The Supply Chain Information Technology blog

If you are considering or about to undertake the acquisition of a new supply chain application, you may find the cover story from Computerworld’s December 6 issue interesting. The topic was How to Negotiate Better Enterprise Software Deals.

Having participated in numerous supply chain software selections, I can confirm many of the article's points from experience.

While the article dealt with software acquisition in general – including operating systems, office suites, SaaS-based sales automation solutions, and enterprise systems – there were several observations that were particularly germane to the pursuit of supply chain applications.

Taking some liberties, I have summarized a few key points as follows:

1. Haggling is a best practice.

Like buying a car from a dealer, prospective buyers should be prepared to haggle for the best deal from a software vendor.

The article gave some tips for pressing a vendor’s hot button by raising the specter of competitors or alternative solutions. I’ll go one step further for supply chain software. There is nothing like a selection process that forces vendors to go head-to-head for your business to help you get the best deal.

You’ll really get the competitive juices flowing if you include arch competitors in the process. All is fair in love and buying software. So don’t hesitate to tell a vendor what the other guy is offering when attempting to extract concessions.

2. Know what to buy.

This may seems like an obvious point. But knowing how many licenses you need to buy for immediate and future use is critical in getting the best deal. Buying more than is needed can result in wasted money. Buying too little can mean paying a premium for additional licenses at a later date.

Supply chain software selections can also inject additional elements into the equation. If suite vendors are included in the mix, there may be other applications that should be considered. Vendors have been known to offer very attractive pricing on secondary applications to get the sale on the primary product in question. Also, some have been know to get creative in offering additional licenses to cover peak season demand.

3. Consider pushing back on maintenance.

For many firms, the reward for completing a selection is the dubious honor paying for all licenses purchased, plus a full year of support and maintenance. Some firms find the total cost of support and maintenance over a five-year period exceeds the initial license value.

Vendors may also routinely increase support costs for older releases. Once you get around to an upgrade, you may be faced with a substantial bill for vendor professional services and modifications. Companies with long or delayed deployment schedules may end up paying for maintenance and support on licenses for years prior to their actual usage.

Questioning any vendor on its support and maintenance pricing will probably result in a serious lecture on the necessity to properly fund new development as well as provide quality support services. But this doesn’t mean that the vendor won’t show some flexibility, especially concerning effective dates and limiting increases in outlying years. If they don’t, you can always mention that you are putting the same question to the other guys.

4. Don’t try to pound the vendor to a pulp.

The final section of the Computerworld article cautioned the reader not to be too rough on the vendor.

Hard nose bargaining is commendable. But getting the rock-bottom price and every desired concession shouldn’t be the sole aim of the prospective buyer. Selecting a supply chain execution or planning package is also about building a long-term relationship with the vendor. You run the risk of poisoning this relationship if you push too hard.

I’ve marveled at the ability of some sourcing and procurement folks to beat software vendors down on price and terms. But you are not buying office supplies or packaging. Totally alienating the selected vendor may result in the delivery of substandard services and support. More likely, it will make the vendor less flexible to work with you in the future concerning any new or changing needs.

The article really didn’t touch on professional services. This is understandable, since it covered office suites and operating systems as well as enterprise applications. But professional services and modifications expenditures can significantly exceed license costs for many supply chain system implementations.

Professional service rates certainly can be the subject of negotiations. But it is more important to place some boundaries or control around the total hours charged. This is a lot more challenging that getting reduced license prices or a deferred date on the start of maintenance.

I think the key to negotiating the best deal on supply chain applications is to fully appreciate and embrace the power you have as a prospective buyer.

Your leverage with any software vendor is never going to be greater than it is prior to signing the contract. You should take full advantage of it.

-- Tom

Resources:

Case Study: Retail Flow WMS Implementation

Tags: integrating, supply chain integration, vendors

When we started this blog one year ago (read inaugural post) our mission was "To inform, provoke & discuss (not necessarily in that order)".

Much has happened inside and outside of Tompkins, but our credo remains the same. And thanks to the joint efforts of all of our blog contributors, we have honored our objectives.

So I would like to continue along the path of provoking and, as always, welcome your discussion.

Is Your Software Really a “Solution” or Is It just a “Tool”?

The chairman of Black & Decker provided some food for thought when he said, "Customers do not want a 3-inch drill; they want a 3-inch hole."

