Companies are beginning to turn up the flame under slow burning IT projects, encouraged by the first murmurs that the economy is starting slowly and hesitantly to move out of recession.
Cost is still undoubtedly a top priority though, and as such the uptake of systems provided on a Software as a Service (SaaS) platform has increased dramatically.
“The recession has certainly made the effectively self-funded SaaS model much more attractive to companies of all sizes,” says Snapfulfil’s commercial director Gavin Clark.
“To avoid the usual Catch 22 scenario of trying to reduce costs but with no financial resources available to support this activity, businesses are now looking to SaaS vendors to provide cost saving solutions that can be paid for from revenue.”
Fabrizio Brasca, vice president of global logistics at i2 Technologies, says he too has seen increased demand for SaaS. “Many companies do not have the luxury of doing large-scale IT implementations with customisations, especially with the shrinkage in capital markets. As companies still need to solve critical business challenges, the approach to do that is to look at the return on investment as the parameter that most impacts software investment decisions.”
Brasca believes: “SaaS can be the right balance between customer-centric choice, product availability and efficient inventory investments with an affordable, rapidly deployed solution offering.”
Clay Perry, senior vice president of global markets at Integration Point, advises that no company is recession proof and the economy still has a long way to go before it is out of recession mode.
“In the wake of this,” he says, “companies need to find ways to efficiently manage every aspect of the supply chain. This includes security and compliance – both aspects of the supply chain that require visibility, flexibility and collaboration.”
He believes companies are looking for applications that do not require large budgets or IT resources, but at the same time meet their business needs. “These solutions are typically SaaS solutions like Integration Point Global Trade Management (GTM),” he says, which provides companies with the ability to build a solid import and export compliance program on a single platform.
However, Alex Mills, sales & marketing director at Chess Logistics Technology, reckons most customers still prefer to “own and operate” applications. “I believe that it [SaaS] is only seeing limited success within the supply chain execution sector.”
Cheap and simple:
He says while it is often cheap and simple to implement, the disadvantages far outweigh the benefits and systems are often too simplistic for advanced operations. “It achieves basic needs but it’s not the customer-focused solution which many in logistics would need or want.”
Chris Jones, executive vice president of solutions and services at Descartes, which offers more than 90 per cent of its products on a SaaS model, warns companies of the need to choose a steadfast vendor when implementing a SaaS system. “If a company buys a system from a vendor and it is installed locally, but for some reason that vendor doesn’t survive the system can still be run because the infrastructure is there. But in a SaaS world you’d be out of luck. Companies need to look at the reliability of the vendor and what rules they have about data. It’s important to look for the vendors that are going to be around for the long haul.”
Manhattan Associates offers its Transport Management and Transport Procurement applications as hosted services, but doesn’t provide WMS on a SaaS basis and is unlikely to in the near future, states UK managing director Allen Scott. “I’m unsure how this will move forward as it is very transaction-heavy and heavily transactional processes lend themselves to systems managed internally. That may well change over time, but if it does it would be more appropriate for tier three customers who want the benefits of tier one but can’t afford it.”
Nevertheless, he still believes the current climate will drive the adoption of SaaS. “The main benefit is that cost doesn’t go on the bottom line as it is typically a monthly payment so it is easier to manage. You also don’t need the skills and knowledge to run it so you can concentrate on the business itself. The only potential problem is that the system is run by a third party.”
He doesn’t see tier one and tier two companies moving to SaaS though. “Most want to in-source everything as much as possible – they want to be in control of their destiny. If they have a problem they will want to fix it themselves.”
In contrast, Integration Point’s Perry does not think there are any disadvantages to deploying a SaaS solution over an in-house system. “The advantages, however, are numerous,” he says. “By deploying a global trade management platform that is built using SaaS technology, companies can gain a competitive advantage by always having the most current regulatory information at their fingertips.”
When it comes to investing in IT during a recession different companies have different views, depending, says Alex Mills, on the size of the business. “At the high end, companies may see shelving IT projects as a potential cost saving but are usually reluctant to do so because, when the recession is over, the lack of those systems will reduce their competitive edge.
“At the smaller end, there is widespread disinclination to spend until times improve. It would be true to say for companies across the board that projects offering a clearer, faster ROI will be more favourably considered.”
Warehouse management has always been one of the underpinning components of a successful supply chain execution system. But, Pieter Feenstra, managing director of Swisslog, says the capabilities of WMS products are always evolving. “There will always be a focus on WMS, even when considering an upgrade. While the requirements to and capabilities of WMS products are increasing, more focus today is placed on elements such as slotting (ideal location of SKUs in a warehouse to improve order picking efficiency) and applications that improve truck filling (reducing both transport costs and a company’s carbon footprint).”
