Fast. That's how logistics managers generally want payback on their supply chain software purchases. Nearly half of the respondents to an exclusive survey on software usage conducted by Logistics Management and our sister publication, Supply Chain Management Review, said they expect to see a return on their software investments within 12 months. Those investments, moreover, are likely to be in both warehouse and transportation management applications.

The online survey drew 259 responses from among readers of the two magazines. Participants represented a mix of large and small companies. At one end of the scale were the 21 percent of respondents whose companies' annual sales last year exceeded $1 billion, while on the other end were the 34 percent who reported sales of less than $50 million.

Just under one-third (31 percent) of the polltakers cited logistics and distribution as their primary job responsibility, while 12 percent identified supply chain management as their most important function. Twenty-two percent described their primary responsibility as corporate management, and another 8 percent said they focused on transportation. Other primary responsibilities for survey takers included information technology, import and export operations, fleet operations, site selection, and inventory control.

The survey reaffirmed that supply chain software applications continue to gain traction in U.S. companies. Some 62 percent of those surveyed said that their companies had increased their use of supply chain software in the past two years; 36 percent reported usage stayed the same, and only 2 percent noted any decrease. A study conducted by Logistics Management last year produced similar results, with 68 percent of those respondents reporting increased use of supply chain software.

Many companies appear to have concluded that they can't implement sophisticated supply chain strategies without the help of software. Forty-two percent of partakers in this year's survey indicated that their companies had increased the number of software packages they use in the last two years. Only 11 percent reported that they were using fewer software packages, while 47 percent reported no change either way.

The majority—63 percent—of respondents said they planned to buy supply chain software applications in the coming year. More than 40 percent of those future buyers said they expected to spend less than $100,000 on new software, and another 30 percent said they planned to spend between $100,000 and $500,000 on those applications. A much smaller number could be categorized as "big spenders." Only 8 percent said they would spend up to $1 million on software in the coming year, and 14 percent anticipated spending between $1 million and $5 million. Just 5 percent planned to spend more than $5 million.

Warehouse management systems (WMS), which oversee warehouse operations, remain the most commonly installed application. Just under half (48 percent) of respondents said they already had a WMS in place. The next most common application, with 31 percent, was enterprise resource planning systems.

Another 28 percent of those surveyed said they had deployed a transportation management system (TMS), which oversees the selection and handling of carriers. Behind TMS in popularity came supply chain planning applications, used by 23 percent of survey respondents. Other common packages were import/export management software and yard management systems, an application that helps companies keep tabs on trailers. (See Figure 1.)

Readers are planning to buy a similar mix of products this year. When asked which applications they planned to upgrade or purchase in the coming year, there was equal interest in both ware-house management and transportation management packages. More than half (53 percent) of respondents who were in the market for software said they would buy a TMS package, and an equal number said they were looking for WMS software. (Survey takers could choose more than one application.)

The need for compliance bar coding to meet demands for specific labels on packages and pallets appears to be a factor behind the appeal of WMS packages. When asked which features they were looking for in a package, 98 percent of prospective WMS buyers cited label printing. Almost as many (91 percent) wanted their WMS to exercise real-time control over their facilities, and 90 percent said they sought a WMS for inventory deployment. (See Figure 2.)

TMS purchases, meanwhile, continue to be driven by the need to exert more control over carriers' pickup and delivery schedules. Routing and scheduling capabilities were high on the list for 85 percent of TMS buyers, while 82 percent cited the freight-rating features of those products. In addition, 69 percent of buyers were interested in the application's consolidation capabilities. (See Figure 3.)

As for other applications readers plan to purchase this year, respondents reported a high level of interest in supply chain planning. Approximately 40 percent said they planned to buy that kind of broad-based application. A little more than one-fourth (27 percent) said they planned to buy or upgrade an ERP system, indicating that companies remain committed to these corporate information systems despite their high cost.

Right behind ERP systems came import/export management applications; 26 percent of respondents said they planned to buy that type of software, which can help companies meet new government requirements for safeguarding international trade goods. Only 13 percent said they planned to acquire yard management systems.

In addition to asking what they planned to purchase, the survey also examined how our readers make their buying decisions. The vast majority (89 percent) of respondents told us that buying software is a team decision. Teams typically include representatives from the following functions, ranked in descending order according to the number of mentions: logistics, corporate management, information technology, transportation, inventory control, supply chain management, and purchasing.

Once they've made the purchase decision, many companies handle the installation on their own. Forty-three percent of respondents said their companies do software integration in-house. Another 24 percent said they look to their software vendors to do the job. Systems integrators get the call from 10 percent, and 9 percent said they bring in a consultant. A further 5 percent were unsure as to how their companies manage software implementation. ("Other" accounted for the remaining 9 percent.)

The survey results offered evidence that logistics managers continue to favor so-called "best-of-breed" applications over software suites. Historically, best-of-breed software vendors would concentrate on one area and develop applications for a particular function. In recent years, mergers have given rise to companies that offer suites, with an array of compatible applications that can easily swap data with one another.

But software buyers seem more interested in specific functions than in seamless data integration. When asked to rank various factors for their importance in software selection, 90 percent of respondents said that having the right features for their particular operations was very important in choosing a package. Almost as many—86 percent—said that vendor service and support were very important, while 84 percent cited configurability in that regard. Seventy-eight percent said that an application's compatibility with existing systems was important when choosing a package. Buyers also wanted "scalability," or as one respondent put it, "finding software that fits our current needs and can be expanded at a later time." (Multiple choices were allowed.)

As for the biggest challenges in choosing logistics software, respondents cited a host of issues, including cutting through vendors' hype, high prices, meeting implementation schedules, and ensuring sufficient flexibility.

Software vendors can take heart that a majority of logistics managers plan to purchase applications this year, even though the economy continues to struggle. Still, the days of freewheeling spending on expensive software packages appear to be over: Survey data also indicated that logistics managers will be prudent shoppers, setting tight dollar limits for their prospective purchases. (See Figure 4.)

The study found that 55 percent of respondents who were planning a WMS purchase intend to spend less than $100,000 on that application, and 81 percent said they would spend less than $500,000. That thrifty mindset holds true for other applications as well. Fifty-seven percent of prospective TMS buyers said they would spend less than $100,000, and 76 percent of future buyers of import/export software don't plan to cross that threshold. Surprisingly, 48 percent of future buyers of ERP software said they would only spend $100,000 for that historically high-priced application.

Not only will they be keeping a tight grip on their purse strings, but logistics managers also will exhibit little patience when it comes to getting a return on those software investments. The survey found that 18 percent expect a payback in fewer than six months, and another 29 percent said they count on making their money back in less than a year. Just over one-third (35 percent) said they seek a payback after 12 to 18 months. Only 18 percent were willing to wait more than 18 months.

In short, although participants in our survey were truly diverse when it came to company size and annual expenditures on technology, a single, consistent theme was evident from their responses: Shippers are still in the market for supply chain software, but they'll really be shopping for value this year.