Throughout our many years of using and implementing a wide range of supply chain IT systems, we have heard these systems referred to with euphemisms such as “tools”, “optimizers,” “integrated suites” (which sounds a little better than “a small set of separate rooms”), and more recently, as the overused buzzword “solutions.”

Although some applications – when properly selected, well designed, thoroughly tested, properly integrated, and completely understood by the business users – may actually be “solutions,” I think we may need to throw a red flag when this term is used too loosely.

It may sound hip and trendy to say things like “Our solution leverages blah-blah architecture on so-and-so platform to enable such-and-such, and will deliver competitive advantage and ROI.”

I know you’ve heard this pitch from more than one software vendor before. And whenever I hear this line, I tend to reach for my wallet to make sure that I still have it and that it is no thinner than it was before.

Unless you know that the ROI is guaranteed (Read this article to see if you are getting what you paid for), all you really have is the 3-inch drill (“tool”) and not the 3-inch hole (“solution”).

What’s worse, rather than the euphemisms mentioned above, you may actually own “vaporware,” “shelfware,” or just a raggedy old (insert your favorite expletive here) application, when what you really need is for the software to provide a strong results for your business.

So, how would you describe your supply chain IT software? Do you have a “tool” or a “solution”?


-- David

 Photo Credit: cote

Tags: software, supply chain technology, technology

Tags: wms, it systems, supply chain

I was rummaging around one of my bookcases the other day when I came across Fred Brooks’ software engineering classic, “The Mythical Man-Month.” The book, first published in 1975, is based on Brooks’ experience managing the development of IBM’s OS/360. It succinctly dissects the various factors that can make or break a large software development project. These include:

-        Project planning,

-        Assembling the right team,

-        Conceptual or design integrity,

-        Formal specifications,

-        Team communications,

-        Version control, and

-        Need for common toolsets.

The title theme should be familiar to even those who are way too young to remember a computing era dominated by machines like the IBM System/360. The idea of the “mythical man-month” suggests that you can’t necessarily reduce the time it takes you to complete something by adding resources.

In fact, Brooks maintains that adding too many resources can dramatically elongate delivery times. While some of the examples Brooks cites are certainly dated (e.g. “state of the art” is a 2MB machine with 400KB devoted to its operating system), his central tenets are as valid today as when the book was first published.

Seeing the book invoked two reactions in me. The first was a reminder of just how old I am. The second was to wonder if we are really that much smarter today about how we plan and manage our supply chain system selection and implementation projects than we were back in the card punch era.

Part of me says “yes.” We have the tools, methodologies and discipline to avoid Brooks’ tar pits. We have learned from the mistakes of past generations. But part of me can’t help but marvel at the repetitiveness of some of our mistakes. They must be classics, because people are so fond of them.

I attended a presentation earlier this year on the reasons that software conversion projects fail. The presentation cited an interesting statistic: Approximately 38% of implementation projects led by a certified Project Management Professional (PMP) fail.

One can certainly challenge this number, as it is highly dependent on the definition of failure. But many supply chain systems implementation projects do sub-perform despite employing structured methodologies and project management best practices.

There are many potential causes for failure that are beyond the control of any project management team. Flawed business cases, selection processes and vested internal interests can stack the deck against success. Some projects certainly fall into the tar pits due to project management practices. But others fail despite employing best project management practices.

I believe that our project management tools and approaches are better today. However, implementing a supply chain execution system still remains a very complex proposition for many operations.

So are we really that much smarter today? Do we still pursue the mythical man-month?

-- Tom

Tags: supply chain execution system, pc technology

A few posts back, I asked, "Where is that last dime?"

Now, as I’m starting a new WMS upgrade / implementation project, the question is even more timely and critical to the success of this particular project.

So here’s the background:

This company has been using one of the more well-known "Best of Breed" (or BoB) SCM software packages (see Tom’s recent post on ERP vs. BoB) since the early 2000s.

The package has been highly modified over the past several years to accommodate incremental improvements in business processes. During this time, the company also added many reports to assist in four wall DC visibility.

Fortunately, since the original implementation, the software supplier has taken great strides in increasing the core functionality of its WMS so that some (hopefully many) of the enhancements and additional reports may be able to be retired.

With that said, why is it such a challenge to continue to find other ways to lower the Total Cost of Ownership (TCO)?

Also, did I mention that this company outsources its fulfillment to a logistics service provider?

