2013 Technology Roundtable: Real-time visibility within reach
Integrated systems that better gather and manage data to provide real-time supply chain decision making is now directly linked to competitive differentiation. Our esteemed analysts believe that this “visibility” is a reality, and fortune favors the bold who are brave enough to achieve it.
May 01, 2013
Logistics and supply chain professionals have never faced a more challenging period than what they’re up against at this moment.
In some cases, their companies are anxiously pushing to expand their global reach deeper into new and uncharted markets to capitalize on a burgeoning consumer boom; others are figuring out how to optimize their sourcing and manufacturing networks in light of rising transportation costs and more complex trade regulations; and still others are trying to figure out the best way to meet a multi-channel distribution challenge driven by an ever-fickle domestic consumer base that needs the order today.
Our esteemed panel taking part in Logistics Management’s 2013 Technology Roundtable firmly believes that there are technology solutions available that will help today’s logistics professionals win any of the aforementioned battles—it just depends on how brave and determined they are to make the case for investment and put them to use.
This year David Krebs, mobile and wireless vice president at VDC Research Group, will bring us up date on the current mobile computing and automatic data capture (ADC) market and it’s vital role in achieving visiblity; Dwight Klappich, vice president of research at Gartner, puts transportation management systems (TMS) functionality into context in light of today’s challenges; John Hill, director at St. Onge and supply chain technology sage, shares his insight into how warehouse management systems (WMS) are evolving; and Tom Wrobleski, vice president at CapGemini Consulting, offers shippers the current state of global transportation management (GTM) systems.
Here’s what this year’s panel had to say.
Mobile computing/ADC: Gateways to visibility
Logistics Management (LM): From your unique view of the highly diversified ADC market, is there a way to neatly summarize where the overall market stands?
David Krebs: The overall ADC market continues to mature as adoption and penetration scales. With increasing needs for not only visibility, but also status, the use of a wide array of data collection, sensing, wireless communications, and mobile computing solutions is certainly expanding. Critical innovations in robotics, voice technology, and image capture, among others, are making this an exciting time for the ADC market.
LM: Is it possible to put your finger on signature trends that are driving the adoption of ADC technology at this time?
Krebs: One trend that continues is the shift to camera-based solutions in logistics environments. This is happening in a number of different ways. First for handheld scanning—primarily the domain of laser scanners because of their long-range scanning capabilities—we’re seeing the emergence of more functional long-range imagers. In addition, we’re seeing an expansion of applications supported by imagers.
Along with bar code scanners, imagers are supporting other value-add services such as damage documentation and dimensioning for load planning.
Another meta trend is the need for greater business analytics. ADC systems today collect a tremendous amount of data, much of which is underutilized or not leveraged at all. However, at the same time, today’s supply chains are becoming increasingly complex and represent growing cost components of today’s organizations. Leveraging the added functionality of today’s image-based ADC solutions is enhancing key applications from vendor compliance and revenue recovery to load optimization, pallet dimensioning, and order automation.
LM: Multi-channel order fulfillment is pushing retailers to basically revolutionize their supply chains. What role do you see mobile computing playing in streamlining these new, highly complex operations?
Krebs: With the shift to multi-channel we’re seeing a greater emphasis being placed on perfect order accuracy. The penalty of errors and poor performance is heightened and can have a lasting impact on brand perception. In addition, multi-channel is driving the need for more efficient returns processing capabilities to support the increase in returns, the need to manage split case and full case picking in the same facility, and the overall shift from batch or wave processes to more dynamic on demand systems. These requirements are, in turn, placing greater emphasis on efficiency and inventory accuracy while creating greater demand for ADC solutions.
LM: Yard management is one area that logistics professionals are realizing they can easily improve through the adoption of intuitive technology. Where does yard management stand today?
Krebs: The yard has often been overlooked when it comes to supply chain optimization investments creating a black hole. The use of wireless communication, location, and RF identification technologies is driving improvements in the yard. In addition, the integration of TMS, yard, and WMS is driving streamlined operations. One area we are seeing those benefits is around load planning and optimization, which in turn can drive significant benefits in terms of fuel cost reduction.
LM: We’re reporting how quickly smart phones and tablets are making their way into logistics mangement. While the “ruggedness” of these devices has come into question, how far do you see smart phones and tablets penetrating this market?
Krebs: The use of smartphones and tablets in the enterprise across a variety of environments—including line of business operations—is evident. It’s also evident that the lower cost and ease of use of many of these consumer devices is appealing to enterprises.
However, for many supply chain and logistics operations, especially those with heavy data collection requirements, consumer devices cannot hold up. Recent research we’ve just conducted reaffirms the value of rugged devices in these environments, especially in the context of cost of ownership and the impact of failure on operational disruption. However, at the same time, it’s not business as usual for rugged mobile vendors, as they will need to address a growing perception that their devices are falling behind major industry trends.
LM: With that in mind, where will logistics professionals see mobile computing and ADC technologies head in five years?
Krebs: In our minds it’s about integration, processes, and global supply chains—not just the technology. Trends we’re witnessing now include shifting demographics, more educated and empowered consumers, the integration of true multi-channel distribution and retailing, shortening product lifecycles, the shift from mass market to greater levels of personalization and customization are all having profound impacts on how businesses operate.
