By Jim Tompkins, CEO, Tompkins Associates
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Hello, this is Jim Tompkins, the President and CEO of Tompkins Associates and Tompkins International. Today we are back with Part Four of our series on Profitable Growth. Joining me today is Kevin Hume, a Principal with Tompkins Associates in our Supply Chain Information Technology Group.
Kevin, thanks for joining us. You have a very unique perspective on the supply chain because you have been an operations consultant, you’ve been a software engineering consultant, you’ve implemented software solutions, and you’ve worked across a lot of different industries.
Given this diverse background across these different disciplines, can you help us understand the relationship between profitable growth and supply chain technology?
Kevin
Thanks for having me Jim. It’s an interesting time to be involved in supply chain technology.
I’ve been around since the initial development of the commercial supply chain technology market in the late 1980s. I’ve witnessed how this market adopted customer specific functionality into increasingly robust supply chain execution platforms.
In fact, some execution technologies, like WMS, are approaching a level of functional parity today as a result of this process. Much of that development has been driven by the emergence of the direct to consumer fulfillment channel over the last 10 years.
I think the continued development of Warehouse Management System functionality is definitely one of several enablers that has and will continue to drive profitable growth in the direct to consumer market.
Today, the world of supply chain technology for most organizations is challenged more than ever before –
….I could go on, but I think you get the picture.
Jim
Ok, so how do you see supply chain technology enable ‘Profitable Growth’ in the coming years?
Kevin
Quite simply, supply chain technology has to figure out ways to support more with less –
Jim
Ok, faster and cheaper spells productivity, which is a key driver for profitably growth.
So what are some of the emerging trends driving profitable growth in supply chain technology –
Kevin
One area that seems to have everyone’s attention right now is software-as-a-service based software applications. “Software as a service” is commonly referred to as SaaS. Certain areas of the Supply Chain are prime candidates for the emerging trends in SaaS based software applications - I see this primarily around TMS and certain WMS environments.
Jim
I can’t seem to pick up a supply chain technology magazine and not read about SaaS. Why is that?
Kevin
As with everything else in life, timing is everything. What we see right now is a convergence of constrained capitol, limited IT resources, and demands for higher productivity and functionality. SaaS type technology offers a solution to many of these challenges.
SaaS presents lower barriers to deployment than traditional license based software applications – for example:
Now, this low barrier to deployment comes with its own set of challenges.
Jim
I continue to be amazed that TMS is not widely deployed; why is this?
Kevin
I think TMS could be an area of untapped potential to enable profitable growth across all organizational sizes – small to large. I’ll reference listeners of the podcast to my past blog comments related to TMS being the least deployed of almost every other supply chain application: http://supply-chain-it.tompkinsinc.com/post/tms-highs-and-lows.aspx
Jim
Given the recent past horror stories about tight transportation capacity and $5 diesel fuel, I would have expected a much larger adoption of TMS technology in the supply chain by now. Why hasn’t this happened? It seems organizations are leaving money on the table.
Kevin
I could not agree more. I think we’re going to see that change over the next few years. Some of the significant past barriers to TMS adoption focused around limited functionality sets and extensive technology efforts related to application configuration and integration to carrier networks.
SaaS technologies will play a significant role in expanding the TMS footprint in supply chain. Today, 60% of TMS application providers offer a SaaS solution.
Jim
So what is it about SaaS that is going to help organizations achieve profitable growth through a TMS application?
Kevin
Aside from the minimal upfront costs and fast time to deployment; one of the key elements of a true SaaS based architecture is the multi-tenant environment I referenced earlier. This means the application provider manages and onboards new carriers to a common network, typically making them available to all users of the TMS.
The customer is no longer responsible for the traditional point to point integration to the carrier network. The carrier network in essence becomes part of the value add of the TMS application in the SaaS environment.
Jim
Ok, I see your point on TMS, and I understand the appeal of SaaS technology – but what about WMS? What about those organizations that have made significant investments in their WMS applications and leverage scale in large automated distribution centers?
Kevin
I don’t expect any of these organizations to be early adopters of SaaS technology, at least from a WMS perspective in their largest, most complex facilities.
However, these organizations, from a technology perspective, face the same challenges when talking about the ability to support profitable growth – constrained capitol, limited resources and increased demands for productivity from the business.
Many of these organizations are running WMS applications that have seen limited to no upgrades since they were installed in the 2002-2006 timeframe. Over that period, many organizations continued to adapt and improve operations to the extent they could leverage the older WMS platform.
However, as the clock ticks on these older WMS platforms, the cost to maintain and the business risk of obsolesce only grows.
At some point in the near future these organizations are going to face the prospect of what could be an expensive upgrade. Our recent experience with several of our own clients in this situation points to a level of cost and effort commensurate with the initial deployment.
Trust me, the time to make this realization is before you begin planning this upgrade process and not after you have started down the upgrade path with your current WMS provider.
Jim
So what is making the WMS upgrade process become much more like a new installation?
Kevin
To date, WMS application providers have consistently -
As a result, many of the leading WMS applications are approaching functionality parity, and what we’re currently finding is a negligible functional difference for most operations.
Today, we see WMS selection criteria trending more towards the underlying technology strategies and the ability of the potential client organization to leverage the broader suite of supply chain applications as much as the traditional feature-function evaluation of the WMS itself.
My recommendations to these organizations are to take the time to look beyond your current WMS partner since this upgrade is really going to be an entirely new installation.
As a result, this is the perfect time to create a competitive selection environment. At best, you may find an alternative WMS solution that can also support needs in other areas of the supply chain thus creating more of a supply chain partner rather than a WMS provider.
At worst, you have created a much more competitive environment that clearly defines your WMS requirements upfront allowing you to more accurately project your budget and timeline commitments.
Jim
Ok, what else is in store for technology that relates to profitable growth?
Kevin
From an execution software perspective, another technology driven area is growth in the Labor Management System (LMS) market. We’re seeing clients with an effective LMS deployment plan getting greater than expected improvements in warehouse productivity. I’m talking about double digit improvements when the projects were really justified on single digit improvement projections. You just can’t ask for any better news than that.
However, unlike SaaS TMS deployments, LMS application deployments typically require much more upfront investment and integration resources. However, they do have the ability to provide those highly sought after productivity gains year in and year out once deployed.
Jim
Thanks Kevin – I appreciate your thoughts on how supply chain technology can help an organization it achieve its profitable growth goals.
Kevin
Thanks for having me, Jim.
Jim
In a couple weeks I welcome back Ralph Cox, an inventory expert here at Tompkins. Ralph will discuss with us managing inventory, and how it can lead to profitable growth. I’ll speak to you real soon.
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