To begin with, these guys are well known for operating on very slim margins. And, they are already using engineered labor standards and performance incentives, which drive costs down and increase service levels. Not a very target-rich environment – all of the low hanging fruit has already been picked.

Here is the plan:

This is not a "find and replace" type WMS upgrade. There is very heavy integration with other systems (ERP, TMS, LMS) and homegrown reporting tools. So I intend to carefully weigh the integration alternatives, which include:

• Decoupling external systems – What can be brought into the core application and what additional integration (or re-integration) may be eliminated, along with the staff required to support those external solutions?
• Automation of reports, queries, and other output files – What business critical reports require human intervention or manipulation and can they be automated?
• New technology integration – Are there opportunities where the integration of new supply chain information technologies (e.g., voice picking, etc.) can provide a payback with either improved service level, inventory accuracy, or reduction in labor cost?
• Host order profile – Are there opportunities to work with customers to change order line quantities prior to download to the WMS that could result in more efficient picking (e.g., round up/round down to layer quantities to reduce less efficient case picking)?

Where else can I look? I’d like to know.

-- David Meyers

Photo credit: wildxplorer

Tags: wms, total cost of ownership

By Kevin Hume 

Recently, I had the opportunity to interview a wide range of supply chain professionals engaged in the design, deployment and end use of Supply Chain Execution software (WMS/TMS/LMS).

I spoke with "in the trenches" practitioners who manage day-to-day operational challenges and execute the strategic mandates passed down from executive leadership.

I also spoke with industry analysts, third-party integrators and supply chain software executives. All this was done in an effort to compile a broad perspective of opinions relating to the emerging trends in Supply Chain Execution (SCE) software. My mission was to identify key emerging trends in the SCE software market over the next 3-5 years.

Considering the broad range of feature-function requirements in the SCE market, I received opinions across multiple perspectives (supplier, integrator and end user) and insight within different industries.

Despite the diverse group and backgrounds, a few issues consistently floated to the top of the list, irrespective of perspective or industry.

The most prevalent themes across all the discussions included:

Software as a Service (SaaS) offerings – This was easily the most common refrain from discussions with SCE software end users.

SCE practitioners’ view SaaS offerings as an emerging opportunity to provide the quickest speed to market at the lowest possible price point. Practitioners are clamoring to meet executives demand for cost effective solutions that can be quickly deployed with minimal investment in software applications and supporting hardware stacks.

Considering that a typical Best of Breed (BoB) WMS deployment runs 4-6 months at best from contract signing to go-live, there is an expectation that SaaS offerings will steadily grow feature-function capabilities and become catalysts to meet practitioners’ demands for quicker deployment timelines, flexible hosting options and lower Total Cost of Ownership (TCO).

From the SCE supplier side, a number of emerging SaaS applications have brought some innovative products into the market. As the next few years unfold, expect to see an increasingly robust SaaS feature-function set coming into the market.

Look for more details on the existing and emerging state of SaaS feature-functions in our upcoming blog posts.

Planning & Execution Integration – The rapid changes in the global economic climate over the last 18 months have highlighted the need for end-to-end visibility and the need for adaptability within the supply chain planning and execution processes.

The ability to provide planning capabilities that reach from the point of supply to the point of distribution have been a primary driver in the growing acceptance of SCM-ERP suites over the past few years.

The BoB players have also recognized this need and have been working hard through the integration of acquired products and core feature-function improvements matching the visibility and functionality of the SCM-ERP offerings.

It’s taken the BoB suppliers significant investment-development effort over the last several years to reach this point.

In the next few years, it should be revealed if the investment in end-to-end integration will pay off and which market’s organizational complexities will generate traction within the BoB view of Planning and Execution integration.

Look for further discussions related to the SCM-ERP versus the BoB model in upcoming blog posts. In fact, if you have a particular idea or question related to this topic, drop me a note and let’s discuss it.

Model Driven Functionality – Similar to SaaS offerings, Model Driven Functionality meets the dual requirements of "speed to market" at the lowest possible TCO.

The ability for SCE software to quickly adapt to emerging fulfillment demands within a zero modification environment continues to be a key desire for both current and future customers, as well as a critical path to capture increased market share for both BoB and ERP suppliers alike.

The Model Driven Configuration capabilities of the leading BoB and SCM-ERP offerings vary widely by supplier today.

The offerings that successfully ‘close the gap’ between robust functional configuration options within an intuitive, graphical tool set will become the industry leaders in the near future.