As a result, the need for systems that better gather, store, manage data and provide intelligence to drive real-time decision making is today, more so than ever before, being linked to competitive opportunities. Put another way, the cost of errors and subsequent impact on brand is at an all time high. This, in turn, spells massive opportunity for a new breed of ADC solutions.
TMS: Capacity crunch pushing adoption
LM: The overall TMS market enjoyed double-digit growth in 2012. What business elements do you see coming together to push this growth?
Dwight Klappich: First, cost containment remains a very high priority as costs are generally trending upwards and remain a burden for shippers of all sizes. However, increasing capacity constraints are anticipated, and we already see signs of this in some modes like refrigerated. So another key motivator is having technology that will help ensure a company can secure capacity.
LM: Do you have any early indicators of how the oncoming capacity crunch will affect shipper/carrier engagement?
Klappich: We did a study last year and were surprised to find that shippers were already engaging with more carriers than we expected. We thought shippers might engage with 10 to 25 carriers, or maybe as many as 50 to 100 for very large shippers. However, our study found smaller shippers were using upwards of 50 carriers, and very large shippers were in the 250 to 500 range. Clearly, these shippers don’t use this many carriers every day, but this indicates that they have at least periodic capacity constraints that force them to have a large number available to them when needed. Managing 10 carriers manually, while suboptimal, is doable, but managing 500 demands technology—and this too is driving increased demand for TMS.
LM: As part of this growth, what role are cloud and SaaS solutions playing in pushing further adoption of TMS?
Klappich: TMS has largely been used at the high end of the market, in the area of greater than $100 million per year in annual freight spend. But now we’re finding significantly greater interest in mid-sized shippers ($20 million to $100 million in annual freight spend), especially for cloud TMS offerings. We see some interest in cloud at the high end, but that is largely private cloud (dedicated instance for a single client) where in the mid-market the demand is for multi-tenant SaaS.
Two things are driving this. First, the economics of SaaS are favorable in that a company can pay an annual subscription that in the near term is far less than equivalent on-premise. The second advantage is that companies are being forced to engage with more carriers and the carrier network that is part of many SaaS TMS is advantageous.
LM: The perception of how cloud computing functions has been a deterrent to skeptical adopters. Are those fears still in play?
Klappich: While some concerns remain, I don’t find that this is a real barrier to SaaS TMS adoption. If anything there’s a barrier we find that customers are now getting better at modeling the cost differentials between on-premise and SaaS based applications. And while SaaS pricing is very favorable in the near term, it can appear more expensive long term. I now find buyers more diligent in conducting this analysis that has had a deflationary price effect. The other issues we see coming up more often now are integration concerns. This is not as much as say an ERP to TMS integration issue, but how one SaaS solution will fit in the overall supply chain management application landscape.
LM: Any tips for new TMS adopters?
Klappich: Even though the economics are very good, a 10 percent or more reduction in annual freight spend, only about 25 percent of the addressable market has adopted a holistic TMS. At the high end we estimate over 50 percent penetration, and that says that in the mid-sized shipper market adoption remains modest. These companies should start looking at TMS given the number of options, particularly SaaS TMS. Compared to many other applications, TMS implements quickly and fairly easily and companies can take a phased approach that allows them to get some pieces up and running initially to gain the benefits that can then fund the remainder of the project.
WMS: Muli-channel drives need for integration
LM: The greater WMS market continues its steady climb, last year growing by about 6 percent. What business elements are coming together to push this?
John Hill: First, if you’ve looked at your 401K lately, it’s likely that it has finally begun to outperform your money market account. And I suspect that this is also true for many small- to medium-sized businesses (SMBs) that, although they’ve understood the potential value of supply chain systems as a differentiator, have been unable or unwilling to risk investment in new technology or systems over the past few years.
Larger firms are also making WMS investments to address the challenges of multi- or omni-channel fulfillment and more tightly integrate their WMS systems with demand planning, order management, and transportation management. Other drivers include traceability concerns and mandates, system-wide visibility demands, workforce performance improvement, and the maturation of ERP, SaaS, and cloud-based alternatives.
LM: How do you see WMS evolving as a result of the multi-channel challenge?
Hill: The buzz about multi- or omni-channel distribution is real. We’re seeing a significant increase in interest from our current and prospective clients in finding solutions for single-site DC fulfillment of on-line and store orders—as well as fulfillment from retail outlets to on-line customers.
Setting aside the complexities associated with DC design for omni-channel fulfillment, the phenomenon raises the bar for WMS, for which inventory slotting and task and labor scheduling and management become even more critically important. Another key is inventory accuracy at every stocking location, including retail stores, as well as visibility into inventory in transit to those locations, which may be provided by TMS.
LM: Any advice for retailers?
Hill: Well-defined work flows and procedures have always been important to laying the proper foundation for successful WMS configuration and deployment, but never more important than here.
LM: Much like its TMS cousin, WMS has moved into the cloud. While still in its infancy, do you see cloud-based WMS gaining momentum?
