On-demand supply chain management (SCM) software continues to grow in popularity. As pointed out in a March 2006 study by Boston-based supply chain research firm Aberdeen Group (www.aberdeen.com), on-demand applications have seen robust growth in sales automation. Now information technology suppliers are beginning to make gains in serving supply chain needs with "software as a service" (SaaS) applications, as on-demand applications are sometimes called.
Four key areas cited in Aberdeen's The On-Demand Tipping Point in Supply Chain report for choosing on-demand SCM over traditional "license and install" software applications include the ease of upgrade process; fast return on investment; reduced implement time and effort; and improved customer service from the vendor.
Although on-demand solutions include a wide range of supply chain activities from order through final delivery, often companies will use only one or two tools to supplement existing systems. The fact they pay for applications only when used is a major factor in making the choice.
Although its enterprise platform is an AS/400 system, as part of an effort to introduce fresh technology to an organization in an industry that has not been quick to adopt it Glazer's (www.glazers.com) uses on-demand software from Management Dynamics Inc. (MDI, www.managmentdynamics.com) of East Rutherford, N.J.
Glazer's is the second-largest distributor of wine and spirits in the United States, with product from such well-known vendors as Robert Mondavi, Brown-Forman, Bacardi and Diageo, among others. Glazer's operates in 12 different states, some in partnership with other companies. Glazer's ships some 48 million cases of product each year.
"We are operating in approximately 4.5 million sq. ft. of distribution space within our network," says Gregg Mitchell, Glazer's v.p. supply chain and logistics. "Our outbound from DCs to customers by 600 trucks in our private fleet. We are making about 75,000 deliveries every week. Stops for trucks are very intricate so we've applied software at some facilities that have a bit more complex challenges to help with that. We're filling about 7,000 purchase orders daily."
On its front end, the Dallas-based company employs a Manugistics (www.jda.com) solution. The remainder of the company's software is home grown.
"The speed of inbound has not been excellent," understates Gregg Mitchell, Glazer's v.p. supply chain and logistics. "So one of the reasons we went after the software from MDI was to be able to reduce the amount of lead-time to get product [for example] from Australia. That is a very slow channel. With our inbound, half of our product moves by vendors' carriers of choice, the other half by us. When we sent a purchase order on to a vendor... it went into a black hole until product showed up with an appointment."
To amplify the problem, Mitchell says that it isn't unusual for a particular vendor to deliver in 85 days one time and 122 days the next, because they choose the most economical route for themselves. "When we began speaking with our vendors about those inconsistencies in lead-time, they were pretty surprised," he recalls. "It's difficult-to have a conversation without math or science to back it up. Our choice was to put a tool in place that accurately measures from the time we write a purchase order to the time it stocks in our facility, in order to give the vendor better visibility into how that process works."
Deb Flahart, Glazer's traffic manager, is in charge of inbound deliveries for the company. She has been pleased with the use of the new technology. "MDI has changed what I do," she claims. "Previously there were four people in the transportation department pulling information from web sites and spread sheets and manually updating expected arrival dates. Now MDI is feeding that automatically. We have the ability to be more proactive with problem vendors who don't ship on time and furnish order confirmations."
MDI's on-demand software has given Glazer's the ability to provide metrics to its carriers. As Flahart notes, she can now say, "your service is poor and here are the metrics to prove it." This year she looks forward to getting all of Glazer's draymen who pick up goods at ports integrated into the MDI solution in order to get visibility all the way to branch locations.
"As much as we can, we use technology to differentiate ourselves from other distributors," says Mike Glazer, a company principal and its secretary. "With MDI and Manugistics we are leaders by far in our industry in using technology or even thinking about it. Our vendors confirm that. We are engaged in pilot projects with some of our large vendors that we think will set the stage for the industry on how wine and spirits partnerships between manufacturer and distributor will be in the future."
"Just by having the conversations with science behind them," adds Mitchell, "we've seen a tremendous improvement in consistency and reliability. Reliability to us is an expected delivery date plus two days. MDI is giving us an exact understanding of purchase order performance all the way through to our facilities. We then apply that accurate and aggregated data to our Manugistics solution in order to become more reliable in the way we order."