Now, take a step back and look at the three topics we just discussed – what are some of the external factors that really enhance the value of these emerging trends? My own thought process works something like this:

a) Current-emerging economic climate is driving a need for

b) robust, quick-to-market business requirement support; and

c) the limited access to capitol dictates lowest possible investment and TCO needed to support supply chain execution.

In a nutshell, I think these external factors are driving SaaS offerings, Planning-Execution Integration and Model Driven Capability to the top of the 3-5 year wish list.

Are these the topics that resonate with you and within your industry? Drop me a line! What do you think the emerging trends will be over the next 3-5 years within the supply chain execution market?

Kevin Hume

Tags:

What are the most disruptive elements to supply chain effectiveness? With up to 80% of supply chain tied to external forces, it is external trading partners’ activities that often leave you highly exposed. 

In order to meld your partner’s activities into your supply chain management practices, a hosted trading partner management platform may be the quickest answer. Of course, this doesn’t apply if all of your processes are synchronized and you have full visibility and control. But I know very few to whom that statement actually applies.

If you’ve been thinking about opening up supply chain communications with your trading partners, the marketplace has broad and robust supply chain IT solutions that provide a valuable platform for securely exchanging the following key information: 

• Forecast;
• Order management;
• Inbound transportation and import/export considerations;
• Domestic distribution practices;
• Transportation to customer; and
• Performance measurement and improvement.

Linking partners in the supply chain can yield the highest level of improvement. It can also highlight the elements of the supply chain that truly need to be improved. Transparency begets understanding; understanding begets improvement. There is nothing like a comprehensive exchange among all of your trading partners (and your internal processes) to gain transparency to where the pains lie and where improvements are needed.

What makes hosted solutions, or SaaS (software-as-a-service), attractive in general is that they offer a solution set to a broad base and limit deployment headaches. They also make simultaneous application updates to a broad population, insulating the user from system upgrade risks.

In addition, SaaS is particularly attractive to the supply chain because it allows for modular deployment of ERP updates and supply chain execution systems updates with minimal risk to trading partner and product flow. When applied to data exchange with trading partners, SaaS is extremely attractive because it typically offers a flexible set of data integration standards (including web form data entry for the less sophisticated).

With the diversity of partners involved and the constantly-evolving maturity of data synchronization capabilities, we believe SaaS is a solid play for supply chain partner integration.

Tis the season to explore your hosting options. Let us know what you think about hosted solutions.

Happy Holidays!

Matt Wilkerson

Photo Credit: izik

Tags: saas

Having spent the last 22 years working within the supply chain logistics arena and helping clients work through the strategy, selection and implementation aspects of supply chain software, I’m frequently asked:

"What do companies often do wrong when evaluating and selecting supply chain logistics technology software?"

This is an interesting question, because although it has been consistently asked over the years, the answer has changed, as both the software and underlying technology have matured.

Ten years ago, software selection required significant effort, looking into functional gap analysis, vertical market penetration, scalability, extensibility, etc.

The typical product offering was, for example, warehouse management with an alliance offering for transportation management or other supply chain execution systems – times have changed.

Don’t get me wrong. You still need to sweat the details in the traditional areas of software evaluation-selection.

However, software providers have done an admirable job of building best-practice driven, configurable products, significantly reducing the need to modify support for most warehouse operations.

As a result, you may find yourself at the end of gap analysis with little difference between competing software products.

In many cases today, an evaluation strategy that relies upon functional fit as a solution differentiator can result in a futile exercise of picking a specific gray cat in the dark.

Your evaluation-selection strategy must adapt to the maturity of the market and identify key criteria beyond the traditional gap analysis in order to shed more light and discover the real color behind those gray cats.

Two areas that will help differentiate offerings beyond functional fit include:

1. Clearly define the scope of the solution.

The footprint of the traditional Tier 1 WMS vendor has evolved far beyond the four walls of a distribution center over the last 10 years. The expanded reach/footprint of supply chain logistics technology providers now ranges from demand planning/forecasting from the enterprise side all the way down to last mile visibility to confirm a shipment at the customer’s doorstep.

As a result, the perceived value of a particular software offering can be dependent upon the perspective or background of the person/team providing input to the evaluation.

Thus, it’s critical to define and engage a steering committee that represents cross-functional leadership and make sure the steering committee has a clear understanding of the elements that drive the underlying business case for the software selection.