Hill: Hosted TMS entered the picture in the mid-1990’s with Gillette’s deployment of a system that managed transportation operations throughout North America—and the system performed well. At the time, bandwidth and security were the major concerns. As it turned out, security was not an issue even though the application sat along with a number of others in its own partition on a third-party server.
On the WMS front, SaaS or cloud-based systems enable SMBs as well as larger companies with small satellite warehouse operations to stick their toes in the WMS water rapidly and with lower cost and risk—provided that they do not require the features of a top-tier, on-site WMS package.
LM: Mobility was infused into the warehouse/DCyears ago with ruggedized handhelds. Those tools have given way to more advanced tablets and smartphones. What can we expect to see in terms of WMS and mobile apps on the floor?
Hill: Hard to believe, but it has been 38 years since Logisticon installed an RF-based WMS with handheld bar code readers and lift truck-mounted printers for JC Penney in southern California. Yes, there have been some very interesting deployments of WMS using iPads, tablets, and smartphones for data collection and communications by early adopters, and I believe this trend will continue. It’s a natural and particularly important for attracting the post-millennials to the workforce.
Additionally, the ability for managers to keep tabs on warehouse operations through smartphone links to their WMS is exciting. Lest we forget, however, there have also been significant developments in bar coding, RFID, and voice that prospective users should not ignore.
GTM: Window to global visibility
LM: Where does the GTM market stand?
Tom Wrobleski: As a result of expansion of global operations, increasing global competitiveness, and complex trade regulations, companies are giving more importance to global trade management. In fact, according to Capgemini’s 2013 Third Party Logistics Study, 43 percent of shippers said they feel that 3PL providers should focus on developing their global trade management IT capabilities.
And according to the recent Aberdeen Annual GTM study, the top investment focus for over 75 percent of discrete manufacturing companies is the move to GTM platforms or solutions that integrate data sharing and workflows with internal users and a myriad of countries, suppliers, carriers, and trading partners. And while this bodes well for the market, we see fragmentation in the GTM software delivery model. While there is clear movement towards web-based or cloud-based solutions, the traditional standalone model has not become obsolete.
LM: What functionalities are the most desirable for shippers adopting GTM?
Wrobleski: The first and most obvious is improved risk management. Countries in South America, Middle East, and Africa are now part of global supply chains and GTM practitioners are less familiar with these regions. There is certainly now more reason to automate GTM to account for the unknowns of doing business in these far corners of the world. Shippers are also looking to better manage changing regulations, a puzzle with pieces constantly shifting. Besides the introduction of new sets of regulations due to the advent of new players into the global supply chain, regulations in mature markets can also change.
Improved visibility is also paramount today. Visibility in a GTM context is no longer restricted to track and trace on the transportation leg. It means following a shipment from order through final delivery, with all the itinerant compliance and finance milestones in between, and then being able to act on that information when roadblocks occur. A GTM solution that integrates seamlessly with existing supply chain systems increases the level of automation and visibility.
LM: What advice do you have to get over the GTM acceptance challenges?
Wrobleski: GTM solutions gain acceptance when shippers target the importance of enhanced visibility to end-to-end trade activities and team productivity; the improved integration of workflows between import and export processes where trade data flows seamlessly between different GTM system modules; the advantages of a paperless process; and the more flexible and scalable processes you’ll establish.
LM:Any tips to facilitate adoption?
Wrobleski: Shippers need to train GTM staff. The role of the GTM practitioner is growing harder day by day. Besides stiffer compliance issues, they also face the task of understanding the financial and operational components of their supply chains and how those pillars are integrated. And most come to their roles without any advanced degrees in compliance, much less the other facets of GTM with which they might not be familiar.
And, you need to map technology to process. In the GTM context, adoption is about change management: converting from a data management philosophy to a process management philosophy.
LM: How will GTM solutions need to evolve to keep up with the complex demands of the global trade environment?
Wrobleski: In general, GTM solutions certainly meet the demands of today’s global trade environment. However, as global trade itself evolves, GTM solutions need to evolve as well to help companies deal with the unfolding challenges in trade compliance, such as understanding which Free Trade Agreements (FTA) they’re eligible for based upon the origin of different purchased parts; maintaining visibility of all purchase part information; coordinating with suppliers to obtain all required FTA information to establish compliance with a trade program; and collecting duty savings by qualifying bills of material of saleable goods for different trade programs.
LM: Where is GTM in five to 10 years?
Wrobleski: We’ll continue too see Saas as the dominant deployment model for GTM. Some vendors offer access to their GTM solutions over the web, thereby bypassing the headaches of buying and installing the solution. Accessing GTM solutions on an as-needed basis reduces cost of usage and ensures that the latest technologies being developed by the software vendor are available to the end user.
We will also see a more efficient use of “big data.” As more and more global trade management processes get automated an increasing amount of data will be collected. Merely collecting data will not be sufficient, but the data will have to be converted into a form that can be used in decision making.
There will also be a shift in the control of data. Instead of allowing an outside vendor to control all of their data and then just draw on that passive data, more logistics firms are realizing that they have to be in control of this data to manage and dictate how it is used.
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