allows you to avoid dead-end solutions that might meet your short-term objectives, but are not viable 36, 24, or even 12 months later.
3. After the dot.com debacle, how do you reassure readers as to the viability and technical security of e-commerce and web-based solutions?
Franke (Manhattan Associates): The dot.com debacle was more a financial debacle than a technical debacle. Businesses were created based on unsound business models and plans that were disastrous for investors. At the same time, there were some significant advancements and developments in technology. That said, e-commerce is here to stay. It’s viable. It’s proven. Companies are constantly working toward improving the ease of use, while also maintaining a high level of security.
Chung (USBX): The dot.com blowup was primarily caused by bad business plans, not bad technology. The Internet is here to stay and it offers many benefits to the logistics industry—from a basic tracking and tracing capability to customer order entry. It wasn’t that long ago that you had to call FedEx to track a package. Now you can get up-to-the-minute reports on delivery status. When choosing vendors and products, do your homework on the company. What is its history, who are its customers, how is its financial strength?
For security, there are many advanced encryption methods being used that are very secure. Again, you need to do your research and see what technology is being used before you decide on choosing any software or IT system.
Landry (Servigistics): We provide an enterprise software solution that helps companies manage their service parts operation. It is designed with configurable security and a true web-based application that shields the database behind the firewall and limits what users see and do according to their responsibility.
Most customers use Servigistics to facilitate collaborative decisionmaking with people in and out of the organization, and geographically dispersed. This demonstrates secured and distributed access. However, Servigistics is more of a decision support platform than an e-commerce portal.
Mullen (Schneider): As customers conduct their due diligence, it quickly becomes clear that any company with a 70-year legacy, such as Schneider, is secure and viable; it can’t be a dot.com. They should look for a customer list that includes top companies, a large volume of financial transactions, and a large footprint the market. Customers should align their interests with companies with a proven track record.
4. Because needs change, so, too, do performance metrics. In measuring the quality of your solutions, which metric do you consider most vital: financial metrics such as ROI, or business process metrics, such as level of customer delivery satisfaction?
Landry (Servigistics): Financial metrics are more important. A big part of how we sell is focused on predicting the financial impact. After the software is live, we work with customers to measure the impact against these expectations. While some improvements are business process metrics, our goal is to quantify the direct and indirect impact to the company’s financial results.
Herzberg (SAP): Internally, SAP has a rigid measurement system to assess actual software quality throughout the development and ramp-up phase. The improvements of certain business process metrics drive the demand for improvements in the IT landscape. Financial metrics, such as ROI, then, are very important for prioritization of money and resources—especially today when there are more potential projects than a company can afford. Therefore, there is merit for both.
In today’s economy, every company wants to do more with less: more income or revenue, less expenditures; more production, fewer resources. Most companies are satisfied with maintaining business levels while reducing required resources. SAP’s solutions are developed and implemented with these issues in mind. By managing production, inventory, and employees all in a single, integrated IT platform, SAP allows companies to achieve greater results with less time and money.
SAP provides customers with the tools needed to reduce costs through processes such as planning and optimization. For example, SAP’s compliance with Collaborative Planning, Forecasting, and Replenishment Interoperability Testing, sponsored by the Uniform Code Council Inc., ensures visibility to the supply chain and enables customers to consistently maintain inventory.
Mullen (Schneider Logistics): It is the customer’s choice. Customer satisfaction is paramount to us. Our customers’ goals may include ROI metrics or may be more qualitative in nature. However customers choose to set the bar for a successful engagement, Schneider Logistics uses that as a measure of success.
Franke (Manhattan Associates): Companies must first ask what are the most pressing issues within their own distribution network or supply chain. For example, Wal-Mart’s number-one priority is typically reducing costs so it can be the low-cost provider. For Tiffany’s, it’s about providing superior customer service and therefore satisfaction.
To determine ROI, an organization needs to go through the following process: Understand who you are and where you are going. What are the best metrics? What are the current processes? Are these best practices? What are the corporate objectives and how do they equate to you? Focus on improving current processes or procedures through education, both internal and external. Attempt to compute the tangible costs, which will not be incurred if the initiatives are implemented. Make sure you can specifically identify how you computed the numbers, otherwise you probably have intangible cost savings.
Determine the costs of the initiatives both on a one-time as well as an incremental/ongoing (e.g., labels, equipment maintenance) basis. Using the above information, determine how long it will take for the initiative’s use to pay for itself over time. This is considered your return on investment. By going through the above, companies can better understand what metric is the most vital for their specific organization.