Also, be sure the team clearly defines the elements of each supplier’s product that are in play or out of play before you begin the evaluation process.

The rub here is to clearly define how much of a software vendor’s footprint you intend to leverage over the life of the software product. Most importantly, ensure the steering committee’s vision is consistent with that of the executives who will ultimately approve the investment and resources needed to implement this system.

2. Perform a cultural comparison.

Consider the cultural aspects of your organization and compare them to the traits of the software providers under consideration. In essence, find a DNA match between your organization and the software provider.

For example, does your organization have stable logistics business process requirements, or are they dynamically driven by customer service demands and/or the needs to grow the business? The answer to these questions will drive the magnitude of value behind aspects like functional fit and product adaptability or scalability.

Are the skill sets and staffing levels of your IT organization more characterized as a maintenance group, development staff, or both?

The answer to this question is critical to understanding your reliance upon the software supplier in the future if/when needs arise to support new business requirements. How will this be reflected in the comparison of projected total operating costs for each supplier?

Recognizing the underlying characteristics of your business processes and IT staffing-strategy is a key component to a successful supply chain logistics technology selection. Mismatches between the customer and software provider in these areas typically result in poor implementation performance, unfulfilled expectations of efficiencies, and ultimately higher than expected total operating costs.

Today, a successful evaluation-selection process requires:

• A clear, consistent view of the solution footprint and evaluation criteria;
• A diverse, multi-disciplinary team that is capable of evaluating the entire footprint; and
• Recognition and comparison of company and software provider cultures.

Focus effort in these areas and you will begin to shed some light on those gray cats, as well as improve your ability to differentiate the ‘real’ value proposition across competing supply chain software products!

Kevin Hume

Photo credit: Larry Page

Tags: culture

Rate your collective experience with software sales reps. How honest have they been on a scale of 1-10, with 10 being absolutely honest and 1 being a total sleaze bag? Think of the used car sales rep and "We’re dealing" when you think of a 1.

In all fairness, this exercise is not intended to prove that the average software sales rep has the scruples of a politician.

Many enterprises view their key software vendors as strategic partners and the vendors’ account managers as integral to the relationship. As a general rule, I don’t believe that supply chain software firms engage in deception as a sales strategy.

The potential fallout from sub-performing implementations is just too great of a risk. Personally, I think that supply chain software reps are more honest as a category than most other sales professionals.

However, I won’t be surprised if a fair number of folks rated TV pitch ads as more believable. Some of this negativity is due to circumstances beyond the control of the salesperson.

For example, a project may go south due to poor vendor delivery or client execution. And, although the sales rep played it straight during the sales cycle, he or she may be considered guilty by association.

But I have to believe that a lot of this skepticism would come from people who felt they were sold a false bill of goods during the sales process. I have seen too many vendor proposals and responses that promised more than they could deliver.

Of course, any successful sales professional plays to win. Would you really want to buy a mission-critical application from a vendor that employed only brutally honest sales reps? I don’t think so.

Viability typically matters too much when selecting a software vendor. If a vendor isn’t willing to occasionally stretch the truth in pursuing sales, how successful will they be?

I’m not suggesting that it makes sense to seek vendors who employ pathological liars as sales representative. I’m only stating the obvious.

We expect software sales reps to aggressively spin their wares and package their message in pursuit of the ultimate prize. We realize that the truth may get twisted as part of this process.

This is why it is an accepted best practice to put structure around software selections. We document requirements, issue RFPs, rate vendor responses, conduct scripted demos, do site visits, and check references.

This helps, but it can’t guarantee complete honesty. It doesn’t eliminate the potential for over-promising and under-delivering.

At the end of the day, our selection process relies on words. And words are always open to interpretation.

We set up processes to validate vendors’ responses, but we also provide incentives that can implicitly encourage vendors to play loose with the truth.

The best we can do is to minimize the risk by doing a good job on our due diligence.

Solid contracts, project management and project teams are principle weapons to combat sub-performing projects.

But if we accept an offer that is really too good to be true during the sales process, then we have huge problems that will haunt us throughout the delivery phase.

Skepticism and disbelief cannot be the basis for any successful software procurement process. Trust must come into play as you proceed toward signing a contract.

However, trust needs to be accompanied by verification. So, how do you keep your vendors honest?

I think we all have a lot to learn in this area, so let the comments roll.

Tom

Photo credit: Emilio Labrador

Tags: vendors