Glazer's larger retail customers like WalMart, Costco and 7-Eleven are extremely smart in the use of technology. For Glazer's to be of value to both its vendors and customers, its got to be able to meet their needs. "If they're using technology," Glazer explains, "we can't say that 'maybe someday' we'll be able to react to them, since obviously we want to be a preferred vendor for the retailer and preferred distribution network to our manufacturing partners."
In looking at on-demand SCM offerings, MDI CEO Jim Preuninger points out that while the company's global trade management suite encompasses 20 products in all, customers don't implement all of them. With globalization of the supply chain, trade compliance portions of the MDI suite are being sought by enterprises of all size.
"Part of what we make available is a library of all the trade content," explains Preuninger. "Included are such things as classification of goods, import and export requirements, duty taxes, documents needed, how they are filled out and so forth. We do that for 120 countries."
For many seeking on-demand solutions, supply chain visibility is particularly important, Preuninger says. Being able to track international shipments is only part of the solution. Users also want a reliable, predictive estimate on shipment delivery, even if its only to the next milestone.
Accompanying shipment tracking is the ability to get an alert when something is outside expectations—an exception— that allows shippers to be able to respond proactively. Along with visibility, MDI customers are looking to manage intransit inventory, including merge, diversion, reallocation, and DC bypass.
Preuninger says leading users are measuring what is happening in their supply chain and providing analytics to create scorecards. Benchmarking permits comparison of expected with actual results.
"Having a tool that takes aggregate numbers and provides detail for understanding issues involved leads to problem solving," he claims. "Over time the company will be able to compress cycles and take time down. When you take time down you take inventory out."
In agreement with Preuninger is Greg Johnsen, executive v.p. of marketing and co-founder of the competing on-demand SCM supplier, GT Nexus, Alameda, Calif. (www.gtnexus.com).
"Reporting and analytics is one aspect of what we do," notes Johnsen. "It's based on success we have in aggregating data and making it available to our operational applications. So it's possible to look at us as having on-demand operational applications for searching for things, locating inventory and shipments, exchanging documents, planning shipments and other traditional logistics operations. But we also have a very good reporting and analytic environment based on the same data."
In late November 2006 GT Nexus selected business intelligence software from McLean, Va.-headquartered MicroStrategy Inc. (www.microstrategy.com) to power its analytics and reporting capabilities. Embedded into the GT Nexus portal, the technology helps users identify supply chain weak spots and make analytically based decisions to reduce costs, improve operational efficiencies and enhance business performance.
Johnsen is an on-demand champion, pointing out a number of its benefits over license and install systems. Among these he touts the lower risk for customers.
"They are not acquiring the infrastructure-the computers, servers and operational aspects of running a system," he says, "and as a consequence the risk of a failed project or having assets on their hands is no longer there. That resides with the vendor. In other words, risk shifts from the customer to the vendor."
Johnsen also notes that the on-demand provider's job is to take care of ongoing maintenance and management of the system, which lets the customer remain focused on the service being received. Another plus: Software upgrades are done automatically. On-demand providers have to make sure all customer-specific data and configurations are preserved through those upgrades.
"One of the softer benefits that get overlooked," claims Johnsen, "is that because the vendor must deliver service and only gets paid for it as it's delivered, the onus is on the vendor to deliver great service. The reality is that unless the customer is happy at all times, the vendor is not going to get paid."
Customers are not necessarily looking to replace systems, notes John Holland, president of Marlborough, Mass.-based, software developer NxTier. "We look to augment and if you've got a system in place that does 90% of what you need to do, but just can't reach that 10%, we don't throw out the 90% good. We'll put our system in to allow you to get that final 10%. We work well for those with very distinct systems in place but no way of linking them all together. We'll go in and put in a system to allow gathering of all the information from the disparate systems and provide a single interface for them and their customers. We also provide a single point and repository for information to be reported and acted upon."
Holland says that NxTier's on-demand software is targeted at the needs of 3PLs. One of its major verticals is the home delivery market space, specifically in last mile deliveries. For these deliveries, Holland says there are usually a number of independent transportation companies moving the product, needing a system that provides information and feedback. NxTier's visibility synchronization and control system offers the necessary visibility into that.
"The visibility is of the information," he says, "synchronization of information between multiple systems and multiple parties; and then control of that information in one centralized facility where it's possible to produce reports, look for exceptions and look for ways to better improve the process."
Glazer's Dallas Warehouse