Mark Croxton, managing director of Aldata, reckons: “WMS is a very mature market, and unless something is completely broken then it tends to be viewed in the large scale SCE deployment category and focus has clearly turned to other elements” such as “smaller, focused initiatives around replenishment where clear benefits can be gained within 12 months.”
Manhattan’s Allen Scott agrees that if you look within the four walls of the warehouse then WMS is becoming a mature market, particularly when compared to other applications. “The role of the warehouse is changing though,” he says. “It’s now more of a distribution centre. It’s no longer all about putting inventory in and taking it out. It should be about flowing inventory through.”
There are a number of other SCE applications being pushed to the forefront in light of the economic situation. i2 Technologies’ Brasca says: “We are seeing a big focus on saving transport costs as these are easy to measure on the bottom line and can achieve a large ROI. Procter and Gamble, for example, has recently started a global transport initiative to drive efficiency across its finished product logistics through improved carrier selection, event management and dashboard reporting.”
Scott agrees that a quick return on investment is vital to companies in the current climate. He has seen a boost in the uptake of labour management systems. “There has been more interest over the last 12 months than there has been in the past couple of years,” he says, “and this is because the cost of implementing it is quite low relative to the benefits received.”
According to Jacquie Boast, chief operating officer at Kewill, the overriding requirement in the current climate is flexibility. “We have found that now more than ever customers are demanding solutions that allow them to respond quickly to changes in market conditions and are upgrading heritage solutions for more functionally rich and flexible applications that enable them to gain more control and visibility over the elements and connectivity of their supply chain.”
It may just take small changes to increase flexibility and boost efficiency, but there are ways of improving the supply chain without causing bankruptcy. One thing which the recession has done is make businesses look longer and harder at their processes and how to get the most out of what they have. In many instances it could be a case of making minor adjustments to help streamline the supply chain, but without the pressure of the economic downturn many would have carried on regardless, oblivious to the fact they could have been making significant savings at a relatively minimal cost.
£250,000 savings for Wickes
DIY retailer Wickes has improved its service delivery levels and reduced operating costs by £250,000 a year after implementing VSc Solution’s electronic proof of delivery, vehicle tracking and performance management systems.
Wickes, part of the Travis Perkins Group, operates 195 stores across the UK, offering a range of kitchens and bathrooms, which is supported by its home delivery operation.
Through its fleet of 60 vehicles and national distribution network of eight depots, the company makes more than 15,000 deliveries each year, and at its peak delivers a kitchen every three minutes.
The company realised the need to introduce electronic, integrated operational systems, to help streamline management, as well as allowing it to offer customers timed delivery slots and joined-up handling of doorstep delivery and queries more efficiently.
Anthony Munro-Martin, business development director at VSc, advises that it is “absolutely vital” for the customer to be confident in the abilities of its vendor because he says: “If you’re offering a two-hour window you absolutely have to deliver within that timeframe or it’s an even bigger failure.”
The original project focused on just ePOD, but was extended to include GPS tracking and vehicle telematics.
ePOD manages the whole delivery and collection process, including scanning and exceptions, running on Motorola MC9000 series hand-held mobile computers and Zebra hand-held printers installed in all delivery vehicles.
Rob Ivers, general manager of Wickes Home Delivery Network, says: “We have achieved major customer service enhancements from having instant, online access to customer delivery information and we can react more quickly and intelligently to customer queries.
“The tracking functionality means that we can also better manage customer delivery expectations and take pre-emptive action where necessary.”
Deployment of the ePOD system has resulted in a 20 per cent cut in the number of claims for incomplete delivery as information accuracy has been improved.
Ivers adds: “The ePOD solution from VSc gave us the platform to be able to check claims, confident in the proof of delivery information received. In practical terms this has saved Wickes around £250,000 per year.
“Wickes handles over 3,000 deliveries each week, which with our previous paper-based system, was an administration nightmare. The ePOD solution has transformed the way we handle claims or queries and also reduced the man power required.”
Wickes is now considering how it can further streamline its business systems to provide self-service access to customer delivery information.
Waitrose optimises replenishment:
Waitrose has selected Aldata as part of an IT initiative aimed at optimising replenishment and supplier ordering at its six warehouses.
The move comes ahead of Waitrose’s plans to grow its core business by expanding its online shopping business and the opening of smaller format convenience stores. Waitrose also recently reported a 10.2 per cent increase in sales.
Liz Gemmill, head of supply chain at Waitrose, says: “With the growth we’ve enjoyed across the business and the ambitious plans we have for the next few years, we knew we had to overhaul our supply chain IT systems in readiness for the future.”
Gemmill says one of the reasons the supermarket chain chose Aldata was “because the modularity of the system gives us clear options for extending its use across the whole supply chain when the time is right for Waitrose”.
The system is expected to go live in time for Christmas 2010, with legacy systems being progressively phased out over a two-year period.
