Software to the rescue?

The latest supply chain apps not only alert managers to developing problems but also suggest corrective action. The only question is whether this software is really ready for prime time.

By James Aaron Cooke, Senior Technology Editor -- Logistics Management, 1/1/2001

Got an emergency? Here's a lifeline. That's exactly how software vendors today want logistics managers to view their latest supply chain applications - as a lifeline. To that end, many providers of supply chain planning and execution packages have begun developing "alerts" that notify logistics managers of developing problems and then follow up by suggesting alternative courses of corrective action.

But managers who really expect to use one of these programs to stay afloat may be disappointed. The applications currently on the market have yet to reach a level of sophistication that allows them to do much more than just sound the alarm. And those that do recommend corrective actions still fail to consider the impact of their recommendations on other links in the supply chain.

Waving Red Flags

For over a year now, developers of warehouse management (WMS), transportation management (TMS), and advance planning (APS) systems have included in their programs the capability to send "alerts," red flags that signal that something has gone awry in the distribution operation. For instance, a TMS might send out a message that a shipment has been delayed in transit, or a WMS might notify management that the last of a particular item has been picked. These alerts, which can be transmitted via e-mail, a page signal, or voicemail, allow a manager to intervene promptly and tackle the problem before it becomes a crisis.

The trouble is, although progress is being made in this area, the "alert" technology typically is not very selective about which urgent messages are sent and when, says Henry Bruce, a vice president of market strategy at Optum Inc. in White Plains, N.Y. (Optum has licensed "alert" capabilities for its supply chain software from Categoric Software Corp. of Palo Alto, Calif.) "The first pass on 'alert' technology has been on or off," Bruce notes. "People are notified about everything. You need more sophistication as to when you trip [an alarm]."

Furthermore, these software "alerts" still place the burden for appropriate action on the manager, says analyst Chris Newton of AMR Research in Boston. "Once the 'alert' is triggered, it then involves human interaction," he reports. " 'Alerts' only trigger people to make phone calls," adds Jim Uchneat, a research director at Surgency Inc. in Cambridge, Mass.

Robust supply chain packages instead need the "intelligence" to advise managers on what corrective actions to take - a capability often referred to as decision support. Decision-support systems either recommend a solution to a problem, which the manager would then approve for implementation, or automatically take some predetermined corrective action before the problem escalates into a crisis. "The best programs would trigger a replan and recommend a solution as well as provide an 'alert,'" says Uchneat.

The Trailblazers

A handful of vendors today claim to have software applications that do just that: serve up contingency plans when logistics problems arise. Supply chain vendor i2 of Dallas, for one, says that its Global Logistics Monitor package can make recommendations on how to deal with a problem.

"If the 'alert' says there's a problem in production, it gives the customer a course of action," reports Rod Strata, i2's industry president for logistics and fulfillment. For example, if a shipment faced a delay, the application might suggest shipping the parts from another supplier or recommend the use of a different carrier, Strata notes. But he adds that the customer would have to have previously configured the software to offer up the alternative. "The customer has to have the parameters [for alternative action] loaded into the model."

Another program, Descartes Systems Inc.'s transportation optimization application, also recommends corrective actions. "If a truck is running late and there's a new estimated time of arrival, the system identifies a variance [from plan], triggers an 'alert,' and then triggers a new route plan," says Beth Enslow, a vice president of strategic initiatives at the Waterloo, Ontario-based software maker.

Software vendor Manugistics in Rockville, Md., claims that its software can recommend alternative sourcing, an alternative set of materials, an alternative carrier, or even a group of carriers. The company recently acquired software vendor Talus Solutions Inc. of Atlanta, a company that specialized in pricing and revenue optimization technology. As a result of that acquisition, Manugistics plans to upgrade its software so that it presents the cost implications of each recommendation it offers.

Those three vendors won't have the decision-support software market to themselves for long, however. Other supply chain software makers are hard at work developing similar capabilities. For instance, supply chain software provider Provia of Grand Rapids, Mich., whose packages now provide 'alerts,' plans to introduce a decision-support feature called "correlated events escalation." "If a carrier does not show up on time for an appointment [to pick up] a certain vendor's product," explains John Pulling, Provia's chief operating officer, "then you'd shortship 20 hot orders. Or if you are X orders behind in shipping at 4 p.m., then you'd be notified that you won't get all your orders out because you're behind."

Another vendor planning to include corrective-action capabilities in its application is McHugh Software International of Waukesha, Wis. Jim LeTart, McHugh's director of marketing communications, says his company plans to include "auto response capabilities" later this year when it releases an upgraded version of its Logistics Execution Nervous System package, which provides real-time visibility of inventory, orders, and events throughout the supply chain. "We are looking for the capability to analyze and then react to 'alerts' and events," LeTart reports.

Startup Bugs

But for all the hype, these first-generation decision-support systems are simply not very sophisticated. The programs' main drawback is that they cannot weigh different variables in real time. "[These systems are] not dynamic enough for today's business," contends Dwight Klappich, a program director with the market research firm Meta Group of Stamford, Conn. "You need to be able to look at the tradeoffs between transportation and inventory."

Rich Sherman of EXE Technologies agrees. Sherman, who serves as the company's vice president of visioneering, says there are often conflicting viewpoints within an organization that cloud a response to a crisis. The sales and marketing department, for instance, may wish to spare no expense to get an item into stores for a planned promotion. The logistics department, by contrast, will likely push to use the least expensive transportation alternative to meet the delivery date.

On top of that, most "alert" mechanisms and decision-support technology now in development fail to take a holistic view of the supply chain. In other words, when a program recommends a contingency plan for one company, it does not take into account the impact of that corrective action on that company's trading partners' operations.

Because all trading partners in the supply chain are affected by a production or shipping delay, well-designed decision-support software would logically inform and involve the entire supply chain in the problem's resolution. Indeed, many industry experts believe that decision-support systems' market potential lies in their ability to make recommendations that consider the breadth of the extended enterprise. Unless this software involves the full complement of trading partners in developing solutions, they argue, it cannot achieve its promise of improved supply chain management.

Ideally, once an "alert" was triggered, a group of trading partners would act in concert to take corrective action. If the bugs can be worked out so that this happens, decision-support technology will likely become a central component of collaborative planning and execution systems. "Event management will become an important component of collaborative execution," says Bruce of Optum. "Over the past few years, we've become good at focusing the spotlight on where the problems are. Providing the tools to solve those problems is the current challenge."