5. If anything, these times make SCM challenges even more complex, especially considering that many buyers don’t have the benefit of a husky IT staff. The skepticism created by the dot.com bust doesn’t help either. What advice do you have in your application area as to how to make good technology choices?
Landry (Servigistics): In today’s economic climate, IT budgets are tight and time is money. The quicker customers will realize a return on their investment, the more apt they will be to adopt a solution. There are two key areas to consider when making technology decisions: choose technology with the strongest ROI and quickest time to benefit.
For example, Servigistics implementation process runs only eight to 14 weeks and its customers exceed their ROI projections within eight months. Expanded product footprint drives increasing value on the global service parts management platform we provide.
Herzberg (SAP): Dot.com busts had one benefit for the survivors—they learned a lot about the business and integrated these lessons learned when developing their respective packages. SAP has spent of time and money on integrating these findings when designing and building solutions.
SAP has a solid track record with security-sensitive industries such as chemicals, oil and gas, pharmaceuticals, and high-tech. SAP recently introduced SAP Global Trade Services, an application that helps companies manage the risks and responsibilities associated with global trade. The solution has standardized and automated the trade process to guarantee regulatory compliance and expedite cross-border trade in a secure environment.
Companies such as Adaptec, which provides storage solutions and operates a global supply chain that attributes 50 percent of its business to overseas business, have begun to see measurable results from SAP Global Trade Services.
Mullen (Schneider): Making a good technology choice means looking for a provider with stability, domain expertise, and IT leadership. For many companies, the task of building software and establishing a network of suppliers connected to it can be daunting, if not impossible. It’s no wonder that customers are skittish because the landscape is littered with start-ups and failed internal initiatives.
Franke (Manhattan Associates): Leaders and long-term players in each respective software category typically have made the necessary investments in R&D that yield functionally robust solutions. By partnering with these types of vendors, an organization has greatly increased the project’s chance of success. They will minimize or reduce the need for hefty IT departments because there is little or no modification required. The software vendor has defined and supports an upgrade path and offers 24/7 support.
For example, Manhattan Associates has more than 600 employees who are focused solely on developing, designing, implementing and supporting WMS solutions. With such resources at a customer’s disposal, it minimizes the need for a husky IT department.
- Do your homework, then extra homework. (Chung)
- Focus on fast, hard ROI. (Landry)
- Seek companies with a broad range of experience and enough financial assets to answer any challenge. (Hertzberg)
- Seek companies that are privately held, ones that have both eyes on the customer, not one eye on the stock market. (Mullen)
- Seek specialists in, for example, TMS or WMS. No one company can do it all. (Franke)
Five Solutions Providers and Who They Are
Nils Herzberg is SAP’s senior vice president for Industry Business Sector Manufacturing & Distribution. Nils holds global solution, revenue and client satisfaction responsibility for the manufacturing industries. He is a member of the SAP Field Management Board that oversees global SAP sales, support, service, marketing and industry activities. He came to SAP from the aerospace industries and strategy consulting. Nils holds a degree in aeronautical engineering from the Technical University in Berlin, a Masters in aerodynamics from Cranfield Institute of Technology in England, and a MBA from INSEAD in France.
Jeff Chung is a director and head of logistics practice at USBX Advisory Services. As head of the logistics practice, he is an active member of industry associations, publishes numerous editorials and research reports, and has built a large network of both strategic and financial buyers within the logistics industry. In his previous career he analyzed and initiated several acquisitions for a leveraged build-up of fabricated metal component manufacturers. He has a BA from California State University and an MBA from the Marshall School of Business at the University of Southern California.
Rodger W. Mullen is president, non-asset sector, of Schneider Logistics. Mullen brings more than 15 years experience in logistics, operations, sales and management to Schneider Logistics. He oversees all logistic operations, including supply chain engineering, outsourced freight management services, alliance and payment services, as well as sales and marketing. He orchestrated the establishment of Schneider Logistics-Europe and the purchase of Tranzact Payment Services. He holds a BA from Indiana University. He is active in the Council of Logistics Management.
Mike Landry is the founder and CTO of Servigistics. He is responsible for Servigistics technical strategy and global product architecture. He brings 20 years of experience delivering software and consulting solutions for service operations to his leadership role at Servigistics. Prior to Servigistics, Landry headed the pre-sales organization for field services and inventory for Vantive Corporation. Landry holds a BA from Georgia Tech and a Masters degree from Georgia State University.